North American Windpower: FERC Approves Transmission Investment Incentives

FERC Approves Transmission Investment Incentives

by NAW Staff on Friday 16 November 2007

The Federal Energy Regulatory Commission (FERC) has approved requests for transmission investment incentives for new grid construction. The requests came from Southern California Edison (SCE) for three proposed transmission projects in California and Arizona and from Baltimore Gas and Electric Co. (BG&E) for several transmission owner-initiated (TOI) projects in Maryland. FERC says the new projects will improve system reliability, reduce transmission congestion and provide lower-cost power to customers.

Under Order No. 679, FERC allows a public utility to obtain incentive rate treatment for transmission infrastructure investments if it demonstrates that the new facilities either will ensure reliability or reduce the cost of delivered power by reducing transmission congestion. In the SCE decision, FERC found that the company's proposed projects meet the rebuttable presumption, established in Order No. 679, of eligibility for incentive rate treatment because they have been approved by a regional planning process.

SCE is proposing to build three projects, including 200 miles of 500 kV transmission line, approximately 10 miles of 220 kV transmission line and three new substation facilities for its Tehachapi Project. This project will allow significant amounts of wind generation to interconnect with the SCE transmission system.

FERC found that SCE satisfied the "nexus" standard under Order No. 679 for each of its requested incentives. In addition, FERC found that SCE's overall risk is reduced by construction work in progress and abandoned plant cost incentives, and therefore, adjusted the return on equity (ROE) incentives to allow a 125-basis point ROE incentive for SCE's Devers-Palo Verde II and Tehachapi projects and a 75-basis point ROE incentive for SCE's Rancho Vista Project.

FERC also determined that BG&E's request for transmission rate incentives for TOI projects qualifies for an ROE transmission rate incentive.

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