UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
National Grid Transmission Services Corporation Docket No. EL11-____-000
Bangor Hydro Electric Company
PETITION FOR DECLARATORY ORDER
Pursuant to Rule 207 of the Commission’s Rules of Practice and Procedure, 18
C.F.R. § 385.207, Bangor Hydro Electric Company (“Bangor Hydro”) and National Grid
Transmission Services Corporation (“NGTSC”) (together, “NEL Parties”) request that the
Commission issue a declaratory order finding that a proposed transaction, as described
below, between the NEL Parties and an as-yet undesignated subsidiary of First Wind
Holdings, Inc. (“First Wind”)
1 is consistent with Commission policy and precedent.
Specifically, the NEL Parties seek a determination that a proposed bilateral
transmission services agreement, under which the NEL Parties will sell First Wind up to
1,100 MW of transmission service over a new, participant-funded, high voltage direct
current (“HVDC”) transmission line, the Northeast Energy Link (“NEL”), in order that
First Wind may deliver energy to purchasers in New England, is consistent with the
Commission’s requirements regarding participant-funded transmission lines, most
particularly as described in the Commission declaratory order in
Northeast Utilities Service
Co. and NSTAR Electric Co.
Although the NEL Parties’ business plan is
substantially similar to the project that was the subject of
it differs in three
For the purpose of this petition the NEL Parties refer to both First Wind Holdings, Inc. and its
undesignated affiliate as “First Wind.”
127 FERC ¶ 61,179 (2009).-
respects: (1) First Wind, Bangor Hydro’s parent company (Emera, Inc.), and Algonquin
Power and Utilities Corp. (“Algonquin”) have announced a proposed joint venture to build,
own and operate wind generation in the Northeast; (2) the parties do not intend to include a
coordinated power purchase agreement such as that contemplated in
the transmission line is intraregional, while the
project connected to the
Canadian transmission system. The NEL Parties believe that these differences do not
affect the consistency of the transaction structure with the Commission’s open access
policies, as set forth in
. The NEL parties seek the Commission’s guidance
here out of an abundance of caution and to facilitate completion of the transaction and
development of the project.
A finding removing any doubt as to the legality of the NEL Parties’ business plan is
necessary in order that the NEL Parties and First Wind may proceed to negotiate the
transmission service agreement and pursue financing for the project. Because the project
will significantly facilitate the ability of New England utilities to comply with near-term
renewable energy and carbon reduction requirements, the NEL Parties ask that the
Commission act expeditiously on this petition and issue an order on it no later than
September 15, 2011.
ISO-NE and the New England States Committee on Electricity (“NESCOE”) have
recognized the need for significant new transmission infrastructure to allow for the
delivery of renewable generation to New England load centers to satisfy state renewable
portfolio standard requirements. The NEL Parties have been actively pursuing the
parties have indicated, in filing the transmission service agreement recently
approved by the Commission in Docket No. ER11-2377, that these arrangements are no longer contemplated.
See Northern Pass Transmission, LLC
, 134 FERC ¶ 61,095 (2011).-
development of the NEL, an HVDC transmission facility, including underground cables
extending from a point at or near Orrington, Maine, to Tewksbury, Massachusetts
(approximately 230 miles), as a means of meeting that need for over three years. During
that period, the NEL Parties have publicly described the project in an application to ISO
NE and presentations to ISO-NE stakeholder committees. They also have contacted
numerous developers of renewable generation and potential balancing resources to gauge
their interest in participating in the NEL. Through that outreach process the NEL Parties
provided notice to potential customers that additional transmission capacity could be made
available between northern Maine and southern New England. In March 2011, First Wind,
which is planning to develop a number of wind electric generating facilities in northern
Maine and to market the wind energy to Load-Serving Entities (“LSEs”) in New England,
requested access to the NEL Parties’ transmission systems. The NEL Parties have
proposed to develop the NEL as a cost-based participant-funded project and to offer
transmission service to First Wind over the NEL in the amount of the full transfer
capability of the line to satisfy this request. The NEL Parties also intend to place the line
under the operational control of ISO-NE.
When combined with First Wind’s planned development of approximately 1,000
MW of wind power, the NEL would significantly enhance the ability of New England
utilities to meet renewable portfolio standards of New England states and to meet carbon
emission reduction goals. Furthermore, as a participant-funded project, the NEL would
achieve these benefits without increasing regional transmission rates, as the cost of the
transmission likely would be included in the price of the power that is sold by the
generator(s) to the power purchaser. As a predominantly underground HVDC facility
planned in cooperation with ISO-NE and in accordance with ISO-NE reliability standards,-
the NEL can achieve these benefits while minimizing environmental impacts and
maintaining or enhancing transmission system reliability.
First Wind and the NEL Parties have executed a memorandum of understanding
(“MOU”) under which they express their intention to enter a long-term transmission
service agreement. Under the terms of the MOU, the transmission service agreement will
provide that First Wind will pay an agreed-upon cost of service formula rate for
transmission services incorporating a reasonable rate of return and such incentives as are
approved by the Commission. If and to the extent that First Wind does not contract for the
full transfer capability of the NEL (or fails to obtain adequate assurances of credit
worthiness), the NEL Parties will offer other interested parties the opportunity to become
participants in the NEL on nondiscriminatory terms that are consistent with Commission
policy. The transmission service agreement will obligate First Wind and any other
participants (collectively, the “NEL Participants”) to authorize ISO-NE to make available
under its tariff any capacity that is not scheduled by the NEL Participants. If non-firm
capacity exists in excess of the firm capacity reserved by the NEL Participants, the NEL
Parties will authorize ISO-NE to make that capacity available.
The NEL Parties request that the Commission issue a declaratory order determining
that the structure of the proposed transaction is consistent with the Commission’s policies.
This determination is appropriate because the transaction’s participant funding model is
consistent with Commission precedent.
