FERC Approves a New Model for Financing Transmission Lines

April 25, 2007

The Federal Energy Regulatory Commission (FERC) announced on April 19th that it has approved a new mechanism for financing transmission lines to connect renewable energy facilities to the power grid. The new approach, proposed by the California Independent System Operator (ISO), allows the transmission system owner to cover the cost of a new transmission line through charges assessed against all the users of the transmission system. When a new renewable energy facility such as a wind power plant connects to the new transmission line, the facility will start paying its share of the cost based on how much of the transmission line's capacity it is using. Other transmission system users will continue to pay the cost of any unused capacity on the line until the line is fully subscribed, that is, until new facilities have signed up to use the full capacity of the line. The decision was hailed by the American Wind Energy Association (AWEA), which notes that the new financing model will make it much easier to extend transmission lines to areas with ample renewable energy resources. See the FERC and AWEA press releases and the full FERC decision (PDF 153 KB). Download Adobe Reader.