Tuesday, March 19, 2019

FERC Blocks GridLiance Oklahoma Tx Acquisition

By Robert Mullin

FERC on Wednesday rejected GridLiance High Plains’ plans to acquire transmission assets from Oklahoma-based People’s Electric Cooperative, finding the company failed to prove the transaction would not have an adverse impact on rates (EC18-122).

The proposed deal would have seen GridLiance take over 55 miles of 138-kV lines and a substation from People’s, which provides electricity to about 15,000 members across 11 Oklahoma counties and operates a 4,500-mile distribution and transmission network.

People’s Electric Cooperative line in Oklahoma | People’s Electric Cooperative

Completion of the transaction was subject to FERC accepting GridLiance’s proposal to earn an annual transmission revenue requirement on the assets by moving them under the company’s commission-approved rates in SPP. The co-op is not a member of the RTO.

In making its case for the acquisition, GridLiance contended the rate impact would be small: about $2.7 million, based on a $14.9 million net book valuation of the assets. It said “non-quantifiable” benefits would offset those costs.

In rejecting GridLiance’s request, the commission acknowledged that the transaction “on its face” resembled those of similar proposals it had approved in the past. Like GridLiance, the buying party in each of those deals acknowledged the acquisition would increase rates for transmission customers, “which the commission has acknowledged ‘is not unexpected’ when the transaction involves ‘ownership changes from a not-for-profit utility to a for-profit business with a different capital structure, tax obligations and the need to earn a return,’” the commission wrote, citing a previous decision.

In each of those transactions, applicants contended that the rate increases were justified by the non-quantifiable benefits of transmission company ownership and therefore not “adverse.”

But in Wednesday’s decision, the commission pointed out that its approvals were based on the specific facts at play in each request. GridLiance, the commission said, failed to back up its promised benefits, or show that they would offset the proposed rate increases.

FERC questioned GridLiance’s claim that the acquisition would increase reliability for retail customers receiving service over People’s transmission system, noting that only 47 MW of load are being served by the transmission feeds being acquired.

“Without further evidence as to the reliability benefits of the transaction, we cannot find that the benefits of increasing the reliability of service to this relatively small amount of retail load is sufficient to offset the rate increase resulting from GridLiance’s acquisition of the assets,” the commission said.

The commission also rejected GridLiance’s contention that the transaction would provide the non-quantifiable benefit of promoting transmission company ownership of facilities.

“This argument simply restates the general holding of the commission’s cases described above without explaining how GridLiance’s ownership of the assets provides benefits that offset the projected rate increase,” FERC said.

The commission also rebuffed GridLiance’s claim that its ownership would improve operations and efficiency in SPP, pointing out that while the lines could be made more reliable if looped into the RTO’s system, they would still be primarily serving the same small volume of industrial load. “GridLiance has failed to demonstrate how placing the assets under SPP’s control would maximize the use of the assets, minimize the need for new transmission or provide new avenues for transmission expansion,” the commission said.

Finally, FERC rejected GridLiance’s argument that the acquisition would further the commission’s goal of increased RTO participation among publicly owned utilities.

“Here, the addition of 55 miles of transmission facilities whose only use is to deliver power to industrial customers does not materially add to the size or scope of SPP, nor has it been shown to provide other material benefits to SPP,” the commission concluded.

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