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First Refusals, Least Regrets

What California can teach FERC about transmission planning.

Fortnightly Magazine - December 2010

differences to be far from clear, particularly, noted San Francisco, where new transmission is built out into previously unserved areas.

When he was asked if a gen-tie could later become a network facility, CAISO’s Lorenzo Kristov answered:

“All we’re talking about is timing and potential—we don’t know what’s going to happen in the future.”

Despite FERC’s announcement in its grid planning rulemaking that it intends to do away with ROFRs, Southern California Edison insists that if incumbent utility transmission owners must accept a backstop obligation to step in and build economic or policy-driven transmission projects when private developers fail to follow through on their projects, that it “reiterates its opposition to the obligation to build that is not coupled with the corresponding right of first refusal,” in spite of what FERC might say in its planning NOPR. (See, Comments, FERC Docket ER10-1401, filed Sept. 17, 2010.)

Otherwise, says Edison, it will be faced with cherry-picking and cream-skimming by independent grid developers:

“How will a PTO be financially impacted if it is forced to build only the least desirable projects that independent transmission companies do not believe are sufficiently lucrative to build?

“How will an incumbent utility PTO address the need to reserve balance sheet capacity to cover all required economic or policy-driven projects within its service territory given the risk that other transmission providers fail to complete their projects?” (See, Protest, FERC Docket EL10-76, filed July 23, 2010.)

Perhaps the ROFR dispute is less important for planning purposes, than for what it tells us about the transmission sector as a market.

And representing the Northern California Power Agency, attorneys Robert McDiarmid and Lisa Dowden ask why FERC continues to grant special financial incentives for transmission expansion, as sanctioned under Order 679 and the 2005 EPAct law, when developers and utilities can be seen fighting amongst each other to win the right to build:

“The battle over the proposed removal of the right of first refusal from ISO/RTO tariffs demonstrates that the need for some forms of transmission rate incentives to encourage transmission construction is rapidly passing.”