The NEL proposal parallels in all major aspects
the proposal for the HVDC facility, now known as “Northern Pass,” to be built by
Northeast Utilities and NSTAR, in conjunction with Hydro-Québec TransÉnergie, which
the Commission approved in
. Like the transmission owners in that case, the
NEL Parties will develop, construct, finance, and own the line. The NEL Parties, the NEL-
Participants, and any credit guarantors of those parties will bear all financial risks and no
portion of the cost will be borne before, during, or after construction by any transmission
customers other than the NEL Participants that agree to support the costs of the NEL. Also
as was the case with Northeast Utilities and NSTAR, the NEL Parties will take the
necessary steps to ensure consistency with ISO-NE reliability requirements and will place
the NEL under ISO-NE’s operational control. While, as noted above, the NEL proposal
differs from the
proposal in certain respects, the NEL Parties believe that these
differences do not present any conflicts with Commission’s open access policies
Neither of the Commission’s decisions in
Grasslands Renewable Energy LLC
SunZia Transmission, LLC
should pose any obstacles to the Commission’s approval of the
NEL proposal. Like Northeast Utilities and NSTAR, and unlike Grasslands and SunZia,
the NEL Parties are existing transmission-providing public utilities and have a residual
obligation under Order Nos. 888
to expand their respective systems upon
request. Also, (1) under both the
proposal and the NEL, and unlike the
proposal, there would be only one class of transmission customer, and (2) the
project, unlike the NEL, was merchant transmission.
133 FERC ¶ 61,225 (2010).
131 FERC ¶ 61,162 (2010).
Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission
Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities
No. 888, FERC Stats. & Regs. ¶ 31,036 (1996),
order on reh’g
, Order No. 888-A, FERC Stats. & Regs. ¶
order on reh’g
, Order No. 888-B, 81 FERC ¶ 61,248 (1997),
order on reh’g
, Order No. 888-C, 82
FERC ¶ 61,046 (1998),
aff’d in relevant part sub nom. Transmission Access Policy Study Group v. FERC
225 F.3d 667 (D.C. Cir. 2000),
aff’d sub nom. New York v. FERC
, 535 U.S. 1 (2002).
Preventing Undue Discrimination and Preference in Transmission Service,
Order 890, FERC Stats.
& Regs. ¶ 31,241 at PP 418-602,
order on reh’g,
Order No. 890-A, FERC Stats & Regs. ¶ 31,261 (2007),
order on reh’g
, Order 890-B, 123 FERC ¶ 61,299, (2008)
order on reh’g,
Order 890-C, 126 FERC ¶ 61,228,
order on reh’g
, Order No 890-D, 129 FERC ¶ 61,126 (2009).-
As described in more detail below, the NEL proposal is not unduly discriminatory
or preferential, incorporates a just and reasonable rate structure, is consistent with the NEL
Parties’ open access obligations, presents no potential for affiliate abuse or the exercise of
market power, and is consistent with regional reliability and operational efficiency. The
NEL Parties therefore request that the Commission declare that the proposed structure of
the transaction among the NEL Parties and the NEL Participants is consistent with
The NEL Parties
Bangor Hydro is an electric utility subsidiary of Emera Inc. Bangor Hydro serves
over 117,000 customers in an area encompassing 5,275 square miles in eastern Maine.
Bangor Hydro is a member of the New England Power Pool and is interconnected with
other New England utilities to the south and with the New Brunswick Power Corp. to the
NGTSC is a wholly-owned, direct subsidiary of National Grid USA (“National
Grid”) engaged in transmission-related business development. National Grid is a
registered holding company with public utility subsidiaries in New England and New
York. National Grid’s public utility subsidiaries include New England Power Company,
Massachusetts Electric Company, The Narragansett Electric Company, Granite State
Nantucket Electric Company, and Niagara Mohawk Power
National Grid has entered into an agreement under which it will sell its shares in Granite State
Electric Company to Liberty Energy Utilities (New Hampshire) Co. The parties have sought authorization
for this transaction from the Commission and the New Hampshire Public Utilities Commission.-
First Wind is a North American wind energy company engaged exclusively in the
development, ownership, and operation of wind energy projects. First Wind focuses on
developing projects in the northeastern and western regions of the U.S. and in Hawaii, and
currently operates seven wind energy facilities with 504 MW of capacity.
Northeast Energy Link
The NEL Parties decided to pursue the development of the NEL in recognition of
the need for additional transmission infrastructure to deliver to load centers in southern
New England the renewable generation that would be required to meet state renewable
portfolio standard requirements. Based on their analysis of potential land-based wind
resources in northern Maine and balancing hydroelectric resources in nearby eastern
Canada, the NEL Parties estimated that there was the potential need for approximately
1,100 MW of new transmission capacity connecting northern Maine and southeastern
Massachusetts. To meet this need, the NEL Parties, through a to-be-formed jointly owned
plan to construct and own the NEL, an HVDC transmission facility connecting
generating resources, including wind resources located predominantly in northern Maine,
to load in southern New England.
The NEL has been under conceptual development for more than three years.
During that period, the NEL Parties broadly disseminated information about the planned
project and the capacity it would provide. As described in the attached declaration of Greg
Blunden, Bangor Hydro first presented the NEL to the ISO-NE Planning Advisory
The term “NEL Parties,” as used in this Petition, also includes the future jointly-owned affiliate
Committee in December 2007 at a meeting to discuss the construction of HVDC
infrastructure to move electricity from northern Maine to central New England.
Grid joined the venture in March 2008.
The NEL Parties officially submitted the NEL to ISO-NE on March 31, 2008,
requesting an economic study of the project as a Market Efficiency Transmission Upgrade.
At an April 30, 2008, Planning Advisory Committee meeting dedicated to presentations of
the submitted projects and the clarification of the study process by ISO-NE, the NEL
Parties provided an updated description of the project.
ISO-NE formed the Economic
Study Process Working Group to help manage the economic studies of system needs and
potential solutions, in which the NEL Parties participated.
The NEL Parties also created a website for the project and posted there the
information that had been provided to the Planning Advisory Committee, as well as
contact information. The NEL Parties have also posted project planning updates on the
website, including a project map.
During the summer and fall of 2008, it became increasingly apparent that there was
considerable controversy in New England regarding the allocation of costs for projects,
such as the NEL, that are planned primarily in order to deliver economic renewable energy
to New England load. In light of the uncertainties involved, the NEL Parties, in October
attached Declaration of Greg Blunden at ¶ 4 and Ex. GB-1. The presentation is also available at
attached Declaration of Greg Blunden at ¶ 7 and Ex. GB-2. The presentation is available at
attached Declaration of Greg Blunden at 8.-
2008, submitted an Elective Transmission Upgrade
Application to ISO-NE, providing the
project with a position in the regional Interconnection Queue.
