FERC conditionally grants incentives for proposed New York transmission line

As WPL Blog readers will know, a 190-mile high capacity transmission line from upstate to down, known as the New York Regional Interconnection, or NYRI, has been proposed and is under review in multiple municipalities and at the New York Public Service Commission (PSC).

A recent decision by the Federal Energy Regulatory Commission (FERC) would help the NYRI by conditionally approving incentive rates. The decision is conditioned on the PSC finding that the project will ensure reliability or reduce congestion, and granting siting approval. NYRI has argued that the transmission line will increase the economic benefits of renewable resources that would otherwise be confined upstate.

From a FERC press release:

The Federal Energy Regulatory Commission (FERC) today approved incentive rates for the New York Regional Interconnect (NYRI) on condition that the New York State Public Service Commission determines the 190-mile transmission line either ensures reliability or reduces congestion, and approves siting for the project.

FERC recognizes the need for and promotes greater investment in energy infrastructure to strengthen and improve reliability of the transmission grid,” FERC Chairman Joseph T. Kelliher said. “We will only approve incentive rate proposals that satisfy the requirements of the Federal Power Act and our regulations.”

Today’s action involves rates for the project. NYRI has not made any requests of FERC for federal siting approval. “That issue properly lies before the New York State Commission, and our approval today rests on the New York State Commission’s approval of the proposed project,” Kelliher said.

FERC’s conditional rate approval includes a 275 basis point, or 2.75 percent, addition to the return on equity (ROE) that will be earned by the company. That incentive includes: 50 basis points for future participation in the New York Independent System Operator, Inc. (NYISO); 100 basis points for forming an independent transmission company (transco); and 125 basis points for a combined transmission and advanced technology incentive…

The full FERC NYRI press release is here. The 22-page FERC order of September 18  in Docket No. EL08-39-000 is here.

In a written statement, FERC Commissioner Moeller added:

I would like to highlight our action today in response to the New York Regional Interconnect’s petition seeking incentive-rate treatment for a proposed high-voltage transmission line. At an estimated cost of approximately $2 billion, the project is substantial in magnitude as it involves constructing a 190-mile DC line that will traverse dozens of municipalities across upstate New York. Moreover, the significant regulatory risk that the line will encounter, as well as the risk associated with siting the line on private lands are factors that were considered before reaching the decision to support the conditional approval of incentive rate treatment for this project.

And while the Commission has not been unanimous in its support for incentives in recent cases involving transmission projects, I should recognize that this order gained the support of all the voting commissioners. Again, 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.

As I’ve stated previously, 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. Perhaps, so much so that we’ve seen an increase in the number of public utilities seeking incentive rate treatment. And while I will continue to judge the merits of each request on a case-by-case basis, consistent with the statute and our policies, I’d ike to emphasize my belief that the Commission’s ability to provide incentives has spurred needed [i]nvestment in transmission.

Response to the decision, including opposition by both of New York’s U.S. senators, may be found in this article by the Utica Observer-Dispatch (9/18).