FERC, in separate orders issued on Jan. 17, granted requests by ITC Midwest and American Transmission Company (ATC) for authorization to recover 100% of all prudently incurred costs associated with the companies’ investment in the Cardinal-Hickory Creek 345-kV Project if the project is abandoned or cancelled for reasons beyond the companies’ control (abandoned plant incentive).
As noted in the order, ITC Midwest, a wholly owned subsidiary of ITC Holdings Corp., and ATC state that the Cardinal-Hickory Creek 345-kV Project is a Midcontinent ISO (MISO) Multi-Value Project (MVP) that will consist of about 102 miles to 120 miles of new 345-kV transmission line from Dane County, Wis., to Dubuque County, Iowa, with associated substation expansions.
According to the companies, ITC Midwest and ATC each own 45.5% of the project, and Dairyland Power Cooperative owns the remaining 9%. FERC added that the companies state that the project is estimated to cost between $492m and $543m, depending on the route, and that the transmission line is expected to be in service in December 2023.
According to ITC Midwest, the cost of its portion of the project would be 45.5% of the total, or about $224m to $247m.
FERC also noted that in the Energy Policy Act of 2005, Congress added Section 219 to the Federal Power Act (FPA), directing the commission to establish, by rule, incentive-based rate treatments to promote capital investment in certain transmission infrastructure. FERC noted that it subsequently issued Order No. 679, which sets forth processes by which a public utility may seek transmission rate incentives under section 219, including the abandoned plant incentive.
Under Order No. 679, an applicant may seek to obtain incentive rate treatment for a transmission infrastructure investment that satisfies the requirements of section 219, i.e., the applicant must show that “the facilities for which it seeks incentives either ensure reliability or reduce the cost of delivered power by reducing transmission congestion.”
FERC added that it established the process for an applicant to demonstrate that it meets that standard, including a rebuttable presumption that the standard is met if:
- The transmission project results from a fair and open regional planning process that considers and evaluates the project for reliability and/or congestion and is found to be acceptable to the commission
- Or if a project has received construction approval from an appropriate state commission or state siting authority
FERC also stated that “other applicants not meeting these criteria may nonetheless demonstrate that their project is needed to maintain reliability or reduce congestion by presenting [to the commission] a factual record that would support such a finding.”
FERC added that the companies argue that the project meets the rebuttable presumption, with the companies stating that MISO approved the project as an MVP in its 2011 MISO Transmission Expansion Plan (MTEP). According to ITC Midwest, MISO found in its 2011 MTEP Report that the project would provide load centers with access to less expensive wind power, as well as help relieve constraints on the existing 345-kV and 138-kV systems in the vicinity of the project. FERC added that ITC Midwest asserts that therefore, even without the rebuttable presumption, the project satisfies the requirement of section 219 because it will relieve congestion and provide other benefits as an MVP.
FERC noted that it has previously found that projects approved through a regional transmission planning process that evaluated whether the identified transmission projects will enhance reliability and/or reduce congestion are entitled to the rebuttable presumption established under Order No. 679. In this case, FERC said, the MTEP transmission planning process, through which the project was approved, evaluated whether identified transmission projects will enhance reliability and/or reduce congestion. Therefore, FERC said, the commission finds that the project is entitled to the rebuttable presumption that it meets that requirement of section 219.
The companies contend that the requested abandoned plant incentive is tailored to address the project’s demonstrable risks and challenges. FERC added that ITC Midwest also states that the project faces risks arising from the interaction among, and the timing of, required federal and state approvals. ITC Midwest explains that the project requires approvals from Wisconsin and Iowa state regulators, along with authorizations from the U.S. Fish and Wildlife Service and the Army Corps of Engineers.
FERC added that the companies state that the project could be delayed or terminated if the necessary approvals and permits are not obtained. ITC Midwest notes that the permitting process for the project is further complicated because the project must cross the Mississippi River, as well as federal wildlife refuge lands. According to ITC Midwest, FERC added, the requirement for numerous independent permits and authorizations from state and federal agencies presents the most significant risk to the project.
ITC Midwest states that route changes or cost increases resulting from the regulatory approval process could also delay or jeopardize the project, FERC said, adding that according to the company, the easement acquisition process could be contentious, which could also result in delays or increased costs.
ITC Midwest asserts that, in order to keep the project on schedule, capital investments must be made before the ongoing, overlapping regulatory processes and easement acquisitions are complete. FERC added that according to the company, those investments are at risk if the project fails to move forward.
ITC Midwest states that recovery of specific abandoned costs would be subject to a future FPA Section 205 filing, and that until the commission approves such rates in the future section 205 filing, the company will maintain a zero balance in its Attachment O template for the placeholder associated with the recovery of abandoned plant costs for the project. FERC added that according to the company, any abandonment costs recovered under the incentive will be recovered through the MISO Tariff using the underlying cost allocation for the project as an MVP under Schedule 26-A, the MVP Usage Rate.
Noting that it grants the companies’ requests for the abandoned plant incentive, FERC said that it agrees that the project faces certain regulatory, environmental, and siting risks that are beyond the control of management and which could lead to abandonment of the project. FERC said that it also finds that the companies have demonstrated that approval of the abandoned plant incentive will protect the companies if the project is canceled for reasons beyond their control.
Among other things, FERC said that it will not determine the justness and reasonableness of the companies’ recovery of costs for abandoned electric transmission facilities, if any, until the companies seek such recovery in a future section 205 filing that a public utility is required to make if it seeks abandoned plant recovery.