During the following year, the NEL Parties held meetings with numerous
renewable energy developers to ascertain their level of interest in using the capacity that
the NEL would make available.
In addition, the NEL Parties have posted information
and identified contacts for the project on the project website and on the NEL Parties’
Following negotiations, the NEL Parties and First Wind executed
the MOU in March 2011.
The Planned Project
The NEL will run between a point at or near Orrington, Maine, and Tewksbury,
Massachusetts, for a distance of approximately 230 miles. The NEL Parties expect the
NEL to be completed by the 2016-17 Power Year. The line will connect with the ISO-NE
transmission grid at or near Bangor Hydro’s Orrington Substation and New England Power
Company’s Tewksbury 22/22A Substation. The proposed design for the line involves two
parallel, underground HVDC cables with a capacity of approximately 1,100 MW. The two
approximately five-inch diameter cables would be installed within the same trench and
The ISO-NE Transmission, Market, and Services Tariff defines an Elective Transmission Upgrade
as “a Transmission Upgrade that is participant-funded (i.e., voluntarily funded by an entity or entities that
have agreed to pay for all of the costs of such Transmission Upgrade), and is not: (i) a Generator
Interconnection Related Upgrade; (ii) a Reliability Transmission Upgrade (including a NEMA Upgrade, as
appropriate); (iii) an Market Efficiency Transmission Upgrade (including a NEMA Upgrade, as appropriate);
or (iv) initially proposed in an Elective Transmission Upgrade Application filed with the ISO in accordance
with Section II.47.2 on a date after the addition or modification already has been otherwise identified in the
current Regional System Plan (other than as an Elective Transmission Upgrade) in publication as of the date
of that application.
The NEL Parties have held at least 15 meetings with 7 developers, including First Wind. With the
exception of First Wind, no other customer has expressed firm interest in paying for a share of the costs of
constructing and operating the NEL in exchange for a concomitant share of the project’s transfer capability.
attached Declaration of Brian T. McCabe at ¶¶ 8-16.
See the NEL project website at
, Bangor’s Oasis site at
, and National Grid’s Oasis site at
operate as a bipolar system, which relies on converter-station technology that utilizes one
of the cables in the circuit as a return path, eliminating in-ground DC current.
The NEL Parties propose to offer transmission service over the NEL in the amount
of the full transfer capability of the line as determined by ISO-NE and the criteria of the
Northeast Power Coordinating Council or the North American Electric Reliability
Corporation. The NEL Parties intend to place the line under the operational control of
ISO-NE pursuant to a transmission operating agreement. As an Elective Transmission
Upgrade, the NEL will be subject to review by ISO-NE pursuant to Section I.3.9 of the
ISO-NE Transmission, Markets and Services Tariff, which requires that ISO-NE find that
the line will not adversely affect the reliability or use of the New England transmission
system. The NEL Parties will submit the NEL to the I.3.9 process later in 2011. ISO-NE
will determine the firm rating and transfer rating of the line and will have approval
authority for planned outages. The transmission operating agreement will establish
responsibility for scheduling the line in a manner acceptable to ISO-NE.
The Department of Energy has identified an expanded transmission infrastructure
as indispensible to realizing the enormous economic, environmental, and energy security
benefits of obtaining a significant portion of our electricity from wind.
on renewable energy resources has become a major policy objective in the United States,
and especially in New England, both to reduce greenhouse emissions and to increase
energy independence. The Commission has recently recognized the need for transmission
expansion in order to enhance the deliverability of renewable transmission in its Notice of
U.S. Dep’t of Energy (2008),
20% Wind Energy by 2030
, available at
Proposed Rulemaking, Transmission Planning and Cost Allocation by Transmission
Owning and Operating Public Utilities.
Currently, however, development of renewable
resources is limited by transmission constraints between the northern areas of New
England where wind resources can be developed and load centers in Southern New
England. The NEL will address these needs by creating a major new corridor for
transmission of northern Maine renewable energy resources to southern New England.
The NEL advances the goal of meeting renewable energy needs by taking
advantage of New England’s significant sources of untapped renewable resources, as set
forth in the New England Governors’ Renewable Energy Blueprint, issued in 2009 based
on a Resource Development Scenarios Analysis conducted by ISO-NE
. When combined
with First Wind’s planned development of approximately 1,000 MW of wind power, the
NEL would significantly enhance the ability of New England utilities to meet renewable
of New England states and to meet carbon emission reduction goals,
such as Massachusetts’s recently announced plan to reduce carbon emissions by 25 percent
over the next decade and the Regional Greenhouse Gas Initiative reductions of 10 percent
by 2018. Furthermore, as a participant-funded project, it would achieve these benefits
without increasing the transmission rates of the customers of franchised electric utilities.
The NEL Parties commissioned ESAI, an independent energy research and
consulting firm, to perform a study of the economic impact of the NEL. The study
concluded that NEL-delivered renewable power is very cost-competitive compared to other
renewable energy alternatives, including Alternative Compliance Payments. The study
75 Fed. Reg. 37,884 (June 30, 2010).
The New England states have the following renewable portfolio standards requirements:
Connecticut, 23% by 2020; Massachusetts, 15% by 2020; Maine, 40% by 2017; New Hampshire, 23.8% by
2025; Rhode Island, 16% by 2019. Vermont has a voluntary goal of 10% by 2013.-
further concluded that the renewable generation that will likely use the NEL has the
potential to suppress market prices in New England by as much as $7.3 billion over 30
years, thus leading to lower regional market prices.
The NEL has been identified as a baseline infrastructure transmission project in a
study being undertaken by the Eastern Interconnection States’ Planning Collaborative, a
study funded by the US Department of Energy, and will result in increased transfer
capability modeling with New Brunswick of approximately 400MW, facilitating the
import of low carbon emitting and renewable generation including hydroelectric power and
The Proposed Transaction
As a result of the outreach process described above, First Wind has requested
access to the transmission capacity that the NEL would provide. First Wind is pursuing
the development of a number of wind electric generating facilities, principally in northern
Maine, which it anticipates entering commercial operation in Power Year 2016-2017. First
Wind intends to market the capacity and energy of these projects through power purchase
agreements with LSEs in New England, which may include affiliates of the NEL Parties.
