On April 10, the Federal Energy Regulatory Commission approved a request for various transmission infrastructure investment incentives submitted by Green Power Express LP (GPE), a transmission-only partnership that proposes to build a 765 kV "green superhighway" consisting of three interconnected loops in North and South Dakota, Minnesota, and Iowa. GPE’s proposal will also extend radially into Wisconsin, Illinois, and Indiana, making use of existing substations in some locations and constructing high voltage substations in others. In total, the project will include approximately 3,000 miles of transmission lines that reach 12,000 MW of wind and stored energy. GPE estimates the project’s cost at $10-12 billion and hopes the project will be in service in 2020.
FERC’s approved the following (non-exhaustive) key incentives that reduce GPE’s exposure to risk in moving the project forward.
Abandoned Plant. FERC granted GPE’s request to recover prudently incurred expenses if the project is abandoned for reasons outside of GPE’s control. FERC stated that the recovery of abadonment costs is a means for encouraging transmission development, reducing the risk that GPE’s investors may lose their entire investment.
Regulatory Asset. FERC will allow GPE to create initial and subsequent vintage regulatory assets in order to defer pre-construction, development, and start-up costs until GPE has customers from which it may later recover those costs. Such cost deferral will also help GPE attract financiers.
Construction Work in Progress. FERC approved GPE’s request to include 100 percent of construction work in progress in its revenue requirement, allowing GPE to service its debt and reduce borrowing over the project’s development–something that would otherwise be difficult for a $10-12 billion project with a 2020 in-service date.
The incentives granted to GPE, as well as other recent changes to FERC’s transmission policies, show that the agency is becoming increasingly serious about spurring transmission development forward. If we are to reach the 62 GW of wind currently in the Midwest ISO interconnection queue, as well as other renewable resources elsewhere, transmission developers will need creative regulatory solutions to help attract financiers and gain firm commitments from generation developers. FERC continues to take positive steps forward.