California Independent System Operator Corporation (CAISO) Proposes Transmission Tariff Changes

On January 30, 2014, the California Independent System Operator Corporation (“CAISO”) submitted proposed tariff changes to the Federal Energy Regulatory Commission (“FERC”) in Docket No. ER14-1206-000 to implement policy and process enhancements to the project sponsor competitive selection process that takes place during the third stage of CAISO’s transmission planning process. The proposed tariff changes were developed by CAISO over the past several months as part of its Competitive Transmission Improvements stakeholder initiative, which began in September 2013. The proposed tariff changes address five issues:

1. The changes provide a mechanism by which an approved project sponsor that is not a participating transmission owner can recover FERC-approved transmission revenue requirements associated with projects under construction prior to the time that the facilities are turned over to CAISO control. Currently, cost recovery through CAISO transmission access charges is limited by the CAISO tariff to participating transmission owners. Participating transmission owners may recover their revenue requirement, which includes the costs associated with facilities turned over to CAISO operational control and for purposes of construction work in progress (“CWIP”) and abandoned plant cost recovery, transmission facilities that are under construction and slated to be turned over to CAISO control. As defined by the CAISO tariff, however, a project sponsor would not become a participating transmission owner until its eligible facility is operational and turned over to CAISO control. The proposed tariff changes provide a mechanism by which project sponsors can recover FERC-approved CWIP and abandoned plant costs prior to becoming a Participating Transmission Owner.
2. The tariff changes clarify that project sponsors that were not participating transmission owners prior to April 1, 2014 will only be required to turn over to CAISO control, rights and interests in those regional transmission facilities the project sponsor was selected to construct and operate in the CAISO competitive solicitation process. This proposed change is intended to address stakeholder concerns over the scope of projects that would be required to be turned over to CAISO control when a project sponsor becomes a participating transmission owner.
3. The tariff changes include provisions for the collection of an application deposit fee for each project proposed in the competitive solicitation process. As proposed, each project sponsor will be required to provide an application deposit of $75,000 and if the pro rata amount required to pay actual costs of the validation, qualification, and selection process for each solution is determined to be greater than $75,000 per applicant, then each project sponsor would be obligated to provide an additional amount up to a cap of $150,000. If the pro rata amount required to pay actual costs is less than $75,000 per applicant, each project sponsor will be refunded the unused amount of its deposit with interest.
4. CAISO proposes to remove the requirement that project sponsors initiate the siting process within 120 days of selection. Instead, CAISO proposes to require project sponsors to enter into the project sponsor agreement within 120 days of their selection notification.
5. CAISO proposes to add tariff language to clarify the requirements that must be met for CAISO approval to transfer or assign a project. Specifically, CAISO proposes that a project transferee be required to (1) meet the qualification criteria; (2) agree to honor any binding cost cap agreed to by the approved project sponsor; (3) agree to meet the selection factors relied upon by the CAISO in selecting the approved project sponsor; (4) assume all rights and responsibilities set forth in the approved project sponsor agreement.

CAISO requests that FERC approve the proposed changes effective April 1, 2014, which CAISO states will allow it to implement the proposed changes during Phase 3 of the 2014 transmission planning cycle. FERC is now considering comments on the proposed tariff charges.