First Wind may also choose to sell any uncontracted capacity and energy into ISO-NE
markets. First Wind and the NEL Parties have executed an MOU under which they
express their intention to enter a long-term transmission service agreement pursuant to
which the NEL Parties will provide long-term capacity rights and transmission service on
the NEL for First Wind’s energy.
Under the terms of the MOU, the transmission service agreement will provide that
First Wind will pay a negotiated rate for transmission services based on the NEL Parties’
cost of constructing, owning, operating, and maintaining the NEL and any upgrades to the-
AC transmission system that ISO-NE determines to be necessary, as reflected in a cost of
service formula incorporating a reasonable rate of return and such incentives as are
approved by the Commission when the NEL Parties submit the transmission service
agreement for filing.
The transmission service agreement will have a term corresponding with the period
over which the NEL Parties will amortize the investment in the NEL. It is expected that
will contract for the full transfer capability of the NEL, as such capacity is
determined by ISO-NE. The transmission agreement will also require an adequate
demonstration of First Wind’s credit-worthiness, whether through power purchase
agreements or otherwise, and will provide First Wind with the necessary time to obtain
such assurances. At First Wind’s request, First Wind’s obligations will be conditioned
upon First Wind entering into power purchase agreements for its wind capacity. If and to
the extent that First Wind does not contract for the full transfer capability of the NEL (or
fails to obtain adequate assurances of credit-worthiness), the NEL Parties will offer third
parties the opportunity to become participants in the NEL at rates and on other terms that
are not unduly discriminatory and are consistent with Commission policy. In addition, the
transmission service agreement will obligate the NEL Participants, if and to the extent the
NEL has capacity available above that scheduled by the NEL Participants, to authorize
ISO-NE to make that capacity available under its tariff on rates and other terms that are not
unduly discriminatory or preferential.
REQUEST FOR DECLARATORY ORDER
The NEL Parties request that the Commission issue a declaratory order determining
that the structure of the proposed transaction is not unduly discriminatory or preferential,
will result in just and reasonable rates, and is consistent with the Commission’s open-
access requirements. As discussed below, this determination is appropriate because the
transaction employs a cost-based, participant-funded model consistent with Commission
precedent and provides non-discriminatory open access service consistent with the Federal
Power Act (“FPA”) and with Order Nos. 888 and 890.
Although the NEL proposal is substantially similar to the proposal the Commission
it differs from the latter in three respects. The NEL Parties file
this petition primarily to seek confirmation that neither these differences between the NEL
Parties’ proposal and that in
(as noted above and described below) nor the
Commission’s recent decisions in
Grasslands Renewable Energy
obstacle to approval of the proposed transaction, contingent upon Commission acceptance
or approval in subsequent proceedings of a transmission service agreement.
The Transaction Is Consistent with Participant-Funded Model
Previously Approved by the Commission.
The NEL is a cost-based, participant-funded project that meets the request of the
prospective customer, which has conditionally agreed to assume responsibility for the costs
of the project. As the Commission has noted previously, it has approved numerous
variants of participant funding as consistent with its policy and precedents.
particular model closely resembles the proposed HVDC facility, now known as “Northern
Pass,” to be built by Northeast Utilities and NSTAR, in conjunction with Hydro-Québec
at P 27 n. 27
, citing Entergy Services, Inc.
, 115 FERC ¶ 61,095 (2006),
, 116 FERC ¶ 61,275 (2006),
order on reh’g and clarification
, 119 FERC ¶ 61,013 (2007),
reh’g and compliance filing
, 119 FERC ¶ 61,187 (2007),
order on reh’g and clarification
, 122 FERC ¶
W. Area Power Admin.
, 99 FERC ¶ 61,306,
, 100 FERC ¶ 61,331 (2002),
sub nom. Pub. Util. Comm’n of the State of CA v. FERC
367 F.3d 925 (D.C. Cir. 2004) (approves a
transmission project that grants exclusive transmission rights to the funders and no obligation of expansion);
Transbay Cable LLC
, 112 FERC ¶ 61,095, (2005)
order on reh’g
, 114 FERC ¶61,031 (2006) (awarding of
rights for transmission funding of line);
see generally Aero Energy, LLC
, 115 FERC ¶ 61,128 (2006)
(initially awarded transmission rights to party who funded the line).-
TransÉnergie, which the Commission approved in
. As the Commission
concluded in that case:
Providing for participant funding of a transmission facility with priority
rights to use that facility is fully consistent with long-standing open access
policies. . . . Any potential transmission customer has the right to request
transmission service expansion from a transmission owning utility and that
utility is obligated to make any necessary system expansions and offer
service at the higher of an incremental cost or an embedded cost rate to the
transmission customer. The fact that the Petitioners have turned over
operational control of its existing transmission facilities to ISO-NE, does
not relieve the Petitioners of their residual obligations under Order No. 888
to expand its system upon request.
As is the case with Northeast Utilities and NSTAR, the NEL Parties will develop,
construct, finance and own the line. The NEL Parties, the NEL Participants, and any credit
guarantors of those parties will bear all financial risks and no portion of the cost will be
borne, before, during, or after construction by any transmission customers other than the
NEL Participants that agree to support the costs of the NEL.
Also as was the case with
Northeast Utilities and NSTAR, the NEL Parties operate in New England in open-access
states and their distribution affiliates have no captive commodity customers.
Also like Northeast Utilities and NSTAR, the NEL Parties will seek reliability
approval under the section I.3.9 of the ISO-NE Transmission, Market, and Service Tariff to
ensure that the transmission line will not have an adverse effect on the reliability of the
ISO-NE grid. The NEL Parties will place the NEL under ISO-NE’s operational control
according to a transmission operating agreement that will be negotiated with ISO-NE.
at P 27.
at P 41.
at P 3.-
Under the transmission operating agreement, ISO-NE will schedule transactions over the
NEL and will have final authority over planned outages.
As noted, although the NEL proposal is substantially similar to the proposal the
Commission approved in
it differs from the latter in three respects.
