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NEET Midwest and Electric Transmission Incentives

In late 2018, Next Era’s affiliate. NEET Midwest, won a competitive solicitation in MISO for the so-called Hartburg-Sabine Project, a $114.8 million Market Efficiency Project identified through MISO’s 2017 comprehensive transmission planning process to relieve congestion in East Texas.  In its Selection Report, MISO determined that NEET Midwest’s proposal “offers an outstanding combination of low cost and high value, with best-in class cost and design, best-in-class project implementation plans, and top-tier plans for operations and maintenance,” and will “convey substantial benefits to ratepayers over time.”  As highlighted in the Selection Report, NEET Midwest’s “multiple categories of cost caps and cost containment measures increase cost certainty and convey substantial benefits to ratepayers over time.” Here are the cost containment measures that NEET Midwest included in their proposal:

  1. Foregoing AFUDC and CWIP – no return on investment during construction – project in-service date of mid-2023;
  2. A total project construction cost cap of $114.8 million;
  3. A cap on project O&M and the project revenue requirement during the first ten years of commercial operations;
  4. An ROE cap, including all FERC-approved rate incentives, of 9.8%, subject to reductions of up to 30 basis points for schedule delays; and
  5. A restriction on the capital structure to limit the equity share to 45%.

In addition, in Docket ER16- 2717, NEET requested from FERC and received authorization for 1) a Formula Rate for its transmission investments in MISO that is incorporated into the MISO Tariff, 2) a 50 basis point return on equity (“ROE”) adder for Independent System Operator participation (“ISO Participation Adder”); 3) a regulatory asset for NEET Midwest’s prudently incurred pre-commercial and formation costs for later recovery, with carrying charges (“Regulatory Asset Incentive”); and 4) a hypothetical capital structure of 60% equity and 40% debt, to remain in effect until the first transmission project is placed in service (“Hypothetical Capital Structure Incentive”).  Any incentive that FERC granted would be subservient to the terms of NEET Midwest’s Proposal for the Hartburg/Sabine Project described above. 
On January 4, 2019, NEET Midwest requested the abandonment incentive for this project.  This request is pending before FERC in ER19-775.      

Paul Dumais's picture

Thank Paul for the Post!

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