Regulation and Policy

FERC finds 500-MW Lake Elsinore is advanced transmission tech

The Federal Energy Regulatory Commission says the proposed 500-MW Lake Elsinore pumped-storage project in California meets the requirements of the Energy Policy Act of 2005 for an advanced transmission technology.

Section 1223 of the Energy Policy Act mandates FERC to encourage deployment of energy storage devices, including pumped hydro, as advanced transmission technology.

By treating Lake Elsinore as a transmission asset, developer Nevada Hydro Co. Inc. has said it believes the project will be easier to finance. Nevada Hydro said at this time it is proceeding down two independent paths for financing. One path would involve a rate-based approach, and provide for a guaranteed rate of return to investors. The other path would require reaching a power purchase agreement with a utility, it said.

Nevada Hydro sought FERC’s approval to treat the plant as a transmission asset for rate recovery purposes, to be included in the California Independent System Operator Corp. (CAISO) Transmission Access Charge. Nevada Hydro further contended pumped storage is an advanced technology that best serves grid management functions. For that reason, Nevada Hydro argued FERC should treat Lake Elsinore no different from a traditional network transmission asset.

While agreeing Lake Elsinore meets Energy Policy Act requirements, FERC deferred ruling on the merits of certain rate principles sought by Nevada Hydro. FERC said it did not have sufficient information to determine whether to include the facility in CAISO’s transmission access charge. FERC added it lacked sufficient information to determine whether rate incentives requested by Nevada Hydro are justified and would result in just and reasonable rates for California ratepayers.

FERC said it would analyze additional information to complete its evaluation of Nevada Hydro’s proposal, and issue a subsequent order on the merits of the proposal.

Nevada Hydro also had asked FERC to determine whether CAISO should either manage or facilitate the management of the pumped-storage project. In its Nov. 17, 2006, order (ER06-278), FERC said it is premature to make that determination, given that CAISO has not indicated how it expects to use the facility to meet and manage the grid, and to what extent the facility would reduce congestion or enhance reliability.

FERC said CAISO has expertise to determine how best to integrate Lake Elsinore into the grid, and directed CAISO to report by Jan. 16, 2007, the outcome of its discussion with stakeholders.

Co-applicant petitions FERC for project determination

In a separate matter, Elsinore Valley Municipal Water District, a co-applicant, asked FERC to make clear it is considering the Lake Elsinore project license application to be for a single hydro project with ancillary transmission, and not as a stand-alone hydro project and a stand-alone 30-mile transmission line.

In a letter to the commission, the district said the project license might be put at risk if such a clarification is not included in a final environmental impact statement. District officials expressed concern that the transmission line could be built without the hydro plant if they are licensed separately.

The district informed FERC it reached an impasse with Nevada Hydro on a project contract and explained a critical component of that impasse to be a �one project versus two projects� disparity between co-applicants. The district said it concluded further negotiations with Nevada Hydro appeared fruitless and called on FERC to expressly reject Nevada Hydro’s notion the FEIS should consider stand-alone transmission.

�Given Nevada Hydro’s intransigence on this matter, the district is compelled to ask the commission to make it absolutely clear in its FEIS that the project analyzed is a hydro project with ancillary transmission, and not (with) a stand-alone transmission project,� the district said.

FERC staff issued a draft EIS for the project (No. 11858), at Lake Elsinore and San Juan Creek in Riverside County, Calif., in early 2006. (HNN 3/6/06) FERC is expected to issue final environmental documents by the end of January, Nevada Hydro said. The developer anticipates the project will cost $1.1 billion to complete, including $750 million for the power project. It estimates transmission will cost $350 million.