First, Emera, the parent of Bangor Hydro, has announced a joint venture with the
potential customer, First Wind. This difference is discussed further below.
transaction, as originally proposed, included the
negotiation of long-term power purchase agreements between the transmission customer
and the LSE affiliates of the parties that would own the new transmission projects.
NEL transaction, however, does not involve any plan for a power purchase agreement with
any entity affiliated with the NEL Parties. The NEL Parties and their affiliates, however,
reserve the right to purchase energy from any NEL Participant and one or more affiliates of
the NEL Parties could well do so if such a purchase will cost-effectively assist in
compliance with renewable portfolio standards. Any power purchase agreement between
an NEL Participant and an affiliate of an NEL Party will of course be subject to approval
by the state utility commission that regulates the purchaser’s recovery of the costs of the
agreement in its retail rates. Moreover, the existence of a power purchase agreement
between the NEL Participant and any party – whether or not affiliated with the NEL
Parties – would likely provide important credit support for the project. Nonetheless, any
power purchase arrangement will be independent of the transaction that is the subject of
The parties have indicated, in filing the transmission service agreement in Docket No. ER11-2377,
that these arrangements are no longer contemplated.
Because the NEL project is not proposed as a mechanism to facilitate a power purchase agreement
between a prospective transmission customer and one or more of the NEL Parties or their affiliates, the-
Third, unlike the proposed project in
, which connected the ISO-NE
transmission system to the transmission system of Hydro Quebec, NEL will connect to the
ISO-NE grid at both ends. The NEL will essentially be withdrawing energy from the ISO
NE grid in the north and injecting energy in the south. The NEL Parties do not believe that
the need to address this difference should interfere with a determination that the NEL
proposal is consistent with the Commission’s policies, as discussed in
Regardless of whether a cost-based participant-funded transmission line connects an
RTO’s transmission system to another system or lies wholly within the RTO’s balancing
area, the project participants have accepted the risks of the project, insulating other RTO
ratepayers from any cost responsibility; the project participants will have access to the line
at cost-based rates, ensuring just and reasonable rates; and the project owners remain
obligated to make any necessary expansions to accommodate requests for additional
service and to offer service at the higher of incremental or embedded cost, ensuring open
It is also possible that First Wind ultimately may not contract for the entire capacity
of the NEL, in which case, as noted above, the NEL Parties will make the unsubscribed
capacity available to other parties at the same rate, terms and conditions and through an
open process. This fact, however, does not represent a material difference between the
NEL and the proposal before the Commission in
Petitioners stated that they might make available additional capacity, “depending on
transaction presented in this petition is a more straight-forward participant-funded transmission project than
that originally presented in
The expansion is being undertaken to accommodate the transmission
needs of a renewable resource and is not tied to the execution of power purchase agreements among the
parties. This fact eliminates issues of rate-bundling or potential affiliate abuse that concerned some
commenters on the
initial proposal. As noted above, the transmission service agreement filed by
parties and approved by the Commission did not include such an agreement.
at PP 27, 41-42.-
market interest and transfer capabilities.”
If that incremental capacity were made
available, it would be offered under the same rates, terms, and conditions as provided for in
the TSA with the initial participant.
This approach is consistent with Commission
precedent approving the same pricing for multiple customers when a particular
transmission expansion accommodates more than one.
In addition, the NEL Parties seek confirmation regarding the impact (or rather the
lack of an impact) on their proposal of the decision in
Grasslands Renewable Energy
where the Commission declined to approve the proposed structure for that particular
participant funded transmission project. Importantly, the Commission was careful there to
identify two factors that distinguish the
proposal from that approved in
. The NEL Parties believe these same factors are also determinative here
First, the Commission noted that Northeast Utilities and NSTAR, unlike Grasslands, are
existing transmission-providing public utilities that, despite having joined an RTO, have
residual obligations under Order Nos. 888,
, to provide transmission service upon
request and, subject to certain conditions and limitations, to expand their systems to the
extent necessary to provide the service.
Second, the Commission pointed out that the
proposal established two classes of customers – those that purchased additional
services from the petitioner and those that did not – whereas, under the
proposal, there would be only one class of transmission customer.
at P 5.
See Northwestern Corp.
, 117 FERC ¶ 61,324 (2006).
133 FERC ¶ 61,225 at P 19.
at PP 20-21.-
Both of these factors also distinguish the NEL Parties’ proposal from
As is true of Northeast Utilities and NSTAR, affiliates of the NEL Parties are existing
public utilities that provide open access to the their transmission facilities under the ISO
NE tariff; and, like the NU/NSTAR proposal, the NEL Parties’ proposal does not
contemplate giving preferential access to transmission customers based on whether they
purchase additional services from the NEL Parties. The considerations that led the
Commission to reject the
proposal therefore do not detract from the NEL
proposal and, the NEL Parties submit, are irrelevant to the Commission’s consideration of
The Proposed Transaction Structure Is Not Unduly Discriminatory or
The proposed transaction is consistent with the FPA’s prohibition of unduly
discriminatory or preferential rates. The NEL is an expansion of the NEL Parties’ existing
The Commission explained in
that public utilities that
have joined an RTO, such as the NEL Parties, have a residual obligation under Order No.
888 (subject to certain limitations and conditions) to expand their systems if necessary to
satisfy a request for transmission access.
Thus, although ISO-NE provides open,
nondiscriminatory transmission access in the region under its Transmission, Markets and
Services Tariff, the NEL Parties remain obligated to accommodate not only First Wind’s
request for access to the capacity of their transmission systems, but any other such request,
The NEL will likely be developed by a jointly-owned affiliate of the NEL Parties that is not itself a
transmission-providing utility. Rather, other subsidiaries of National Grid and Emera are transmission
owning utilities with obligations under Order No. 888. This was also the case in
. As a practical
matter, it makes no difference if the transmission expansion obligation originates with an affiliate, because
the service must be provided nonetheless.
at P 27. Among other things, the transmission customer is responsible for the cost of
any necessary expansion and must provide a form of security acceptable to the transmission provider.
