FERC rejects CAISO proposal to allocate some interconnection costs regionally

Dive Brief:

The Federal Energy Regulatory Commission last week rejected tariff amendment proposals from California's grid operator that would have developed a new class of participating transmission owner for whom low-voltage, generator-interconnection-driven network upgrade costs would be allocated regionally, rather than locally.
Republicans on the commission, however, were unconvinced the change would allocate the costs of network upgrades to those that benefit.
At issue is Valley Electric Association, which is one of four participating transmission owners (PTOs) in the California ISO, though it supports only a small percentage of the grid's load.

Dive Insight:

The debate boils down to this: renewable generators see Valley Electric's system as a good place to locate renewable infrastructure — but it is small, and located in Nevada, and at least one commissioner said its ratepayers should not have to bear the costs of system improvements that will benefit others.

"The location of Valley Electric has led to a volume of interconnection requests to meet California’s renewable targets that is grossly disproportionate to its customer base," former Chairman Cheryl LaFleur wrote in her dissent. "It is simply unfair to require the 0.27 percent of CAISO’s customer base in Nevada to bear the costs of these interconnections."

For some comparison: Valley Electric has an annual gross load of 545 GWh, according to the commission's order—less than 1% of the system's annual gross load. Pacific Gas & Electric, however, is CAISO’s largest PTO and has an annual gross load of 91,500 GWh.

CAISO's proposal would have set a new "Certified Small PTO" for whom low-voltage, generator-interconnection-driven network upgrade costs would be allocated regionally, rather than locally. The interconnection costs for Vallery Electric's system, said LaFleur, "are not remotely commensurate with the benefits they receive."

The two new Republican members, Chairman Neil Chatterjee and Commissioner Robert Powelson, disagreed.

They noted that FERC has previously considered proposals regarding alternative cost allocation methodologies for network upgrades assigned to low-load zones. "However, CAISO has not demonstrated that its proposal allocates the costs of network upgrades to those that benefit from the network upgrades," they wrote in FERC's order.