On August 9, 2019, in Docket No. ER19-2568, Pacific Gas and Electric Company (PG&E) filed a request to recover, through its formula rate, 50 percent of the prudently-incurred costs that it incurred associated with the development of its Diablo Canyon Voltage Support Project (DCVS Project) and its Atlantic – Placer 115kV Transmission Line Project (Placer Project), which were ultimately abandoned. On October 10, 2019, FERC found that PG&E has demonstrated that it qualifies to recover 50 percent of the prudently-incurred project costs for the DCVS Project ($1.1 M) and the Placer Project ($0.3 M) based on the facts and circumstances presented in this proceeding, consistent with Opinion No. 295. Specifically, FERC found that the transmission projects for which PG&E seeks abandonment cost recovery were cancelled based upon CAISO’s determination that the projects were no longer necessary. Thus, we conclude that the abandonment of the two projects was beyond PG&E’s control and that the costs incurred appear to be prudent and have not been shown to be unjust and unreasonable. Protesters objected to PG&E’s proposed 40-year amortization period. In its reply comments, PG&E agreed to change the amortization period to one year. FERC authorized a one-year amortization period, which will reduce potential overall costs by avoiding years of carrying costs and, accordingly, will reduce the impact on PG&E’s overall revenue requirement. FERC explained that the RTO/ISO participation adder does not apply to abandoned transmission projects, which are not turned over to the operational control of an RTO/ISO.
On May 31, 2019, in ER19-2023, Tucson Electric filed, pursuant to sections 205 and 219 of the Federal Power Act (FPA) and part 35 of the Commission’s regulations, a request to recover in rates 100 percent of the prudently-incurred costs that it incurred associated with the development of a 345 kV transmission line between Sahuarita and Nogales, Arizona (Nogales Project), which was ultimately abandoned. Tucson Electric states that, at a minimum, it is eligible to recover 50 percent of the prudently incurred costs associated with the Nogales Project. In its Order dated September 19, 2019, FERC denied Tucson Electric’s request for 100 percent recovery of prudently incurred costs associated with the Nogales Project and granted Tucson Electric’s request for 50 percent recovery, consistent with Opinion 295. FERC accepted and suspended the filing for a nominal period, effective August 1, 2019, subject to refund, and set for hearing and settlement judge procedures the types and level of prudently incurred costs and the appropriate amortization period. FERC denied Tucson Electric request for 100 percent abandoned plant cost recovery on a retroactive basis and many years after it incurred the costs (mostly prior to 2005) and abandoned the project (2014). Tucson Electric developed the Nogales Project (and incurred the associated costs) not only prior to its submittal of the Abandonment Incentive application, but also largely prior to the enactment of section 219 of the FPA and the issuance of Order No. 679.
On October 1, 2018, in EL17-45, the California Public Utilities Commission, the Northern California Power Agency (NCPA), the City and County of San Francisco, the State Water Contractors, and the Transmission Agency of Northern California (collectively, Complainants) filed a request for rehearing of the Commission’s August 31, 2018 order denying the Complaint filed in this proceeding against PG&E on February 2, 2017. The Complaint alleged that PG&E is in violation of its obligation under Order No. 890 to conduct an open, coordinated, and transparent transmission planning process because more than 80 percent of PG&E’s transmission planning is done on an internal basis without opportunity for stakeholder input or review. In the Order on Complaint, the Commission found that the Complainants had not shown that PG&E’s transmission owner tariff is unjust, unreasonable, unduly discriminatory, or unduly preferential because it does not require the asset management projects and activities in question to go through an Order No. 890-compliant transmission planning process (Order on Complaint, 164 FERC ¶ 61,161 at P 65). On September 19, 2019, FERC denied rehearing because the Complainants did not show that PG&E’s asset management projects and activities fall within the scope of Order No. 890’s transmission planning reforms or that failing to include these projects and activities within the Order No. 890 transmission planning reforms results in undue discrimination, violates EPAct 2005 requirements, or is inconsistent with Commission precedent.
FERC denied the Complaint in its initial Order on Complaint, finding that the Order No. 890 transmission planning reforms were intended to address concerns regarding undue discrimination in grid expansion, and to the extent that PG&E asset management projects do not expand the grid, they do not fall within the scope of those reforms. FERC found that the transmission-related maintenance and compliance projects, which it referred to as “asset management projects,” at issue in this proceeding do not, as a general matter, expand the CAISO grid. Instead, asset management projects include maintenance, repair, and replacement work, as well as infrastructure security, system reliability, and automation projects that PG&E undertakes to maintain its existing electric transmission system and to meet regulatory compliance requirements. However, the Commission acknowledged that to the extent that an asset management project will result in a non-incidental, or incremental, increase in transmission capacity, the incremental portion of the asset management project would be subject to the transmission planning requirements of Order No. 890 and would have to be submitted for consideration in CAISO’s TPP. FERC also noted that while the projects and activities at issue in this proceeding are not subject to the transmission planning requirements of Order No. 890, Complainants, other stakeholders, and PG&E are all likely to benefit from increased transparency into asset management projects. FERC strongly encouraged PG&E to continue its efforts to work with Complainants and other stakeholders to develop a process to share and review information with interested parties regarding asset management projects that are not considered through the TPP.
Dr. Paul Dumais
CEO of Dumais Consulting with expertise in FERC regulatory matters, including transmission formula rates.