June 6, 2012
Previously published on June 4, 2012
On May 22, 2012, FERC issued an order allowing Rock Island Clean Line LLC (“Rock Island”), a subsidiary of Clean Line Energy LLC, to allocate up to 75 percent of its planned capacity on a proposed transmission line to anchor customers before conducting an open season for the remaining capacity. However, in the same order, the Commission denied Rock Island’s request to favor renewable energy projects for the remaining quarter of transmission capacity on the proposed line. Rock Island argued in its application that establishing a preference for renewable projects would be justified because interested stakeholders and potential customers, including environmental organizations and renewable energy developers, are less likely to support a transmission project that will ultimately be used to transmit coal-fired generation. The Commission determined Rock Island had not justified its preferential treatment of renewable resources over other generators. However, FERC will permit Rock Island to charge negotiated rates with anchor shippers, and the majority of those anchor shippers are expected to be wind farms in South Dakota, Nebraska, Minnesota, and Iowa. The Rock Island order suggests FERC is increasingly comfortable with the certainty the anchor tenant model provides for the investment community. Rock Island had argued that obstacles to financing merchant transmission projects can be reduced to the extent that a transmission developer can negotiate financially secure pre-subscription agreements with creditworthy anchor customers. Since 2009, the Commission has approved the pre-subscribing of capacity on proposed merchant developer lines in an effort to increase transmission development. FERC acknowledged this trend in the Rock Island order and stated “[w]e have approved similar requests to allocate capacity to anchor customers in the past in light of the difficulties in financing merchant transmission projects.” The specific path for the new transmission line has not been determined, but the project will be an approximately 600 kV HVDC line that will be 500 miles long. The line will deliver 3,500 MW of power initially to the PJM Interconnection, and Rock Island has already submitted a request to interconnect with the PJM system. Rock Island has also begun the study process in order to eventually interconnect with the Midwest Independent Transmission System Operator (“MISO”). Once Rock Island’s transmission line is complete, operational control of the transmission line will be turned over to PJM or MISO.
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