Green Energy Express LLC, 021810 FERC, EL09-74-001

Docket Nº:EL09-74-001
Party Name:Green Energy Express LLC
Judge Panel:Before Commissioners: Jon Wellinghoff, Chairman; Marc Spitzer, Philip D. Moeller, and John R. Norris. Kimberly D. Bose, Secretary.
Case Date:February 18, 2010
Court:Federal Energy Regulatory Commission

130 FERC ¶ 61, 117

Green Energy Express LLC

No. EL09-74-001

United States of America, Federal Energy Regulatory Commission

February 18, 2010

Before Commissioners: Jon Wellinghoff, Chairman; Marc Spitzer, Philip D. Moeller, and John R. Norris.


1. In this order, we deny rehearing of the Commission’s November 23, 2009 order in the above-captioned proceeding.1 The November 23 Order conditionally granted transmission rate incentives pursuant to section 219 of the Federal Power Act (FPA)2 and Order No. 6793 to Green Energy Express LLC (Green Energy) for its proposed transmission project (Project).4 As discussed herein, we deny Green Energy’s request for rehearing of the November 23 Order and uphold our conclusion that Green Energy failed to demonstrate that its Project satisfies the requirements of FPA section 219 by either reducing the cost of delivered power by reducing transmission congestion or ensuring reliability. We also uphold the November 23 Order’s decision to condition Green Energy’s requested abandoned cost recovery incentive on approval of the Project in the California Independent System Operator Corporation’s (CAISO) transmission planning process.

I. Background

2. On September 9, 2009, Green Energy filed a petition for declaratory order (Petition) requesting the following transmission rate incentives for the Project: (1) deferred recovery of pre-commercial expenses; (2) inclusion of 100 percent construction work in progress in rate base; (3) abandoned plant cost recovery; (4) a return on equity (ROE) adder of 50 basis points for participating in a qualifying Transmission Organization; (5) an ROE adder of 100 basis points in recognition of Green Energy’s status as an independent transmission company; (6) an ROE adder of 50 basis points to otherwise compensate for the unique risks and challenges faced by the Project and Green Energy’s investors; and (7) a hypothetical capital structure of 50 percent debt and 50 percent equity.

3. The November 23 Order found that, while the Project would be eligible for incentives under Order No. 679, Green Energy did not make a satisfactory demonstration that its Project satisfied the section 219 requirement of either reducing the cost of delivered power by reducing congestion or ensuring reliability.5 Therefore, the November 23 Order conditioned granting the incentives on approval of the Project in the CAISO’s planning process, and directed Green Energy to submit a filing within 30 days of approval or disapproval of the Project in the CAISO’s planning process. In accordance with Order No. 679-A, the November 23 Order required Green Energy to show that, if the Project were approved in the CAISO’s planning process, such process evaluated whether the Project reduced congestion or ensured reliability.

II. Request for Rehearing

4. In its rehearing request, Green Energy asserts that the Commission erred in two respects. First, Green Energy argues that the Commission erred in finding that the Petition failed to demonstrate that the Project satisfied section 219’s requirement that it either reduce the cost of delivered power by reducing congestion or ensure reliability. Second, Green Energy contends that, even if the Commission had correctly concluded that the Project failed to meet the section 219 requirement, it erred in conditioning the abandoned cost recovery incentive on approval of the Project in the CAISO’s planning process.

A. Whether the Commission Correctly Concluded that Green Energy Failed to Satisfy FPA Section 219’s Requirement

5. Green Energy argues that its Petition and the two engineering studies included in the Petition clearly demonstrated the economic and reliability benefits of the Project and were consistent with the nature of submissions provided in earlier rate incentive proceedings. Green Energy states that its economic analysis explains that the Project has been designed to allow for the transfer of up to 2, 000 MW from renewable generation resources (primarily solar) in remote locations in eastern Riverside County, California to load centers in southern California. According to Green Energy, the energy supplied by these low-operating cost solar resources could be used to replace and reduce dispatch of costly fossil-fired thermal generation plants. Green Energy states that the economic analysis indicated that the gross savings to consumers would be $81.6 million to $169 million annually if the Project is constructed. In addition, Green Energy states that its gross savings estimate did not take into account additional benefits from the use of advanced technologies.

