The Price of Developing Power Projects in Kern County Just Went UP

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The East Kern Wind Resource Area (EKWRA)--it's a mouthful--and it's also a hotbed for renewable energy development and the location of a fight over millions of dollars among Southern California Edison (SCE), the California ISO, and independent power developers (IPPs).  Late last week, the Federal Energy Regulatory Commission (FERC) scored that fight in favor of SCE and the California ISO.

For the past few years, SCE has been working to reconfigure the transmission system in the EKWRA region in order to address a reliability issue occurring there.  But the reconfiguration would have another impact--it would modify the transmission system in the area so that it became a distribution system under SCE, rather than CAISO, control.  To IPPs, that modification came with significant cost consequences:  in the interconnection process, IPPs funding network upgrades on the transmission system receive a full reimbursement for the cost of those upgrades; distribution upgrades, on the other hand, result in no reimbursement.  For IPPs who had assumed they would be reimbursed the network upgrade costs that appeared in their interconnection agreements (which often cost a single project millions of dollars), it came as something of a surprise when they learned that the reconfiguration might cause their reimbursements to dry up.

And so the IPPs challenged SCE and the California ISO.  In its decision, FERC determined that the reconfigured EKWRA facilities are distribution, or non-integrated facilities, and that the California ISO correctly transferred control over the facilities to SCE's tariff.  As a result, no further reimbursements to the IPPs will occur.  "Despite being informed of the possibility of reclassification, [the IPPs] made a business decision to proceed with interconnection."  For some IPPs, this could have a very costly impact.  

You can read the entire order here:  EKWRA Order


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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