On September 20, 2018, FERC dismissed Nevada Hydro Company, Inc.’s (“Nevada Hydro”) request that (1) the Lake Elsinore Advanced Pumped Storage (“LEAPS”) facility is a transmission facility and (2) LEAPS is entitled to cost-based rate recovery under the California Independent System Operator Corporation’s (“CAISO”) Transmission Access Charge.  FERC found that Nevada Hydro’s request is premature because LEAPS has not been studied in the CAISO Transmission Planning Process (“TPP”) to determine whether it addresses a transmission need identified through that process, and, if such a need were met, how the facility would be operated.

Nevada Hydro’s proposed $2 billion LEAPS project consists of two primary components: (1) a 500 MW pumped storage facility to be located on Lake Elsinore in Riverside, California; and (2) the Talega-Escondido/Valley-Serrano 500 kV Interconnect, a 30-mile transmission line that will interconnect the pumped storage facility to the transmission systems owned by Southern California Edison Company and San Diego Gas & Electric Company.  In its petition, Nevada Hydro contended that it satisfies FERC’s criteria for storage to operate as a transmission facility, consistent with Western Grid and the Storage Policy Statement (see January 24, 2017 edition of the WER).  Nevada Hydro also explained that it, not CAISO, would maintain operational responsibility for LEAPS.  Protestors, including CAISO, argued that CAISO’s TPP, not Nevada Hydro’s petition, should determine whether LEAPS is a transmission facility and is needed to address a transmission constraint.  Protestors also called into question the propriety of relying on the benefits study Nevada Hydro included in its petition, as opposed to the TPP process.

In finding Nevada Hydro’s request premature, FERC stated that it “can only determine whether or not LEAPS is a transmission facility after it has been studied through the CAISO TPP.”  FERC also stated that whether it would approve any particular form of cost-based rate recovery for an electric storage resource, through transmission rates or otherwise, “is a separate matter” that would be addressed on a “case-by-case basis” because such resources do not readily fit into the traditional asset functions of generation, transmission, or distribution.  For that reason, FERC also dismissed Nevada Hydro’s request that LEAPS is entitled to cost-based rate recovery.  FERC added that, even if the CAISO TPP ultimately identifies LEAPS as a more efficient or cost-effective solution to identified transmission needs, Nevada Hydro must still demonstrate to FERC, i.e., through a filing for cost recovery under the Federal Power Act, that LEAPS would operate to address the identified need in such a way that LEAPS qualifies as a transmission facility.