Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

Deal Friction

Why the green grid might do better without open access.

Fortnightly Magazine - April 2011

the networked bulk power system. At least two appeals of just such NERC directives were pending before FERC in late March, each filed last October by wind project developers, and each appeal has garnered virtually unanimous support from industry players, insisting that NERC is out of line on this issue. (See, FERC Docket RC11-1, and RC11-2.)

Speaking out at the recent FERC conference, Invenergy’s Kris Zadlo, v.p for regulatory affairs and transmission, summed up the feelings of the developer community:

“We construct gen tie lines out of necessity. It is not a business we want to be in.”

Penguins On Ice

In fact, the issue also affects bona fide transmission line developers, including sponsors of high-voltage DC lines. In the merchant grid arena, the question is whether transmission developers must conduct an open season to solicit interest in planned grid capacity, or whether transmission line sponsors can reserve capacity rights for preferred anchor shippers who participate as equity investors in funding line construction.

In early March, Hudson Transmission Partners asked FERC to bend even further than it already has on rights to new grid capacity, offering fresh evidence that FERC’s policy of open-access transmission is at war with green grid expansion and renewable energy development.

If approved as requested, Hudson’s proposed 660-MW high-voltage DC transmission project could go forward, linking New York City to PJM, with 90 percent of line capacity transmission capacity reserved for use by the New York Power Authority and other preferred anchor tenants—without first being offered through an “open season” bidding process, as ordinarily would be required under FERC policy governing merchant transmission lines that ask for authority to charge negotiated, market-based rates. (See, FERC Docket ER11-3017, filed March 3, 2011.)

In this way, Hudson’s proposed eight-mile line would vault past the 50 percent allowable threshold for anchor tenant interest set in 2009 for the 1,000-mile Chinook and Zephyr HVDC merchant lines (Dockets ER09-432 et al., 126 FERC ¶61,134) , and even beyond the 75 percent benchmark that FERC allowed last summer for the 400-mile, 2,000-MW bi-pole Champlain Hudson Power Express (not affiliated with the Hudson NYC project), which would connect Montreal with Bridgeport, Ct. (See, Docket ER10-1175, July 1, 2010, 132 FERC ¶61,006.)

And open access has proven superfluous even in the public utility arena, where incumbent transmission providers offer service at cost-based rates. In 2009, in a notable case involving NStar and NE Utilities (the Northern Pass project), FERC granted a 100 percent reservation of grid capacity for an anchor tenant (Hydro-Quebec) that agreed to take on the risk of line construction—the theory being that any other shipper seeking access could take on the same risk—pay to expand the line and claim the new capacity for private use. (Docket EL09-20, 127 FERC ¶61,179.)

In FERC’s defense, the open-access policy does afford certain rights to initial gen project developers who build tie lines.

Under the so-called Milford rule, announced in 2009, the original developer can claim priority to unused line capacity only if the developer can prove what are known as “plans, milestones, and progress.” To retain