Dive Brief:
- On a 4-1 vote, the Federal Energy Regulatory Commission on Friday approved large load transmission tariff measures proposed by Duke Energy Carolinas.
- The approved provisions include the rate treatment and financial security requirements for large-load-driven network upgrades, as well as shortfall payments for loads of 100 MW or larger. But even as it greenlit the plan, FERC urged Duke — and other transmission owners — to do even more to protect existing customers from paying for costs caused by data centers and other large loads.
- “Duke’s proposal offers meaningful, if imperfect, new protections, and for that reason the commission is right to accept it,” FERC Commissioner David Rosner said in a concurring statement, noting that the utility’s previous rules lacked any cost-shift protections for residential or small business customers.
Dive Insight:
FERC’s decision comes as the agency is awaiting proposals from regional transmission organizations and independent system operators for beefing up their processes for interconnecting large loads such as data centers.
Those proposals — due next month — are driven by a set of “show cause” orders FERC issued in June that found that RTO and ISO large load interconnection rules appear to be inadequate, including for protecting existing customers from cost shifts when large loads require grid system upgrades to come online.
The show cause orders don’t affect Duke Energy Carolinas and other transmission owners that operate outside RTOs and ISOs. The utility has about 3 million retail customers in the Carolinas.
In response to growing large-load activity on its system, Duke Energy Carolinas on May 29 proposed revising its pro forma network integration transmission service agreement to add specific large-load provisions.
The new provisions include a requirement that new or transferred large loads pay a “committed revenue contribution” equal to 75% of the megawatt value in the load schedule for each applicable month and year for a 15-year period following the in-service date of the network upgrades required to accommodate the load, FERC said in its decision.
Transmission customers that require network upgrades to accommodate a new or transferred load also will pay a monthly charge to cover the cost of building the upgrades. Once the upgrades are in service, Duke will reimburse the transmission customer for the costs plus interest.
FERC encouraged Duke to do more to protect its existing customers from possible cost shifts caused by large loads. The utility should consider entering into individualized network integration agreements that provide greater protection against cost shifting compared with the pro forma agreement, or it could propose additional consumer protections to the just-approved pro forma NITSA, FERC said.
“We encourage transmission providers — including [Duke Energy Carolinas] — to continually reevaluate their study processes and transmission service agreements to ensure both that they are minimizing the costs of network upgrades required and that they have sufficient protections in place to shield other transmission customers from potential cost shifts as new technologies and trends in load growth emerge,” FERC said.
In his concurrence, Rosner said that Duke’s proposal highlighted a broader problem: “[C]onsumer protections are inadequate across the country.”
FERC may have to do more to protect consumers, he said.
“To the extent state regulatory actions are not sufficient to protect consumers, the commission has an obligation to seriously consider expanding the cost recovery framework it established in the Large Load Show Cause Orders,” Rosner said.
FERC Commissioner Lindsay See said in a concurring statement that the Duke order “involves one of the most pressing cost allocation issues we face: how to ensure large load pays its way and that residential and small business customers aren’t saddled with stranded costs if those loads don’t materialize, don’t take service at the expected level, or exit prematurely.”
The proposal was “not perfect,” but it was better than the status quo, which left existing customers “wholly exposed,” See said.
Duke’s proposed committed revenue contribution mechanism would have been stronger if it required transmission customers serving large loads to post financial security at “a large load-worthy scale,” See said. “That additional step would ensure that if the transmission customer serving large loads goes bankrupt, other ratepayers will not be stuck paying for grid upgrades they did not cause.”
FERC Commissioner Judy Chang voted against Duke’s proposal, saying the agency should have offered the utility guidance on how to improve it.
The proposal, for example, lacks meaningful financial security requirements or adequate transparency around executed large load agreements, Chang said in her dissent.
Also, the proposal defaults to rolled-in rate treatment for large load network upgrades, which might not adequately protect other customers, Chang said.
“I do not believe that [Duke Energy Carolinas] has demonstrated that its filing represents an acceptable level of customer protection, and the precedent the commission establishes here takes a step backwards from the strong arguments set forth in the Large Load Show Cause Orders,” Chang said.
