Dive Brief:
- LS Power’s lawsuits aimed at opening opportunities for competition for the construction of transmission projects in the Midcontinent Independent System Operator’s footprint were denied in federal appeals court Friday.
- In one case, the U.S. Court of Appeals for the District of Columbia ruled the Federal Energy Regulatory Commission properly approved MISO’s proposals setting minimum voltage thresholds for certain projects eligible for competition and exempting from competition projects needed to address near-term reliability issues.
- Separately, the court upheld FERC’s approval of a MISO proposal allowing baseline reliability projects built in a single zone to be given to an incumbent utility, even if a project benefits other MISO zones.
Dive Insight:
The court decisions come as FERC is proposing to revise its rules for regional transmission planning and cost allocation, sparking debate over the role competition should play in transmission construction, a multibillion-dollar endeavor.
In part, the dispute centers on whether third parties like LS Power should be able to compete to build power lines or whether incumbent utilities should get those projects.
In one case, the court rejected LS Power Midcontinent’s arguments that FERC erred when it let MISO lower the minimum threshold for market efficiency projects, a type of project that is open to competitive bidding, from 345 kV to 230 kV. The transmission company argued the threshold should have been lowered from 345 kV to 100 kV.
“It was reasonable for FERC to accept a 230 kV threshold, which increases the overall number of projects subject to regional cost allocation and competition, as the new lower bound for Market Efficiency Projects,” the appeals court said, citing previous court findings.
However, the court noted that projects under 230 kV could provide regional benefits, which would trigger regional cost allocation and a competitive process.
“We share petitioners’ concern that FERC’s holding here — that as long as MISO does not attempt to calculate any regional benefits, it may locally allocate the costs of sub-230 kV projects — encourages a head-in-the-sand approach to cost allocation,” the court said, adding that the issue was outside the scope of the case.
Also, FERC’s decision to accept MISO’s proposal to exempt “immediate need” reliability projects from competition was based on sound reasoning, according to the court.
In the second case, LS Power and two groups representing transmission customers argued new evidence shows there are widespread regional benefits from baseline reliability projects, which are assigned to incumbent utilities under a 2013 FERC decision. Generally, projects in MISO with regional benefits have regional cost allocation, making them eligible to be built by companies like LS Power.
The court said the petitioners’ evidence was of limited scope, exposing a cost-causation problem for only 12 out of about 400 projects.
“And yet the relief they seek is expansive — they argue that location-based cost allocation is no longer just and reasonable for the entire category of Baseline Reliability Projects,” the court said. “Given that imbalance, it was not arbitrary or capricious for the Commission to deny Petitioners’ complaint and retain the current cost-allocation regime for Baseline Reliability Projects.”
