NYISO Proposes cost caps be included in transmission project competitive evaluations
On December 17, 2019, in ER20-617, the NYISO proposed changes to its public policy transmission process to establish provisions for cost containment of transmission projects proposed by developers. As detailed in its filing, the NYISO’s proposed revisions will establish: (A) the cost containment mechanisms that a Developer may voluntarily include as part of a proposed Public Policy Transmission Project in the Public Policy Process; (B) how the NYISO will evaluate in a quantitative and qualitative manner cost containment commitments made by Developers to select the more efficient or cost effective transmission solution to a Public Policy Transmission Need; (C) the manner in which cost containment commitments will be implemented as part of the rate recovery for a selected transmission project; (D) the requirements to include any cost containment commitment in the pro forma Development Agreement that must be entered into between the NYISO and the Developer of the selected project; and (E) additional, related tariff revisions.
Cost Cap – needs to include all capital costs except 1) the cost of system upgrades identified through the interconnection process; 2) cost of financing during construction period; 3) unforeseeable environmental remediation and mitigation costs (Note 1); and 4) real-estate costs for existing rights of way which will not be owned by the developer (can be excluded or included by developers).
Note 1: Costs relating to environmental remediation and environmental mitigation that are not anticipated by the Developer or are otherwise indeterminable based upon information reasonably available to the Developer at the time of submission, including any environmental remediation or mitigation costs that cannot be estimated by the Developer without performing an environmental site assessment or investigation . . . . Costs attributable to environmental investigation, remediation, and mitigation that exceed the amount estimated in the Developer’s bid based on, among other things, changes in the extent of known contamination will be considered “unforeseeable environmental remediation and environmental mitigation costs.”
Developers can propose hard cost caps or soft cost caps. Hard cost caps contain an amount over which the developer cannot recover costs from customers. Soft cost caps contain an amount over which the developer will recover less than or equal to 80% of the costs from customers.
NYISO will evaluate developers capital cost containment commitments qualitatively and quantitatively, as with other evaluation metrics.
NYISO proposes to require the Developer of a selected transmission project to file with FERC any Cost Cap that it proposed as part of the rate for its project. It will amend the pro forma Development Agreement between the NYISO and Developer to include the Cost Cap proposed by the Developer of a selected project.
NYISO proposes limited, specified excusing conditions from the Cost Cap. Those conditions are: (i) Transmission Project changes, delays, or additional costs that are due to the actions or omissions of the ISO, Connecting Transmission Owner(s), Interconnecting Transmission Owner(s), or Affected Transmission Owner(s); (ii) a Force Majeure event as defined in the Development Agreement, (iii) changes in laws or regulations, including but not limited to applicable taxes; (iv) material modifications to scope or routing arising from siting processes under Public Service Law Article VII or applicable local laws as determined by the New York State Public Service Commission or local governments respectively; and (v) actions or inactions of regulatory or governmental entities, and court orders.
Dr. Paul Dumais
CEO of Dumais Consulting with expertise in FERC regulatory matters, including transmission formula rates, reactive power and more.