On October 17, 2019, FERC denied a complaint filed in June 2019 by Nevada Hydro Company, Inc. (“Nevada Hydro”) alleging that the California Independent System Operator Corporation (“CAISO”) failed to follow its Tariff requirements in studying the Lake Elsinore Advanced Pumped Storage Project (“LEAPS”) as a transmission facility in CAISO’s 2018-2019 transmission planning process. FERC concluded that Nevada Hydro failed to demonstrate that CAISO violated its Tariff in studying LEAPS as a proposed reliability-driven transmission solution and as a proposed economic transmission project. Rather, FERC accepted CAISO’s conclusion that it could identify no reliability need for LEAPS, and that the project’s economic benefits are far outweighed by its costs. FERC’s October 17 order also explained that it found no evidence that CAISO’s treatment of LEAPS was biased by a predetermined conclusion that LEAPS is a generation asset or that storage cannot qualify as transmission. FERC went on to note that a project’s ability to provide transmission benefits does not equate to a transmission need, nor does it guarantee eligibility to recover costs through transmission rates.
Nevada Hydro has on two occasions previously requested that FERC declare LEAPS—a proposed, 600 MW pumped hydroelectric facility located in southern California—to be a transmission facility that is eligible for cost-based rate recovery under the CAISO’s Transmission Access Charge. FERC denied the latest of those requests in a September 2018 order, finding that it could not make a reasoned decision on whether LEAPS is a transmission project until LEAPS had been studied in CAISO’s transmission planning process (see September 24, 2018 edition of the WER). Following FERC’s 2018 order, Nevada Hydro proposed the LEAPS project in CAISO’s transmission planning process as a reliability need to resolve thermal overload concerns identified on San Diego Gas & Electric’s (“SDG&E’s”) system, as well as an economic-driven project, arguing that LEAPS would provide economic benefits to ratepayers in excess of the project’s annual revenue requirement.
Nevada Hydro brought its June 2019 complaint to FERC after CAISO did not identify the LEAPS project as a needed transmission project in its 2018-2019 transmission plan. Nevada Hydro argued that CAISO violated its Tariff by choosing to rely on operational measures including battery storage and demand response to address the reliability issues on SDG&E’s system, without first comparing those measures to LEAPS. In addition, Nevada Hydro argued that CAISO failed to follow its tariff requirements in conducting its economic analysis of the LEAPS project, arguing that CAISO materially undervalued LEAPS’ benefits.
FERC rejected both of Nevada Hydro’s allegations, finding CAISO’s Tariff did not require it to compare LEAPS to other, existing reliability solutions, and that CAISO’s economic analysis of LEAPS was consistent with its Tariff. Finally, FERC rejected Nevada Hydro’s request to direct CAISO to include additional metrics pertaining to its economic analysis of proposed transmission projects in its Tariff.
FERC’s October 17 order is available here.