Our annual survey of rates of return on common equity authorized by state public utility commissions in recent rate cases for electric and gas retail distribution utilities.
The Queue Quandary
Why developers today are often kept waiting to get projects ok’d to connect to the grid.
Late last year FERC learned that the Midwest regional grid likely would require at least 40 years — until 2050 — simply to clear its backlog of proposed gen projects awaiting a completed interconnection agreement to certify their compatibility with the interstate power grid. But grid engineers would meet that date only by shortening the process and studying multiple projects simultaneously in clusters. To apply the process literally, studying one project at a time, as envisioned by current rules, the Midwest reportedly would need 300-plus years to clear its project queue.
Bringing this bad news were Clare Moeller, vice president of transmission asset management for the Midwest Independent Transmission System Operator (MISO), and John Norris, chairman of the Iowa Utilities Board. Norris serves also as president of the Organization of MISO States, the group that represents the state utility regulators who function within the MISO footprint.
Each man had appeared as a witness at a technical conference held at FERC on December 11 to explore ways to fix the commission’s LGIA rule. That rule, set some five years ago in FERC Order 2003, sets the process for a proposed large generating facility to obtain an Interconnection Agreement, which would certify the plant in question as a fully deliverable “network resource.” The completed IA ensures that the plant’s operation at full capacity will mesh with existing grid operating parameters and in so doing will not hinder the operations of other, previously certified network resources. But the process has become badly outdated.
“It’s now time to look at our interconnection process and see whether there are tweaks that need to be made,” said FERC Commissioner Suedeen Kelly, who had first suggested the project interconnection queue as a topic for study, according to Chairman Joseph Kelliher. Yet the problem may well call for more than a tweak.
A month before the conference, the governors of seven Midwestern states wrote to MISO CEO Graham Edwards to express their “growing concern” about how wind-energy developers face a “crisis” in the delays they encounter in bringing new projects on line. Citing a study conducted in April 2007, Norris predicted at the conference that wind-energy development in the Upper Midwest during the next six years or so could generate some $59 million in payments to farmers and ranchers, plus $148 million in new property taxes in sparsely populated rural areas.
As each conference speaker took the microphone, it became evident that some grid operators and regional transmission organizations (RTOs) have had to stretch to complete the complicated engineering studies and restudies seemingly required by FERC’s LGIA rule. “Transmission engineers are overtaxed,” said Kris Zadlo, transmission vice president for Calpine.
In written handouts distributed at the meeting, Laurence Chaset, senior staff attorney from the California Public Utilities Commission, explained that the “first come, first served” right embodied in FERC’s LGIA rule, combined with the implied requirement of conducting serial studies for