On March 4, 2010, FERC approved a transfer of title for the 53-mile, 400 MW high voltage, direct-current transmission line and its associated facilities from Trans Bay Cable LLC (“Trans Bay”) to Pittsburg Power Company (“Pittsburgh Power”). Pittsburg Power will own the assets but not the transmission rights on the line. As such, Trans Bay will pay Pittsburg Power to own, operate, and maintain the line. In turn, Trans Bay will seek to recover these costs as part of a transmission revenue requirement.
The line itself, which is mostly underwater, will connect Pacific Gas & Electric Company’s Pittsburg Substation and San Francisco Potrero Substation. On September 8, 2005, Trans Bay’s project was approved by the California Independent System Operator Corporation (“CAISO”) as a preferred long-term transmission alternative for relieving congestion in the greater San Francisco area. However, CAISO conditioned its order on FERC’s approval of Trans Bay’s Transmission Owner Tariff and the establishment of Trans Bay’s transmission revenue requirement. On October 23, 2009, Trans Bay submitted materials to FERC to establish this revenue requirement. While settlement discussions over the transmission revenue requirement are ongoing, Trans Bay filed for the transfer of ownership of the project in a separate docket (EC10-30) on December 18, 2009, as supplemented on January 13, 2010.
In approving the disposition of jurisdictional facilities, FERC rejected arguments that the transfer will have an adverse effect on rates. Instead, FERC stated that it was only accepting the rate principles and operational responsibilities it set forth in a previous order, as well as the ownership structure contemplated for the line project. FERC stressed that its decision only approves the disposition of transmission facilities not yet in service and facilities whose revenue requirement have not been determined. As such, FERC has not determined whether costs incurred in developing, constructing, owning, or operating the project were just and reasonable.
FERC also determined that the transfer of ownership will not negatively impact regulation, and will not result in cross-subsidization or encumbrance of a utility since there are no captive customers involved in the transaction. Finally, FERC noted that the proposed project presented a novel accounting issue in regards to the recognition of transmission revenue requirements pursuant to the current ownership transaction. In this regard, FERC ordered Trans Bay account for the transaction according to the Electric Plant Instruction No. 5 and Account 102 of the Uniform System of Accounts and to submit its final accounting entries within six month of consummating the transaction.
Currently, the project is scheduled to be in service by the end of March 2010. A copy of FERC’s full order can be found at www.ferc.gov under Docket No. EC10-30.