CPUC Plans to Create Transmission Rate Backstop

By Published On: May 5, 2006

A California Public Utilities Commission proposed decision would assure utilities and renewables developers that the costs of new transmission projects will be covered by rates if federal regulators deny cost recovery. The draft decision by administrative law judge Julie Halligan sets eligibility parameters for recovery of project investments that count toward the investor-owned utilities’ renewables portfolio standard mandate. The criteria are being set pursuant to Public Utilities Code Section 399.25. The proceeding began last September “to ensure that California has the necessary transmission infrastructure in place” in order to meet the renewables portfolio standard goals, states Halligan’s proposed order. Who bears the up-front costs of new and expanded high-voltage lines serving renewables projects has been a contentious, ongoing struggle at the state and federal levels. It is central to the development of 4,000 MW of new wind power in the Tehachapis, geothermal power in Imperial County, and the Stirling Energy solar dish projects with Southern California Edison and San Diego Gas & Electric. The up-front cost debate is a chicken-and-egg argument. Utilities worry about picking up the tab for independent projects that don’t come on line, leaving them with stranded assets. Solar, wind, geothermal, and other green power developers insist that they cannot bear the up-front cost needed for the development of lines hooking their projects to the grid. They don’t want to take the financial risk of building projects that cannot connect to the transmission highway.

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