The New York Public Service Commission along with environmental advocates are urging the Federal Energy Regulatory Commission to approve a proposal from the state’s grid operator to make ratepayers across the state pay for local transmission upgrades needed to meet state clean energy goals.
The New York Independent System Operator’s proposal meets FERC’s “beneficiaries pay” approach to transmission cost allocation and would establish a flexible rate mechanism that would help contain costs, the Natural Resources Defense Council and Sustainable FERC Project said in comments filed Tuesday at the agency.
However, LS Power subsidiaries and a trade group for New York municipal and cooperative utilities oppose the proposal, which could affect an estimated $4.4 billion in transmission projects. LS Power argued the proposal would insulate the utilities from competition by giving them the sole right to build the upgrades in violation of FERC rules.
NYISO on June 21 asked FERC to approve a cost-sharing and recovery agreement, or CSRA, among New York’s investor-owned utilities, as well as tariff changes, for transmission upgrades that the grid operator said are needed to advance the state’s clean energy goals.
The upgrades are expected to create on- and off-ramps for clean energy projects to access the high-voltage transmission system and local loads, NYISO said.
The upgrades will benefit ratepayers across New York and those costs would be shared on a volumetric load-ratio share basis, according to NYISO, which asked that its proposal take effect Aug. 22.
The New York PSC urged FERC to approve the agreement, saying it was in line with the commission’s policy statement on voluntary transmission cost-sharing agreements that are outside the agency’s Order 1000 transmission rules.
The New York PSC said it is reviewing two utility petitions for local transmission upgrades, and another one is set to be filed by Jan 1.
“Timely acceptance of the CSRA and tariff amendments is critical to providing a cost allocation and recovery framework that will enable expedient development of the local transmission projects needed to fulfill the renewable generation requirements established in New York State’s [Climate Leadership and Community Protection Act] and Accelerated Renewable [Energy Growth and Community Benefit] Act,” the PSC said.
Driven by electrification of multiple sectors, NYISO expects electricity use to grow by 30% from 2021 levels to nearly 200,000 GWh in 2052 and peak demand to climb over 40% to 44,547 MW in the same period, creating a need for local transmission and distribution and high-voltage transmission system investments, according to NRDC and Sustainable FERC.
The Accelerated Renewables Act in 2020 directed the New York PSC to identify transmission upgrades needed to meet the state’s energy goals and to set up planning processes to support their development, the groups noted.
“The proposal will enable and encourage the [New York transmission owners] to consider, propose, and construct transmission projects that they may otherwise not undertake out of the concern over allocating the revenue requirements of the projects to customers only in their footprint while the benefits of the projects inure to a broader swath of customers,” NRDC and Sustainable FERC said.
Also, under the proposed agreement, the utilities’ return on equity and capital structure for any upgrades will be capped at their FERC-approved ROE and capital structure, which will help contain costs, the groups said.
However, NYISO’s proposal skirts FERC Order 1000 requirements because it would allow a project to be deemed “local” for planning purposes but regional for cost allocation, according to LSP Transmission Holdings II and LS Power Grid New York Corp. Under Order 1000, the cost of local projects cannot be shared regionally, while regional projects are open to competition.
The proposal would “eviscerate” Order 1000 requirements by allowing the investor-owned utilities to exclusively plan and build regionally beneficial projects addressing public policy drivers without a competitive process that FERC said was needed to ensure just and reasonable rates for such regionally cost allocated projects, LS Power said.
Also, NYISO lacks the authority to make the tariff proposal because it wasn’t vetted through a stakeholder process, according to LS Power.
There isn’t any evidence the proposed load-share cost allocation approach is just and reasonable, the New York Association of Public Power told FERC.
New York’s municipal and cooperative utilities represent less than 3% of the state’s load but are contributing about 10% of its clean energy, the trade group said.
“The in-state municipals and cooperatives are doing more than their load-ratio share of contributing to the state’s clean energy goals,” the group said. “Thus, there is an imbalance of costs and benefits contained within applicants’ proposal which violates the cost causation principle.”