[pro forma OATT §§ 13.5, 19.4, 25].-
on terms that are not unduly discriminatory or preferential. The NEL Parties have
determined that the NEL is an appropriate means for fulfilling this obligation. As noted
above, the Commission considered this obligation critical in its determination that the
transaction presented in
unlike that in
presented the potential for
Consistent with this obligation, the NEL Parties have to date made information
about the additional transmission capacity that the NEL could provide available to the
public, including potential customers, on an open and nondiscriminatory basis. The
subsequent announcement of a planned joint venture among First Wind, Emera, and
Algonquin is not inconsistent with the NEL Parties’ making the opportunity to participate
in the NEL available on an open and nondiscriminatory basis. Order Nos. 888 and 890 do
not proscribe a transmission owner’s provision of transmission service to an affiliate.
They only prohibit preferential treatment for the affiliate. As discussed below, First Wind
has received no preferential treatment.
In addition, as required by Order Nos. 888 and 890, the NEL Parties must and will
make NEL capacity available to prospective participants on a nondiscriminatory basis,
subject only to limits imposed by ISO-NE. First, as previously noted, if First Wind does
not contract for the full planned capacity of the NEL or is unable to meet creditworthiness
requirements, the NEL Parties will offer the unsubscribed capacity to third parties at rates
and on other terms that are nondiscriminatory and consistent with Commission
transmission pricing policy.
133 FERC ¶ 61,225 at P 19.
Order No. 888, FERC Stats. & Regs. ¶ 31,036 at 31,740-41.-
Second, if there is no uncommitted capacity available to meet a request for access
to the NEL by a customer other than the NEL Participants, the NEL Parties will expand
capacity on non-discriminatory basis to the extent economically and physically feasible.
Any such expansion will also be priced in a manner consistent with Commission policy.
The proposed transaction accordingly contemplates no separate classes of
customers that would be treated differentially from one another. The terms of access to the
NEL will not differ based on customer fuel source or willingness to procure other services
from NEL Parties. These facts, too, distinguish the proposed transaction from that the
Commission rejected in
, in which only those generators that agreed to take the
bundle of services offered by the petitioner were guaranteed to receive preferential,
embedded cost rate treatment.
Finally, as a further assurance of nondiscriminatory treatment, the NEL Parties will
make any unscheduled or excess non-firm capacity available through ISO-NE. This
commitment, in combination with the others described herein, ensures that the proposed
transaction will comply with the prohibition against unduly discriminatory and preferential
The Rates Resulting from the Proposed Transaction Structure Will Be
Just and Reasonable.
The rate structure contemplated by the proposed transaction, as described in the
MOU, is consistent with the model approved by the Commission for cost-based,
participant-funded projects and is just and reasonable. The NEL Participants will pay a
cost-based formula, capped at the NEL Parties’ costs, with a reasonable rate of return.
Cost-based rates are the most fundamental difference between participant-funded projects
133 FERC ¶ 61,225 at PP 20-21.-
and merchant projects.
The NEL Parties and NEL Participants will negotiate the
particular formula and the rate of return (including any ratemaking incentives). The
negotiated rate of return may itself include certain incentives, but in no event will it be
outside the zone of reasonableness. The NEL Parties will file the transmission service
agreement, including the cost-based formula rate, pursuant to section 205 of the FPA, with
appropriate cost support. All components of the formula rate, including any requested
incentives, will thus be subject to Commission review under FPA sections 219
Accordingly, any interested entity, including load-serving entities that may purchase
energy from First Wind and any other transmission customer of the NEL, will have the
opportunity to evaluate and comment on the rates.
The transmission service agreement will also include provisions governing risk
sharing. All such terms will be included in the NEL Parties’ filing under FPA section 205
and be subject to Commission review. Under no event will the risk be shifted to any party
other than the NEL Parties, the NEL Participants, or parties providing credit support to an
NEL Participant. Stated another way,
the costs of the NEL will not be included in any ISO
NE rates and the transmission customers of ISO-NE (other than the NEL Participants) and
of any other transmission provider will be held harmless from the costs of the NEL
cost responsibility extends to any system reinforcements necessary to directly
accommodate the NEL as determined by ISO-NE. The NEL Parties retain the burden of
proving that these and all other terms and conditions of the transmission service agreement
at PP 41-43.
16 U.S.C. § 825s (2006).
See Promoting Transmission Investment through Pricing Reform
No. 679, FERC Stats. & Regs. ¶ 31,222,
order on reh’g
, Order No. 679-A, FERC Stats. & Regs. ¶ 31,236
order on reh’g
119 FERC ¶ 61,062 (2007).
16 U.S.C. § 824d (2006).
See So. Cal. Edison Co
., 133 FERC ¶ 61,107 (2010).-
are just and reasonable and do not ask the Commission to make any predetermination as to
The rate parameters described above closely parallel those described by Northeast
Utilities and NSTAR in their petition. In
, the Commission found this to be
satisfactory, subject to Commission evaluation in the FPA section 205 proceeding.
The Proposed Transaction Structure Is Consistent with Open Access
As described above, in demonstrating the absence of any undue discrimination, the
obligation of the NEL Parties to expand their systems combined with the operation of the
NEL by ISO-NE, ensures consistency with the open access requirements of Orders No.
888 and 890. As the Commission explained in
“Providing for participant
funding of a transmission facility with priority rights to use that facility is fully consistent
with long-standing open access policies.”
The NEL is a transmission expansion project
required to meet the transmission service request of First Wind at a cost-based rate. Since
“[a]ny other potential [generation] developer has the same right to request transmission
service” from the NEL Parties, who are obligated “to undertake any necessary system
expansion at the higher of incremental or embedded cost,” an open season is not required
to avoid undue discrimination.
Certain intervenors in
asserted that the proposed transaction there
would violate the Commission’s unbundling requirement by recombining transmission and
generation rates. The Commission rejected this argument, however, because the rates
at P 42.
at P 27.
at P 29.-
would be stated separately.
The transaction that is the subject of this petition, however,
does not even raise that issue, because no energy purchase is linked to the availability of
the NEL transmission capacity.
