Court Rules On Cost Allocation For Transmission Upgrades

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Michigan’s challenge to the allocation of costs incurred for the upgrade of the Midwest electric grid transmission system has been rejected by the U.S. Court of Appeals for the Seventh Circuit. The case stems from actions taken by the Midwest Independent System Operator (MISO) to add a charge to wholesale transmission pricing across its twelve state region to finance the grid upgrades necessary to bring wind generated energy from remote wind farms to population centers. The authority to assess the charge was given to MISO by the Federal Energy Regulatory Commission. Michigan argued that its ratepayers would not realize much benefit from the new infrastructure because: 1) Michigan utilities draw very little power from MISO because the interconnection with Indiana is severely limited; and 2) out-of-state renewable energy cannot be counted toward the state’s renewable energy standard mandate. In rejecting these arguments the Court also commented that any discrimination by Michigan against out-of-state generation could be deemed a violation of the Constitution’s Commerce Clause. Since this Constitutional question was not before the Court, this comment is dicta and cannot be viewed as definitive or controlling. Nonetheless, the trade press has picked up on the comment and is speculating whether someone will soon file a test case.