Plan to share local, clean energy-related transmission costs across New York gets mixed reviews

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Diving brief:

  • The New York Public Service Commission and environmental advocates are urging the Federal Energy Regulatory Commission to approve a state grid operator’s proposal to make state ratepayers pay local transmission upgrades needed to meet the state’s clean energy goals.

  • The New York independent network operator’s proposal responds to FERC’s “beneficiary pays” approach to transmission cost allocation and would establish a flexible pricing mechanism that would help contain costs,** the Natural Resources Defense Council and Sustainable FERC Project** said in comments filed Tuesday at the agency.

  • However, LS Power subsidiaries and a trade group for New York City and Cooperative Utilities oppose the proposal, which could affect about $4.4 billion in transmission projects. LS Power argued the proposal would insulate utilities from competition by giving them the exclusive right to build upgrades in violation of FERC rules.

Overview of the dive:

NYISO June 21 Requested Ferc to approve a cost-sharing and recovery agreement, or CSRA, between New York investor-owned utilities, as well as tariff changes, for transmission upgrades that the network operator says are necessary to advance the state’s clean energy goals.

The upgrades should create on-ramps and egress for clean energy projects to access the high-voltage transmission system and local loads, NYISO said.

The upgrades will benefit New York ratepayers and those costs would be shared based on a volumetric load ratio share, according to NYISO, which has requested that its proposal take effect Aug. 22.

New York CSP urged Ferc to approve the agreement, affirming that it was in line with the opinion of the committee policy statement on voluntary transmission cost-sharing agreements that fall outside the agency’s Order 1000 transmission rules.

The New York PSC said it is considering two utility applications for local transmission upgrades, and another is expected to be filed by Jan. 1.

“Timely acceptance of the CSRA and tariff changes is critical to providing a cost allocation and recovery framework that will allow for the rapid development of local transmission projects needed to meet the renewable energy generation requirements established in the New York State. [Climate Leadership and Community Protection Act] and accelerated renewables [Energy Growth and Community Benefit] Take action,” the CPS said.

Driven by the electrification of several sectors, NYISO expects electricity consumption to increase by 30% from 2021 levels to nearly 200,000 GWh in 2052 and peak demand to climb more than 40% to 44,547 MW over the same period, creating a need for local transmission and distribution and investments in the high-voltage transmission system, according to NRDC and Sustainable FERC.

The Fast-Track Renewable Energy Act of 2020 directed New York’s PSC to identify transmission upgrades needed to meet state energy goals and put in place planning processes to support their development. noted the groups.

“The proposal will enable and encourage the [New York transmission owners] to envision, propose and build transmission projects that they otherwise could not undertake out of concern to allocate project revenue requirements to customers only within their footprint while project benefits accrue to a wider range of customers,” NRDC and Sustainable FERC said.

Additionally, under the proposed agreement, the utility’s return on equity and capital structure for any upgrades will be capped at their FERC-approved ROE and capital structure, which will help contain costs, the groups said.

However, NYISO’s proposal circumvents the requirements of FERC Order 1000 because it would allow a project to be considered “local” for planning purposes but regional for cost allocation, according to LSP Transmission Holdings II and LS Power Grid New York Corp. Under Order 1000, the cost of local projects cannot be regionally shared, while regional projects are open to competition.

The proposal would “eviscerate” the requirements of Order 1000 by allowing investor-owned utilities to plan and build exclusively regionally beneficial projects that respond to public policy drivers without a competitive process that FERC says was necessary to ensure fair and reasonable rates for such regionally distributed projects, says LS Power.

Additionally, NYISO does not have the authority to make the tariff proposal because it was not approved through a stakeholder process, according to LS Power.

There is no evidence that the proposed load sharing cost allocation approach is fair and reasonable, the New York Association of Public Power said to Ferc.

New York’s municipal and cooperative utilities account for less than 3% of the state’s load but contribute about 10% of its clean energy, the trade group said.

“Municipalities and co-operatives across the state are doing more than their load ratio share to contribute to the state’s clean energy goals,” the group said. “Thus, there is an imbalance of costs and benefits contained in the applicants’ proposal that violates the principle of cost causation.”

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