The Edison Electric Institute and California’s investor-owned utilities — Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric — on Monday asked the Federal Energy Regulatory Commission to reverse its decision finding PG&E wasn’t eligible for a regional transmission organization “adder” to its transmission rates.
EEI, a trade group for IOUs, contends the Federal Power Act requires FERC to give transmission owners an incentive to be members of RTOs and independent system operators, according to a filing at the agency.
The incentive of an extra 0.5% return on equity — worth an estimated $41.4 million annually for PG&E — helps offset the risks of being an RTO or ISO member, such as increased tensions between state decisions and policies and wholesale market rules as well as the loss of operational control of transmission assets, EEI said.
The dispute over PG&E’s RTO adder comes amid expectations that utilities and other companies will embark on a major buildout of the transmission system to improve reliability and access relatively low-cost renewable energy resources.
In late December, FERC decided PG&E was ineligible for the ROE incentive adder because a 2022 state law requires California utilities to be California Independent System Operator members and bars them from leaving without California Public Utilities Commission approval. The RTO incentive was one part of PG&E’s $2.8 billion annual formula transmission rate request, which FERC “accepted” and set for settlement procedures and hearings.
Under FERC’s policy for transmission incentives, issued in 2012, the agency said its RTO incentive is for utilities and other transmission owners who voluntarily remain in regional transmission organizations and ISOs.
EEI said FERC’s decision to reject PG&E’s request for an RTO adder marks an “unfortunate shift” in the agency’s approach to infrastructure investment.
Further, FERC singled out PG&E as ineligible for the RTO adder while other utilities in the state can continue to receive it, a move that is arbitrary and capricious, EEI said.
FERC made a mistake when it let a state law preempt the Federal Power Act, according to EEI. “Issues relating to RTO/ISO membership, which depend entirely on RTO/ISO operational control over transmission facilities subject to the Commission’s oversight and jurisdiction, are solely within this Commission’s jurisdiction,” EEI said.
PG&E disputed the involuntary nature of its membership in CAISO.
“Even if PG&E is required to obtain CPUC approval to withdraw from the CAISO, its ability to seek that approval makes its ongoing CAISO participation ‘voluntary,’” the San Francisco-based utility told FERC.
Also, in its decision FERC adopted a new requirement for showing “voluntariness” without an adequate explanation, PG&E said.
In a joint filing, SCE and SDG&E echoed PG&E and EEI. “There is no support in the [Federal Power Act] or Commission precedent for interpreting ‘voluntary participation’ to exclude circumstances where a utility must first obtain regulatory approval in order to withdraw from a transmission organization,” they said.
The California Department of Water Resources State Water Project, the PUC, the city and county of San Francisco, the Northern California Power Agency, and the State Water Contractors on Jan. 26 asked FERC to reject a request by EEI that it be allowed to intervene in the case after intervention deadlines had passed. FERC hasn’t ruled yet on EEI’s late intervention request.