During the recent technical conference in Docket No. AD11-11-000, Commission
staff expressed concern about the potential for transmission developers to undersize
expansion projects so as to avoid eliminating all congestion. Such concerns are misplaced
with regard to the NEL or other participant-funded projects. While the NEL will yield
substantial economic benefits to the region, which provide added reasons for Commission
approval, that is not its purpose. Rather, the NEL is proposed to satisfy the request of the
initial NEL Participant, First Wind, for transmission service that the existing transmission
system cannot accommodate; to obtain that service, First Wind is willing to pay the costs
of the NEL consistent with Commission pricing policy.
Right-sizing, in the case of a participant-funded project, means that the project is
appropriately sized to accommodate the potential transmission customers that are willing
to bear the project’s cost, as reflected in a cost-based rate consistent with Commission
pricing policy. As discussed above, the NEL Parties initially sized the NEL to satisfy the
anticipated demand for additional transmission capacity between northern Maine and
southern New England. The NEL Parties initially determined that 1,100 MW
appropriately accommodated the potential wind capacity in northern Maine. The NEL
Parties subsequently approached potential wind developers with the opportunity to secure
capacity in the NEL in exchange for a commitment to support the project’s costs. As it
turned out, the only resulting expression of interest in participant-funding the project
produced a request for approximately 1,000 MW of capacity.
at P 48.-
Due to the sizing of components of HVDC facilities, which require capacity to be
added in discrete increments, the NEL is expected to have a transfer capability of
approximately 1,100 MW and, if the initial NEL Participant does not need the incremental
capacity above its 1,000 MW request, the NEL Parties will offer it to additional customers
that would become NEL Participants. Moreover, 1,100 MW is just below the greatest
single contingency for which the ISO-NE system is planned, which is 1,200 MW. The
NEL is thus appropriately sized to accommodate the requested service.
The NEL Parties will also expand the project to accommodate requests by
additional parties that are willing to pay the cost, as determined by Commission policy.
Indeed, as a general matter, the Commission’s open access policies would preclude a
developer from proposing an undersized participant-funded project in an effort to maintain
congestion. A developer’s “obligation to undertake any necessary system expansion [to
respond to transmission service requests] at the higher of incremental or embedded cost”
ensures that a participant-funded project cannot be intentionally undersized.
Commission policies, if the capacity of the NEL or any other participant-funded
transmission project could be efficiently expanded at low cost, other transmission
customers could easily gain access to that additional capacity by requesting service and
committing to pay the cost of satisfying their requests. In this regard, as the Commission
participant-funded projects proposed by existing transmission
providers are fundamentally different from merchant projects. An open season is
appropriate for merchant projects because merchants lack the Order No. 888 obligation to
expand in order to accommodate transmission requests. In contrast, there is no need for an
at P 29.-
open season in the case of participant-funded projects proposed by existing transmission
providers to satisfy that obligation.
It is accordingly clear that any concerns about undersized transmission expansion
projects have no basis in the case of the NEL.
The Proposed Transaction Presents No Potential for Affiliate Abuse or
the Exercise of Market Power.
Although the joint venture between Emera and First Wind, if consummated, would
create an affiliation between those companies, the proposed NEL transaction fully
complies with the principles of the Orders 888, 889, and 890 that protect against actual and
potential affiliate abuse. Those principles allow affiliated customers to request and receive
service from a transmission owner; indeed, they are designed to enable them to do so while
protecting against the affiliates’ receiving preferential transmission access. With regard to
transmission service requests, these principles require that (1) available capacity and
capacity that a transmission upgrade would make available must go to the prospective
customer who first requests it, whether or not affiliated with the transmission owner;
(2) information about available capacity must be made available to all potential customers
at the same time.
Compliance with these principles protects against actual and potential
First Wind’s request for transmission capacity on the NEL complies with these
requirements. First Wind’s was the first and only request that the NEL Parties have
received for transmission capacity that the NEL would create. Providing this capacity to
Order No. 890 at P 1424;
at P 27.
Order No. 889,
FERC Stats. & Regs
¶ 31,035 at 31,588 (1996)(“Open access non
discriminatory transmission service requires that information about the transmission system must be made
available to all transmission customers at the same time.”),
order on reh'g,
Order No. 889-A,
FERC Stats &
Regs. ¶ 31,049 (1997),
Order No. 889-B, 81 FERC ¶ 61,253 (1997).-
First Wind in exchange for its commitment to support the costs of the NEL therefore
cannot constitute an affiliate preference.
Further, First Wind received no preferential access to information about the NEL.
As discussed above, the NEL Parties made public presentations regarding the NEL’s
potential to create additional capacity between northern Maine and the Boston area as early
as late 2007 – over three years before the execution of the MOU. That information was
provided though presentations at ISO-NE committees, which were subsequently available
on ISO-NE's website.
These presentations provided all interested parties, including
potential customers, with notice of the potential to install additional capacity for the
delivery of energy – from renewable and other resources – from northern Maine to
Southern New England. This information was publicly and equally available for all.
In addition, the NEL Parties’ filing of an Elective Transmission Upgrade
Application in October 2008 provided further public notice that this capacity could be
available, and also indicated the NEL Parties’ intention to pursue the project on a
Starting in July 2009 and continuing for more than a year, the
NEL Parties engaged in outreach to all the suppliers of which they were aware that could
take advantage of the new capacity – both potential renewable energy suppliers and
potential balancing energy suppliers. In all, the NEL parties had 15 meetings with 7
suppliers. As discussed in the declarations of Greg Blunden, Vice President Business
Development for Bangor Hydro, and Brian T. McCabe, Vice President, U.S. Business
Development for National Grid, neither Bangor nor National Grid provided First Wind –
attached Declaration of Greg Blunden at ¶¶ 4, 7 and Ex. GB1-2.
attached Declaration of Greg Blunden at 9;
queue no. 283.-
during these discussions or otherwise prior to First Wind’s request for transmission
capacity – with any information that was not provided to other potential customers.
The information available to First Wind thus was available to all other potential
customers. The fact that First Wind acted on the information, while no other potential
customer chose to do so, does not affect the conclusion that an agreement to provide the
requested capacity to First Wind in exchange for First Wind’s commitment to pay for the
capacity is fully consistent with the Commission’s open access requirements and does not
represent affiliate abuse.
The Commission might also be concerned whether the terms and conditions under
which the capacity is provided to First Wind represent preferential treatment to an affiliate.
