IRS Finally Excludes from Taxable Income Funds that an Interconnecting Generator Advances for Transmission Network Upgrades

With the issuance of a recent Revenue Procedure , the Internal Revenue Service has eliminated a long running source of discord in the negotiation of new (or expanded) generator interconnections. The new Revenue Procedure creates a "safe harbor" that exempts from taxable income the payments that a generator, pursuant to FERC open-access rules, advances to an operator or owner of the transmission system to which it proposes to interconnect for needed upgrades to the transmission network. Many transmission utilities treated these advances as taxable income to the utility and would insist that a...

Open-Access Transmission Redux as New FERC Chair Jettisons Controversial Standard Market Design Championed by His Predecessor

In his new capacity as Chair of FERC, Joseph Kelliher has made good on his commitment to improving the existing open-access transmission rules that the agency adopted nearly ten years ago. In particular, with Kelliher at the helm, FERC appears committed to strengthening the anti-discrimination protections of existing regulation of interstate power transmission. At the same time, under Kelliher's leadership, FERC formally interred the Standard Market Design (SMD) Rulemaking proceeding that his predecessor Pat Wood rolled out on Wall Street three years ago, see Special Update (7/31/02), but...

PJM Test for Mitigating Scarcity Prices to Be Tested in Hearing

Engaging the nettlesome issue of scarcity, FERC convened an inquiry into whether the PJM Interconnection needs scarcity pricing and, if so, how a generator's potential to exercise market power during periods of scarcity should be mitigated. FERC's attention to these issues in PJM may herald for the MidAtlantic numerically exact mitigation price triggers, similar to what has already been established for other organized RTO and ISO markets. The current inquiry grows out of a proceeding in which FERC explored compensation due generating units needed to run for reliability reasons. In PJM,...

North Carolina's Highest Court Validates Local Regulator's Assertion of Veto Over Proposed Wholesale Power Contracts

The North Carolina Supreme Court ruled July 1 that the North Carolina Utilities Commission ("NCUC") can exercise veto power over certain wholesale power contracts "” contracts that would confer on wholesale customers a higher priority than accorded to a Tar Hill State utility's retail native-load customers. In so ruling, the court rejected the argument that FERC's exclusive jurisdiction over wholesale sales preempted the state commission's assertion of this veto power. The case arose out of a 1998 plan by Carolina Power & Light (since renamed Progress Energy Carolinas) to build two plants...

FERC Denies SoCalEd Full Approval of Utility's Plan to Add Transmission, Use Wind to Reach RPS Goals

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...

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