In a July 1 order, FERC denied Southern California Edison's (SCE) request that the agency recognize a new “trunkline” category of transmission line the cost of which could be “rolled” into SCE's transmission revenue requirement (rate base) and recovered in transmission charges to all users of the Golden State's transmission grid. FERC's refusal is significant since without “rolled in” cost recovery it is questionable whether this type of “trunkline” project can or will be financed.
The transmission line in question, Segment 3 of the SCE's Antelope Project, would connect to the California transmission system an undeveloped but wind-resource rich are of Tehachapi at the base of the Sierra Nevada Mountains. California directed SCE to construct Segment 3 so that it would be available to interconnect future wind generation projects that the state will require to fulfill its ambitious renewable energy portfolio standard. Before undertaking the costly project, however, SCE sought FERC's guarantee that the Segment 3 and two other transmission lines (Segments 1 and 2) would be eligible for complete cost recovery in transmission charges. A split (3-1) FERC balked and denied “rolled in” treatment of Segment 3 on the ground that it was not a generally beneficial upgrade to the transmission grid, but was instead only a generator lead line for use exclusively by the future developers of wind projects in Tahachapi. Outgoing FERC Chair Pat Wood dissented, arguing that the Segment 3 project benefited all users of the California transmission grid by “provid[ing] access to significant and diverse supplies of energy that help meet network grid customers' electricity needs.” Commissioner Nora Brownell also expressed reservations over the decision concerning the treatment of Segment 3, but nevertheless concurred in the majorities' decision.
Despite rejecting SCE's proposals concerning Segment 3, FERC seemed to leave open another avenue for achieving SCE's objectives. The agency implied that that it might grant the requests with respect to Segment 3 if the request came from the regional transmission grid operator, the California ISO, instead of from SCE.
SCE received more favorable results from FERC with respect to Segments 1 and 2 of the project. FERC determined that SCE could roll those segments into transmission rate base, and could recover prudently incurred Segments 1 and 2 costs in transmission charges, regardless of whether the potential wind generation is ever brought on line. FERC deferred making an advance determination of the prudence of the Segments 1 and 2 costs until such time as SCE has received from the state all of the necessary certificates for their construction. [Southern California Edison Company, 112 FERC ¶ 61,014 (2005)] [NEW MATTER]