Great River Energy employees have been hard at work for the last couple of years ensuring the massive power grid buildout underway in the Upper Midwest is in the best interest of the cooperative’s member-owners for reliability, affordability and fairness. They have enjoyed several significant victories throughout the process, not the least of which came in early February with an approval from the Federal Energy Regulatory Commission (FERC).
“Our original estimate mid-2022 showed the regional transmission buildout would increase the net present value of future transmission costs by 10%. We successfully reduced that to 6% through gaining investment opportunity in regional transmission projects,” said Great River Energy Vice President and Chief Transmission Officer Priti Patel. “This FERC decision reduces the expected increase further, bringing the projected increase to 3%.”
Patel noted that transmission costs make up only a small portion of member-consumers’ electricity bills.
As part of its Long-Range Transmission Plan, the Midcontinent Independent System Operator (MISO) last summer approved 18 transmission projects estimated to cost $10.3 billion in its Upper Midwest regions. Because those projects provide regional benefits, the cost is spread across all transmission customers in those MISO regions based on how much electricity they consume.
“The way to offset costs is investing in projects so you can earn revenue,” Patel said. “Throughout this process we have advocated for broader ownership and it has paid off for our members.”
Great River Energy employees advocated for the right projects at MISO to benefit both the member-owners and the broader MISO footprint. In the end, Great River Energy is able to mitigate costs through ownership and investment opportunities in the Northland Reliability Project that the cooperative is building jointly with Minnesota Power as well as the Alexandria-Big Oaks project that is a five-owner project, where Great River Energy is a minority owner.
The early February FERC decision, which focused largely on financial structure, was significant.
“FERC approved our request to apply a financial structure similar to ones used by investor-owned utilities. The approved new structure allows us to earn a return on our Northland Reliability Project investment through a capital structure of 50% equity and 50% debt, similar to an investor-owned utility,” said Great River Energy Manager of Transmission Mike Saer. “More importantly, through this new capital structure, we are able to mitigate negative impacts to our credit rating.”
This FERC approval will now result in a higher net present value return than an earlier estimate that did not include the value of the incentives.
Great River Energy also requested, and was granted, 100% construction work in progress in rate base for the Northland Reliability Project.
“We will now earn a return on the project as we incur construction costs rather than waiting for the project to go into service, which ensures rate stability,” Saer said.
Finally, FERC granted Great River Energy “abandoned plant recovery,” which gives the cooperative the ability to seek recovery of “prudently incurred costs” for a project canceled for reasons outside the cooperative’s control, for both the Northland Reliability Project and the Alexandria-Big Oaks transmission project.
“FERC’s decision will go a long way toward achieving the grid benefits of these regional transmission projects while managing costs and risks for our member-owner cooperatives,” Patel said.