On March 5, 2019, in Docket No. ER19-775, FERC granted NextEra Energy Transmission Midwest, LLC (NEET Midwest) request for incentive rate treatment pursuant to Order No. 679. NEET Midwest requests authorization to recover 100 percent of all prudently-incurred costs associated with its investment in the Hartburg-Sabine Junction 500 kV Competitive Transmission Project (Project) if the Project is abandoned or cancelled for reasons beyond NEET Midwest’s control (Abandoned Plant Incentive). The Project was identified through the 2017 MISO Transmission Expansion Plan (MTEP) as a Market Efficiency Project aimed at relieving both near-term and long-term system congestion in East Texas. The Project consists of five new high-voltage transmissions lines and one new substation. The 2017 MTEP Report concluded that the Project would provide estimated benefits in excess of 1.35 times the cost, have an estimated 20-year present value benefit of $214 million, and fully relieve congestion in the Sabine/Port Arthur area. MISO estimated that the Project would cost $129.6 million with an in-service date of June 1, 2023. As part of the selected project, NEET Midwest committed to forego allowance for funds used during construction and construction work in progress. In addition, NEET Midwest committed to a total project cost cap of $114.8 million; a cap on project operation and maintenance and the project revenue requirement during the first ten years of commercial operations; an ROE cap, including all Commission-approved incentives, of 9.8 percent, subject to reductions of up to 30 basis points for schedule delays; and a restriction on the capital structure to limit the equity share to 45 percent.
FERC granted NEET Midwest’s request for the Abandoned Plant Incentive as, in Order No. 679, FERC found that the abandoned plant incentive is an effective means of encouraging transmission development by reducing the risk of non-recovery of costs in the event a project is abandoned for reasons outside the control of management. FERC agreed with NEET Midwest that the Project faces significant regulatory, environmental, and siting risks that are beyond NEET Midwest’s control and that could lead to abandonment of the Project. FERC found that the total package of incentives, including the previously-granted incentives, as modified as part of the selected proposal, is reasonable, because it addresses the risks and challenges associating with the development of the Project. FERC made the Abandoned Plant Incentive for the Project available to NEET Midwest for 100 percent of prudently-incurred costs expended on and after March 5, 2019, the date of the order.
Dr. Paul Dumais
CEO of Dumais Consulting with expertise in FERC regulatory matters, including transmission formula rates.