Highlights

While FERC professes support for new independent transmission, it has approved orders in California expressing a preference for investor-owned utilities to build transmission.

The outcome of FERC's May 19th Notice of Inquiry may be a formal change in national policy that would impact the development of new independent transmission.

Michael Peevey, CPUC president, issued a powerful letter that hopefully will change the direction of several ongoing FERC proceedings.  

Recent actions and policy initiatives at the federal level have led many industry participants to express concern at the continuing viability of the independent electric transmission business in the United States.

While the Federal Energy Regulatory Commission continues to profess support for new independently owned transmission lines and has provided healthy incentives for several new development proposals, the same Commission has issued recent orders that call into question its willingness to continue providing already granted incentives to fully developed, financed and operating independent transmission lines. It has also recently approved orders giving a clear preference for investor-owned utilities to build new transmission lines in California.

On May 19th, FERC issued a public Notice of Inquiry looking into Promoting Transmission Investment Through Pricing Reform. The 42-page notice contains 74 individual and specific questions for which the Commission is soliciting public comment. Some of the questions clearly signal possible changes in Commission policy. Those questions look at the effects of the existing incentive policies, whether those policies balance the need for regulatory certainty with changing investment climates and how best to promote investment "with the assurance of just and reasonable rates." The outcome of this Notice of Inquiry may well be a formal change in national policy goals for supporting the development of new independent transmission. Participation in this FERC proceeding will be important for anyone interested in developing, owning, operating or financing an independent transmission project.  

At the same time that FERC seems to be well down the path toward articulating a new transmission development policy, its current policy gives a preference to IOUs building transmission over independently developed lines. This point was recently recognized by the president of the California Public Utilities Commission, Michael Peevey. In his April 29th letter to the California Independent System Operator concerning the CAISO's 2010-2011 Transmission Plan, the CPUC president makes note of the fact that the plan rejects all projects submitted by independent transmission developers as "unnecessary," the net result being a transmission plan for the state of California that is a "total reliance on IOU transmission development and a significant step back from the use of competitive solicitations for transmission projects." The letter expresses concern that the current trend (since 2006, 190 projects have been approved costing $7.5 billion but only Transbay Cable was not IOU sponsored) "will have the effect of strongly discouraging continued efforts by independent transmission developers to pursue projects in California." The letter concludes by asking the CAISO to "find a more balanced approach to transmission planning at this critical juncture in California's path to greater utilization of renewable resources." It's a powerful letter that hopefully will change the direction of several ongoing FERC proceedings, including the final rule on transmission planning and cost allocation currently pending at FERC.