• FERC Grants Incentives for New York Transmission Line
  • October 19, 2008
  • Law Firm: Troutman Sanders LLP - Atlanta Office
  • On September 18, FERC approved incentive rates for the New York Regional Interconnect, Inc. (“NYRI”) on condition that the New York State Public Service Commission determines that the project either ensures reliability or reduces congestion, and approves siting for the project. NYRI has proposed a 1200 MW high-voltage direct-current transmission line spanning approximately 190 miles between the Edic substation in Oneida County in upstate New York and the Rock Tavern substation in southeastern New York.

    On February 12, 2008, as amended on May 28, 2008, NYRI filed a petition for declaratory order, requesting conditional Commission approval for incentive-rate treatment for the project as consistent with Order No. 679. Order No. 679 implements section 1241 of the Energy Policy Act of 2005 which directed FERC to establish incentive-based rate treatments for new transmission construction. The applicant must demonstrate that the facilities either ensure reliability or reduce the cost of delivered power by reducing transmission congestion. NYRI asked for approval of rate incentives for the project conditioned on receipt of state siting approval.

    The Commission conditionally approved a 275 basis point, or 2.75 percent, addition to the return on equity (“ROE”) for the Project. The ROE incentives consist of the following: (1) 50 basis points for future participation in the New York Independent System Operator, Inc.; (2) 100 basis points for forming an independent transmission company; and (3) 125 basis points for a combined transmission and advanced technology incentive.

    FERC did not set the base ROE, but said the 2.75 percent adder would be granted “subject to the ROE being within the zone of reasonable returns.” This will be determined when NYRI makes a future rate filing under section 205 of the Federal Power Act. The adders are intended to enable NYRI to attract investment necessary to develop the project. FERC also dismissed as premature comments related to rate impacts and cost allocations, which will be evaluated if the project is approved and NYRI makes a rate filing with FERC.

    FERC Commissioner Philip Moeller noted that the order gained the support of all voting commissioners even though the Commission has not been unanimous in its support for incentives in recent cases involving transmission projects. “I stress that NYRI’s proposal is both ambitious and fraught with risks, and in light of the circumstances presented in its application I believe that the particular incentives that we’re conditionally approving will achieve the purposes of FPA section 219,” he said. He also stated that “our country needs to play some serious catch-up in building the transmission infrastructure that is needed to deliver reliable and reasonably-priced power to market. Providing incentives to utilities, as authorized by Congress, has proven to be an effective way to encourage utilities to invest their dollars in new transmission infrastructure.”

    NYRI estimates the cost of the Project to be $1.8 to $2.1 billion and expects it to be in service by 2012. The Commission’s order is available at http://www.ferc.gov/whats-new/comm-meet/2008/091808/E-31.pdf.