CA Agencies See Fed "Gold Plating"

The Federal Energy Regulatory Commission proposes "gold plating investments" in the nation's power grid, according to the California Public Utilities Commission and the Electricity Oversight Board. The two charge that FERC is overspending to implement congressional directives to develop incentive-based rate treatments of electric transmission. FERC's "proposals will transfer the risk from the investment community to ratepayers who have no mechanism for hedging such risk," concluded the Oversight Board in comments to regulators. The CPUC, however, is not opposed to carefully tailored financial incentives, noting that they "may be appropriate. We also note that transmission system under-investment may be attributable to many factors other than the absence of incentive-based" rates. The "incentives" that California entities were commenting on have few specifics. FERC calls for a rate of return on equity "sufficient to attract new investment." Other proposed incentives include recovery of construction costs while the transmission is being built instead of after completion, accelerated depreciation, and deferred cost recovery. Utilities, such as San Diego Gas & Electric, are keen on an incentive plan. However, the California Independent System Operator cautioned against giving incentives to all transmission projects - although it supports the concept. CAISO called on FERC to either deny or, at a minimum, carefully review any proposal that would provide incentives for facilities not found to be needed by an independent system operator or regional transmission operator. It is not the planning process that concerns the Imperial Irrigation District. Rather, it is CAISO's efforts to expand its control area. IID described it as one of "two major impediments" to new transmission investments by public power entities in California. The second is CAISO's financial transmission rights model. Rather than a physical transmission rights model, its treatment of existing transmission contracts is in a state of flux. "These actions deter, rather than promote, participation by public power" in new transmission projects, IID stated.

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CA Agencies See Fed “Gold Plating”

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