The Federal Energy Regulatory Commission Approves Cost-Allocation Method For Transmission Development

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The Federal Energy Regulatory Commission (FERC) has approved a proposal that removes barriers to the development of transmission. The proposal, offered by the Midwest Independent Transmission System Operator Inc. (Midwest ISO) and its stakeholders, is intended to enable the region to comply with energy policy mandates and to address reliability and economic issues affecting multiple transmission zones within the region.

The proposal improves Midwest ISO's ability to ensure that the costs of transmission projects with regional benefits are properly assigned to those that benefit, according to FERC.

The Midwest ISO proposes to create a new category of transmission projects, called multi-value projects (MVPs), to recognize the regional benefits of qualifying transmission projects for the purpose of cost allocation.

Under the proposal, the Midwest ISO will review each proposed MVP on its own to ensure that it supports a public policy requirement or that it addresses reliability and/or multiple economic issues in multiple transmission zones. Individual MVPs then will be aggregated with other similar projects in a portfolio so that benefits of the new projects are conferred across the entire Midwest ISO in a manner that is commensurate with the costs incurred.

The American Wind Energy Association (AWEA) applauded the decision.

‘With this policy in place, the Midwest is ready to step up to the plate and support wind development and unlock the associated manufacturing and supply-chain jobs throughout the region,’ says Rob Gramlich, senior vice president for public policy at AWEA. ‘The proposed mechanism would spread the costs of new transmission infrastructure to the beneficiaries, allowing the region to build a robust transmission grid that will bring reliability and economic benefits, as well as supporting state, regional and national policy goals.’

FERC conditioned the approval of the proposal on the Midwest ISO removing language that would implement an export charge for transmission to the PJM Interconnection LLC region,* located to the east of the Midwest ISO. FERC says such a charge would inappropriately reimpose the pancaked transmission rates that were eliminated years ago between the two market areas.

The proposal also provides for generator interconnection projects to share the costs of network upgrades on which they mutually rely and otherwise retains the cost allocation for network upgrades needed for generator interconnection projects, which was accepted by FERC in October 2009.

The Midwest ISO manages the wholesale electricity market in a part of the Midwest that includes 13 states and the Canadian province of Manitoba.

SOURCES: Federal Energy Regulatory Commission, American Wind Energy Association

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