FERC Agrees that, in MISO, Projects with 80% or More of its costs consist of upgradesd be assigned to imcumbant TOs. Four commissioners express concern about a lack of transmission project cost review
In an Order dated July 26, 2022, in Docket No. ER22-1955, FERC accepted changes to MISO’s competitive transmission project process to assign the development of a transmission project where the costs are 80% or more related to the upgrade portion of a project to the incumbent transmission owner. Four of the commissioners attach a concurring statement that expresses their concern that existing processes may not adequately protect consumers with regard to the selection and construction of many transmission projects and that this Order has the negative consequence of expanding the scope of projects for which the transmission owner has less incentive to reduce cost and maximize benefits to the greatest extent possible. They go on to state that, in response to the Commission’s Advanced Notice of Proposed Rulemaking on regional transmission planning, cost allocation, and generator interconnection, many commenters including the National Association of Regulatory Utility Commissioners (NARUC), urged the Commission to apply greater scrutiny to the costs of transmission projects. Specifically, NARUC “recommends that the Commission explore whether there is some limit at which the presumption of prudence no longer applies and ratepayers would benefit from an automatic review of the prudence of an expenditure.” Other commenters suggested a variety of approaches to limiting project costs, such as enhanced transparency, or utilizing an independent transmission monitor to assist the Commission in implementing appropriate cost caps. The need for the Commission to apply scrutiny is particularly acute for projects that are subject neither to competition at the wholesale level, nor to cost review pursuant to state jurisdictional proceedings. Accordingly, we note that a lack of competition at the regional level for an increased number of projects selected as part of its transmission planning process, coupled with a less than robust level of scrutiny of such projects at the state level, may require greater cost scrutiny of those projects by the Commission. The Commission is holding a technical conference on October 6, 2022, to examine cost management of transmission investments. We hope for robust participation in this conference and urge stakeholders to provide the Commission with detailed information regarding these issues so as to inform any subsequent action the Commission may take. In particular, we urge commenters to provide a detailed picture of the extent of cost review that currently exists at the state level for different types of transmission projects, including regionally selected projects not subject to competition such as MISO’s “upgrade” projects described in this order, as well as local projects constructed by transmission owners.
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Dr. Paul Dumais
CEO of Dumais Consulting with expertise in FERC regulatory matters, including transmission formula rates, reactive power and more.