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Deal Friction

Why the green grid might do better without open access.

Fortnightly Magazine - April 2011

Robert van Beers of Tonbridge Power warned that an over-sized grid line that flooded a geographic area with huge amounts of transmission capacity might cause a collapse of locational marginal energy prices, but that sparked an objection from FERC staffer Arnie Quinn, who defended open-access rules and suggested that preventing monopoly transmission owners from influencing or manipulating competitive power markets was a non-negotiable, essential tenet of FERC policy.

Nevertheless, the panelists still seemed skeptical of any FERC rule that would force developers to build larger-capacity lines than financiers would care to support.

Kenneth Houston, director of transmission services for PacifiCorp, recounted his company’s experience with its planned Energy Gateway transmission project, where so many project developers for renewable generation had submitted transmission service requests that PacifiCorp decided to spend more and construct a double circuit for its planned 500-kV line, only to see those requests fall away when it came time to chip in equity support for the project.

“Basically we wanted to right-size the line so that there would be enough capacity for load-based service to native load at points in the future, but could not find a way to do it without equity funding from queue customers”—who eventually proved less than forthcoming.

Attorney David Raskin of Steptoe & Johnson suggested that right-sizing is a question better left to the regional planning process, working as a backstop behind private development efforts—not to merchant lines or gen tie lines that simply carry a dedicated supply of renewable energy to a grid entry point.

Stephen Conant, senior v.p. for strategic development at Anbaric Transmission, seemed to agree, as he questioned whether “right-sizing really isn’t simply wrong-sizing.”

Law school professors often counsel their students not to pose a question to a witness “if you don’t already know the answer,” and FERC staffers Steve Rogers and Jamie Simler proved the value of such advice in questions they addressed to the morning panel of merchant grid developers.

Simler asked point-blank whether there would be any “downside” to having FERC adopt formal rules governing open season solicitations for merchant grid lines, and heard a disquieting reply from former colleague Cindy Marlette, now working as special counsel with Patton Boggs:

“The commission is at a critical point here. It has to decide whether it wants new projects. If the commission wants to have merchant transmission projects, it can’t adopt a regulatory straightjacket on open seasons and transparency.”

And when Rogers asked whether FERC should allow a transmission project to reserve 100 percent of capacity for a favored anchor shipper, and saw the panelists nodding, he followed up a little too earnestly and received an answer that he should have known was coming.

“If that’s the case,” asked Rogers, “then wouldn’t that lead to a situation when all projects would be non-open-access?”

The panelists simply shrugged in unison, with Van Beers answering, “Maybe so.”

“We Let It Go”

There is perhaps no better example of the misfit between green power development and FERC’s open-access policy than the case of the ill-fated Wind Spirit Project, sponsored by Grasslands Renewable Energy