On September 10, 2021, the Federal Energy Regulatory Commission (“FERC”) hosted a technical conference to discuss a proposal submitted by Working for Advanced Transmission Technologies (“WATT”) and Advanced Energy Economy (“AEE”), advancing that a shared savings approach be taken to promote greater deployment of grid enhancing technologies (i.e., dynamic line ratings, power flow control, and topology optimization). For small grid enhancing technology projects (those that cost below $2.5 million), WATT/AEE suggest that a transmission owner would be able to propose a project for FERC’s consideration at any time. For approved projects, WATT/AEE suggest FERC allow transmission owners to receive full cost of service rate base recovery, including a return on equity (“ROE”) on invested capital, and a 25% share of the net savings (project benefits less actual project costs) with the remainder flowing to customers. WATT/AEE suggest that mid-sized projects (those that cost between $2.5 million and $25 million) be evaluated by the balancing authority or planning authority, where cost allocation for such projects would be evaluated across the planning authority’s region and allocated to project beneficiaries as appropriate. Project developers and transmission owners would be entitled to apply to FERC for the full cost of service rate base recovery, including a ROE on invested capital. To be approved, both small and mid-sized projects would have to show a four to one benefit to cost ratio and incentives for such projects would be capped at $10 million.
During the technical conference, participants discussed that implementing grid enhancing technology projects may lessen the need for traditional transmission projects, which are more expensive than grid enhancing technologies. Notably, several participants indicated that providing a 25% share of the net savings to transmission owners for small projects is too low an incentive, given the low price of grid enhancing technologies. Participants also raised that implementing new technology will require a closer look at enhancements to the North American Electric Reliability Corporation (“NERC”) physical and cyber security standards, as well as communication protocols with regard to the data derived from such technologies. Participants also stressed that, to successfully implement grid enhancing technologies, the whole transmission line will need to be evaluated and communication assumptions will need to be aligned across neighboring areas that are outside of regional transmission operator and independent system operator (“RTO/ISO”) areas. During the technical conference, Colorado Public Utilities Commission Commissioner John Gavan stressed that it will be important to bring the expertise of RTOs/ISOs to co-operatives, especially in the West, as making generation and transmission co-operatives part of the conversation will be pivotal.
WATT/AEE’s Shared Savings Proposal is available here and more information about the technical conference is available here.
For more information, please contact Michael Postar, Sean Neal, or Sylwia Dakowicz.
