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Tilting to Windward

As if carbon control were a fait accompli, gen developers skew the queue toward renewable projects, driving new policy on transmission pricing.

Fortnightly Magazine - September 2007

seeks to shift the cost burden to the next project on line.

In MISO’s own words, “This first-mover-pays treatment incentivizes interconnection customers to move their projects into the queue, and then withdraw awaiting either the next generator of the local utility to step up and fund the upgrades.”

Unfortunately, however, that just forces everyone back to the drawing board, as MISO then must restart the impact and facilities studies for all other projects in the queue, to reflect the changed topology on the grid. The whole process repeats itself, until the delays in the project completion cycle become unmanageable.

Of course, MISO’s recognition of this problem is no novelty. California utilities (notably, Southern California Edison) have struggled in the past in their efforts to secure long-term grid expansions to accommodate windpower development. (See, Commission Watch, “ Greening the Grid ,” April 2007.) And last spring, the Federal Energy Regulatory Commission (FERC) OK’d a proposal by the Cal-ISO to create a new category of electric transmission projects designed to make it easier to develop and build large wind power projects. (See, Docket EL07-33, April 19, 2007, 119 FERC ¶61,061.)

Nevertheless, the situation in MISO might hold more significance, policy-wise, as politicians in the Midwest generally have appeared to be less aggressive then California in pushing renewable energy. Only three states within the MISO footprint (Minnesota, Wisconsin, Iowa) have yet to adopt a mandatory renewable portfolio standard.

In fact, MISO reported during the summer that, as early as this fall (September at the earliest), it likely would propose a new tariff at FERC modeled after the already approved Cal-ISO regime. MISO’s new tariff, to be known as the “RPGIP” (Regionally Planned Generation Interconnection Project), would introduce a new transmission pricing protocol to recover grid upgrade costs required to accommodate new wind projects. (See, “Proposal to Remove Barriers to Efficient Transmission Investment,” MISO White Paper, June 29, 2007.)

As events have unfolded, however, it seems that two other Midwest players—American Transmission Co. LLC, and ITC Holding, the parent company of Michigan Electric Transmission Co.—have beaten MISO to the punch.

These two companies, ATC and ITC, operate as stand-alone transmission companies and recover their utility revenue requirements entirely through grid pricing tariffs. It is their contention, in lockstep with MISO (though for different reasons), that current grid pricing tariffs don’t work when it comes to wind projects. This summer, ATC and ITC each proposed new tariffs at FERC to deal with grid upgrade costs related to wind power development.

Reliability and Economics

Heretofore, regional grid operators have tended to see grid buildouts as coming in one of two flavors: reliability transmission, or economic transmission. The one ensures compliance with contingency standards, voltage requirements, and the like. The other aims at boosting consumer welfare, such as by reducing prices, or by allowing for long-haul regional imports or export of low-cost power.

This new initiative from MISO, however, along with FERC’s April ruling involving the Cal-ISO, suggests that theory ought to make room for a third grid category, designed to foster more renewable energy projects. Call it environmental