6. Further, Green Energy explains that the economic analysis conducted by ZGlobal Inc. (ZGlobal) used an energy forecasting and analysis tool to perform a security-constrained unit commitment analysis for resources and loads on the CAISO-controlled grid. Based on those results, ZGlobal calculated marginal costs for energy, congestion, losses, and other economic components. In addition, Green Energy explains that it used the CAISO’s approved Transmission Economic Assessment Methodology, which was developed in a stakeholder process and has been used in prior cases to evaluate the need for economic transmission projects. Green Energy states that, using a 2015 base case, the analysis assumed an additional level of renewable energy production based on projections by the California Energy Commission, and assumed that certain planned, large transmission projects are constructed and in service.

7. Green Energy also contends that congestion costs are driven by transmission loading that prevents the transfer of power produced from the most efficient generating units. In its economic analysis, Green Energy found that the Project would result in substantial savings by allowing loads in southern California to be served by low operating cost renewable generation resources rather than higher cost fossil fuel generation resources. Green Energy recites the estimated cost savings that it set forth in the Petition.

8. Green Energy argues that, despite this data and the detailed explanation of the assumptions underlying the economic analysis, the November 23 Order found, without explanation, that the analysis was inconclusive as to whether the Project would reduce transmission congestion. Green Energy notes that the November 23 Order’s only specific criticism concerned the four-week sample period used in the economic analysis. However, Green Energy contends that the November 23 Order never explains why the estimate in the economic analysis is inconclusive while finding that applicants in other rate incentive proceedings had “clearly demonstrated” the economic benefits of their projects. For example, Green Energy argues that the applicant in Pioneer Transmission, LLC6had conceded that its economic studies did not calculate the precise level of congestion savings because certain generator pricing data was unavailable and, as a result, a wide range of possible outcomes was studied. Thus, Green Energy contends, the applicant in Pioneer presented data that was no more clear or conclusive than what was demonstrated in this case.

9. With regard to the November 23 Order’s criticism of Green Energy’s use of the four-week sample period in the economic analysis, Green Energy explains that ZGlobal selected a one-week sample from each season in order to conservatively incorporate seasonal sensitivity into its analysis. Green Energy argues that, by incorporating shoulder and off-peak seasonal energy cost assumptions, the analysis ensures that economic savings are not overstated by modeling peak periods only. Green Energy argues that the study provided by Pioneer Transmission, the applicant in Pioneer, was limited to projected conditions of a single summer peak period, which would normally be expected to overstate both congestion and reliability benefits.

10. Green Energy also argues that the November 23 Order erred in finding that the applicant in Green Power Express, LP7 made a persuasive case that its project satisfied section 219 through the submission of materials that included an engineering affidavit and an outside study. Green Energy contends that the ZGlobal analysis was an outside study that it had commissioned, similar to what had been submitted in Green Power Express, and that the entire study represents an engineering analysis that used a Western Electricity Coordinating Council (WECC) power flow base case to show the impact of the Project on the grid and the resulting estimated economic benefits.

11. In addition, Green Energy argues that the November 23 Order fails to acknowledge the beneficial reliability impacts supported by the Project, and instead provides only a conclusory statement that the Commission had evaluated the studies and find that they do not provide the necessary support. Green Energy explains that its Petition included the testimony of Mr. Philip G. Harris, one of the company’s principals, who testified that the Project would install an advanced technology phase-angle regulating transformer at a new substation. Green Energy states that, according to Mr. Harris, this would allow power flow to be redirected to the new 500 kV line, reduce loading on the existing Eagle Mountain-Julian Hinds-Mirage transmission line, and give the CAISO more granular control over the AC network in the Eagle Mountain-Devers area.

12. Moreover, Green Energy states that its feasibility analysis undertook extensive power flow and contingency analyses of the Project, using the most recently available WECC power flow data representing a power system configuration for 2015 as the base case. Green Energy further explains that the analysis modeled the impact of the Project on transmission in the vicinity of the...

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