On December 21, 2021, in Docket No. ER21-2882, FERC denied Pacific Gas and Electric’s (“PG&E”) request to recover 50% of the abandoned plant costs associated with three projects which CAISO had not canceled but had changed the scope. PG&E had requested authorization to recover 50% of abandoned plant costs associated with three transmission projects that the CAISO approved and then subsequently modified: (1) the Spring/Morgan Hill Area Reinforcement Project (Spring/Morgan Hill Project), (2) Oro Loma 70 kV Reinforcement Project (Oro Loma Project), and (3) Lockeford–Lodi 230 kV Area Development Project (Lockeford–Lodi Project) (collectively, Projects). PG&E explains that it identified the project costs it seeks to recover by forming a Project Cost Review Team (Review Team) that was responsible for assessing the costs of the Projects. The Review Team evaluated PG&E’s work for the Projects as originally designed and compared them with the scope of each revised Project to identify those costs that would no longer be useful for the rescoped Projects. PG&E sought recovery of 50% of the approximately $11.8 million ($5.89 million) the Review Team determined were no longer useful to the rescoped Projects, with PG&E writing off the remaining $5.89 million.
PG&E did not assert that CAISO had recommended abandonment of any of the Projects, but rather that the “rescoping” of the Projects through CAISO’s regional transmission planning process had resulted in a reduction in size and cost of the Projects to such an extent that the originally conceived Projects have been “essentially cancelled” and, therefore, should be eligible for abandoned plant cost recovery treatment under Opinion No. 295. However, PG&E cited no authority to support its theory that the Commission should permit such cost recovery where projects have been “rescoped,” and FERC saw no reason here to deviate from the Commission’s well-established policy. The Projects are designated as active and ongoing within CAISO’s 2020-2021 Transmission Plan, and CAISO has assigned 2025 and 2026 expected in-service dates for them. Therefore, FERC found that the Projects have not been abandoned and do not qualify for abandoned plant cost recovery treatment pursuant to Opinion No. 295. Further, unlike in situations where projects have been abandoned, the Commission’s accounting procedures provide for the capitalization of construction costs once the Projects go into service; therefore, PG&E will have the opportunity to seek recovery of the relevant costs at that time.
Dr. Paul Dumais
CEO of Dumais Consulting with expertise in FERC regulatory matters, including transmission formula rates, reactive power and more.