The fact that the transmission service agreement is to be cost-based assures that there will
be no pricing preferences. Because NEL Participants will be funding the entire costs of the
NEL, there is no possibility of NEL costs being borne by captive customers of any NEL
Parties’ affiliates. The transmission service agreement will also be subject to Commission
review under section 205 of the FPA, and the Commission will not, indeed cannot, approve
a rate structure that is unduly preferential.
Finally, NGTSC’s participation in the process provides additional protection
against any potential concerns about affiliate preference. NGTSC is not a party to the
planned joint venture involving First Wind and Emera. NGTSC thus neither had nor has
any incentive to provide special treatment to First Wind. To the contrary, NGTSC’s and
National Grid’s only interest is to promote the development of the project. To do so,
NGTSC and National Grid have every incentive to make the capacity available to the first
creditable customer requesting the capacity; it has no incentive to favor First Wind.
attached Declaration of Greg Blunden at 11-12 and Declaration of Brian T. McCabe at ¶ 7.-
The NEL Parties are aware that concerns regarding affiliation between the
transmission provider and its customer prompted the Commission’s rejection of the initial
request for approval of the proposed transaction in
Those circumstances are not
comparable to the circumstances here. First, unlike the
parties, the NEL Parties are
existing transmission owners, each with a residual obligation under Order No. 888 to
expand their systems upon request upon nondiscriminatory and non-preferential terms.
This obligation ensures that affiliates and non-affiliates receive like treatment. Second,
unlike the NEL,
was a merchant project.
As explained in
Commission imposes certain restrictions on presubscription for merchant projects, in order
to ensure open access. These concerns do not arise in participant-funded projects, which
are in fact the product of standards open access principles.
The Proposed Transaction Presents No Opportunities for the Exercise
of Market Power.
There is also no potential for the NEL to create or enhance the ability of any
participant to exercise horizontal market power. Each NEL Participant will presumably
market its energy through its Commission-approved market-based rate tariff. The
Commission’s acceptance and oversight of these market-based rate authorizations thus
protects against any exercise of horizontal market power in generation.
nor Bangor Hydro can exercise horizontal market power in transmission because they have
at PP 45, 61, 64.
at PP 27-28.
"Through regularly scheduled updated market power analyses . . . the Commission is better able to
evaluate the ongoing reasonableness of . . . sellers’ charges and to provide for an ongoing assessment of their
ability to exercise market power."
Market-Based Rates for Wholesale Sales of Electric Energy, Capacity and
Ancillary Services by Public Utilities
, Order No. 697, FERC Stats. & Regs. ¶ 31,252 P 852 at 31,992,
, 121 FERC ¶ 61,260 (2007),
, Order No. 697-A, FERC Stats. & Regs. ¶ 31,268
order on reh’g and clarification
, 124 FERC ¶ 61,055 (2008).-
turned over their facilities to the operational control of ISO-NE.
Further, the transaction
employs a cost-based rate, rendering any transmission market power – even it if existed –
Finally, there is no potential for the exercise of vertical market power. As the
Commission stated in
, “[A] minimum requirement for the possession of vertical
market power is the ability to control more than one stage of production, in this case,
generation and transmission.”
The operation of the NEL, and the scheduling of any
capacity beyond that used by the NEL Participants, will be under the control of ISO-NE.
this factor resolves any vertical market power concerns.
The Proposed Transaction Is Consistent with Regional Reliability and
As discussed above, the NEL Parties will submit the proposed line project to ISO
NE for review under section I.3.9 to ensure consistency with applicable reliability criteria.
Subsequently, the NEL Parties will turn over operational control of the NEL to ISO-NE,
which will operate the line as required to ensure continued efficiency and reliability of the
ISO-NE transmission grid. Accordingly, the NEL presents no regional reliability or
Maine Public Service’s transmission lines are located in a portion of Northern Maine that is
interconnected only with Canada and not any other portion of the US transmission grid. Maine Public
Service’s transmission lines, however, are subject to open access in accordance with Order Nos. 888 and 890.
at P 54.
COMMUNICATIONS AND SERVICE
Communications regarding this filing should be addressed to the following
individuals, whose names should be placed on the official service list established by the
Secretary with respect to this submittal:
Jeffrey M. Jakubiak
David B. Rubin
Troutman Sanders LLP
401 9th Street, NW
Washington, DC 20004-2134
Tel: (202) 274-2950
Fax: (202) 274-2994
Kenneth G. Jaffe
Michael E. Ward
Alston & Bird LLP
The Atlantic Building
950 F Street, NW
Washington, DC 20004-1404
Tel: (202) 756-3300
Fax: (202) 654-4875
Gerald R. Chasse
President and Chief Operating Officer
Bangor Hydro Electric Company
PO Box 932
Bangor, ME 04402
Tel: (207) 973-2653
Fax: (207) 973-2980
Brian T. McCabe
VP US Business Development
25 Hub Drive
Melville, NY 11747
Fax: (631) 755-6763
The NEL Parties have served copies of the Petition for Declaratory Order, and all
attachments thereto, on the public utility commissions of the New England States, ISO-NE,
and counsel for the NEPOOL Participants Committee.
The following documents are included as attachments to this petition:
Declaration of Greg Blunden, with Ex. Nos. GB-1 – GB 4;
Declaration of Brian T. McCabe.
The NEL Parties respectfully requests waiver of Rule 203(b)(3) of the Commission’s Rules and
Regulations to permit each of the persons listed below to be included on the service list in this proceeding.-
For the reasons above, the NEL Parties request that the Commission issue an order
declaring that the structure of the proposed bilateral transmission services agreement,
under which the NEL Parties will sell First Wind up to 1,100 MW of transmission service
over a new, participant-funded, HVDC transmission line, in order that First Wind may
deliver energy to purchasers in New England, is consistent with the Commission’s
requirements regarding participant-funded transmission lines.
/s/ Kenneth G. Jaffe
Kenneth G. Jaffe
Michael E. Ward
Alston & Bird LLP
The Atlantic Building
950 F Street, NW
Washington, DC 20004-1404
Tel: (202) 756-3300
Fax: (202) 654-4875
Counsel for National Grid and
on behalf of the NEL Parties
Dated: July 11, 2011