NextEra Energy Transmission MidAtlantic, LLC (NEET MidAtlantic) on April 20 filed with the Illinois Commerce Commission an application for a certificate of public convenience and necessity to own, operate, and maintain – as well as to provide transmission service to the public using – transmission facilities that the company has contracted to acquire from the City of Rochelle, Ill., (Rochelle) as a public utility.
NEET MidAtlantic is a direct, wholly owned subsidiary of NextEra Energy Transmission MidAtlantic Holdings, LLC, and an indirect subsidiary of NextEra Energy Transmission, LLC (NEET) and of NextEra Energy Capital Holdings (NEECH). The application also noted that the ultimate parent company of NEET MidAtlantic, NEET MidAtlantic Holdings, NEET, and NEECH is NextEra Energy (NYSE:NEE).
NEET MidAtlantic was formed in 2015 to acquire, develop, own, and operate transmission facilities in the region of PJM Interconnection, of which NEET MidAtlantic is a member. Consistent with that objective, the application added, NEET MidAtlantic has negotiated and entered into an asset purchase agreement (APA), dated as of April 16, with Rochelle, acting through its Rochelle Municipal Utilities (RMU) division, to acquire the transmission facilities and system currently operated by RMU in Rochelle and nearby areas (referred to as the Rochelle transaction). The Rochelle City Council has adopted an ordinance authorizing the execution of the APA.
The application also noted that the transmission facilities that NEET MidAtlantic is contracted to acquire from Rochelle under the APA consist of about 20 miles of 138-kV transmission lines, as well as transmission assets at two substations, Caron Road and Twombly, currently providing transmission service to, or for, the public. The transmission facilities are interconnected with the transmission facilities of Exelon’s (NYSE:EXC) Commonwealth Edison (ComEd) and with the RMU distribution system.
The application added that the transmission facilities are presently used by RMU to perform the transmission function in Rochelle and nearby areas, as part of the PJM transmission network. Upon closing of the Rochelle transaction, NEET MidAtlantic would continue the operation of those transmission facilities to provide transmission services to the public, the application said.
Rochelle has adopted a franchise ordinance (referred to as the franchise), which has been accepted by NEET MidAtlantic, granting NEET MidAtlantic the authority to operate and maintain a transmission system and facilities within the municipal boundaries of Rochelle; NEET MidAtlantic would pay to Rochelle a $250,000 per year franchise fee.
The application further noted that NEET MidAtlantic would provide transmission service through PJM under PJM tariffs and organizational agreements approved by FERC. NEET MidAtlantic – which would be a FERC-regulated PJM Transmission Owner – would offer network and point-to-point transmission service, on a non-discriminatory basis, to all eligible customers under the PJM tariff.
The application added that eligible customers under the PJM tariff include generators, load-serving entities, and end users that have met the relevant application requirements set forth in the PJM tariff. NEET MidAtlantic has entered into an interconnection agreement with RMU and would take assignment of RMU’s existing interconnection agreement with ComEd. The application added that NEET MidAtlantic would also actively study and plan for future generator interconnections, as and when requested, to its transmission facilities.
NEET MidAtlantic would establish a field operations office and service facility in the Rochelle local area, which would include storage facilities for spare and replacement parts. The application also noted that the field operations office would serve as the local headquarters. NEET MidAtlantic anticipates that it would contract with local contractors and other resources to provide a local presence for maintenance activities, repairs and replacements, and event response.
The application added that NEET MidAtlantic plans to continue to use the transmission system operator (TSO) services of – and take assignment of RMU’s existing contract with – GridForce Energy Management, which is a subsidiary of NAES Corporation, and has been providing TSO services for RMU since 2015. At a future date, NEET MidAtlantic may transfer the TSO functions to the primary and backup control centers of its affiliate Lone Star, located in Austin, Texas, which are staffed by NERC-certified system operators.
The application also noted that NEET MidAtlantic’s initial capitalization would be about 60% equity capital injected by NEET, through NEET Midwest, and about 40% debt capital borrowed from NEECH under a loan agreement with NEECH. Based on the currently projected purchase price for the transmission facilities of $12.6m, NEET MidAtlantic’s initial capitalization would be about $7.6m equity and $5m debt. The application also noted that under the loan agreement and subject to certain conditions, NEET MidAtlantic may borrow from time to time, on a revolving basis, up to an aggregate amount of $20m outstanding at any time; however, NEET MidAtlantic would maintain a debt to total capitalization ratio of no greater than 0.45 to 1.0.
As a condition to borrowings under the loan agreement, NEET MidAtlantic would be required to mortgage and pledge its assets to NEECH as collateral security for the loans, under a form of mortgage and a security agreement, the application said.
Among other things, the application noted that NEET MidAtlantic is seeking commission approval of the entry into, and performance by, NEET MidAtlantic of the loan agreement, form of mortgage, and security agreement with NEECH. NEET MidAtlantic is also seeking approval of the issuance, on a revolving basis, of up to an aggregate amount of $20m of debt outstanding at any time by NEET MidAtlantic, under the loan agreement, and the mortgage and pledge by NEET MidAtlantic of assets as collateral security under the form of mortgage and security agreement in connection therewith, according to the application.