Green Energy Express LLC (Green Energy Express) recently submitted a Petition for a Declaratory Order with FERC for approval of rate incentives for its Green Energy Express Transmission Line. The line would transport up to 2,000 MW of renewable energy from Riverside County, California to load centers in Southern California. Specifically, Green Energy Express requested:
- Deferred cost recovery of development costs incurred to date and pre-commercial costs going forward if not included in rate base
- Recovery of construction work in progress through the inclusion of such expenses in rate base
- An incentive-based return on equity adder of 200 basis points
- Approval of a capital structure that assumes 50-percent equity and 50-percent debt investment in the project
In analyzing previous requests for incentive rates, FERC has stated that it would examine the scope of the project, (i.e., monetary investment and the involvement of multiple jurisdictions), the impact of the project on reliability or congestion costs, and any unique challenges in siting or financing facing the project. Green Energy Express explains that the monetary investment already made by the principals of project has been significant, that the effect of the project would both decrease congestion costs and increase reliability on the grid controlled by the California Independent System Operator Corporation, and that its project faces unique challenges in obtaining further financing because, as a stand-alone company not affiliated with a utility, it has no rate-payer revenues to apply towards the development or initial construction costs. Green Energy Express states that FERC's approval of its requested rate incentives is required to obtain new capital investment to continue developing the project and therefore requested expedited action on its petition within 90 days.
FERC previously granted similar incentive packages for other transmission projects, including for example the Tallgrass Transmission and Prairie Wind projects in Oklahoma and Kansas. Unlike those projects, which are owned by and affiliated with traditional investor-owned utilities, the Green Energy Express project faces greater financial hurdles because it is not affiliated with a traditional utility and has no ratepayer revenues to use to defer its costs. FERC has not yet ruled on the requested rate incentives in these cases,but has been pursuing a policy of promoting investment in electric transmission infrastructure, including investments for the further development of renewable energy resources.