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In what could dramatically alter transmission and wind energy development in the Upper Midwest, a Federal Energy Regulatory Commission (FERC) ruling last week shifts virtually the entire responsibility of paying for transmission network upgrades to wind developers in the footprint of the Midwest Independent Transmission System Operator (Midwest ISO).

The FERC ruling requires that Midwest ISO wind generators pay 90% of the cost of transmission upgrades for network upgrades for projects rated 345 kV and higher. This ruling applies to all energy generators. For projects rated lower than 345 kV, generators are required to pay the entire cost.

The ruling comes as some wind developers struggle to finance projects under the traditional 50/50 cost-allocation arrangement.

Jack Levi, president of Minneapolis-based developer National Wind, says the ruling "runs contrary to other rulings handed down by FERC in other parts of the country, such as California and the Southwest Power Pool [coverage areas]," adding that the FERC decision will add 5% to 20% to National Wind's project costs.

The Midwest ISO says the one-year measure is designed to alleviate concerns until a permanent solution be can be worked out. According to FERC, the temporary ruling must be revisited by the Midwest ISO no later than July 2010.

"We recognize that the cost-allocation issue is one of the most difficult and contentious issues facing the Midwest ISO region at this time," the FERC ruling states. "We find that the filing parties have proposed a reasonable interim approach to resolve the significant impacts resulting from the current cost allocation and have developed a reasonable plan to implement a longer-term solution."

While wind energy's tremendous potential in the Dakotas and Minnesota grabbed the headlines last year, local utilities such as Otter Tail Power and Montana-Dakota Utilities Co. - fearing exposure to massive cost increases - informed the Midwest ISO of their intent to leave the operator's territory last December.

To appease the utilities, the Midwest ISO subsequently filed a request with FERC to modify the cost-allocation methodology.

According to the FERC filing, there are 12.7 MW requesting interconnection for every 1 MW of load in the Otter Tail service area. For Montana-Dakota Utilities Co., the ratio is 4.7 MW requesting interconnection for each 1 MW of load. Both Otter Tail Power and Montana Dakota Utilities have stated that their customers would see sizable cost increases with little benefit.

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