Renewable Energy Law Alert: The Upper Midwest Reopens to Renewable Energy Development
12/17/2010

Yesterday, December 16, 2010, the Federal Energy Regulatory Commission (FERC) conditionally approved a proposal by the Midwest Independent Transmission System Operator (MISO) that significantly changes how large transmission upgrades are funded across the MISO region. MISO's proposal creates a new category of transmission projects called Multi-Value Projects (MVPs) for upgrades that are determined to enable reliable and economic delivery of energy in support of public policy mandates or laws that address transmission reliability and congestion across multiple transmission zones. MISO's proposal is effective as of July 16, 2010 and thus applies to transmission projects identified in Appendix A of 2010 MISO Transmission Expansion Plan (MTEP).

As conditionally accepted, MISO's methodology for allocating the costs of transmission upgrades now breaks down as follows:

A. Qualification Criteria and Cost Allocation of MVPs.

To qualify for MVP treatment, a transmission project must either bring about an increase in reliability or economic efficiency, or aid in achieving mandated state or federal public policy goals. Projects qualifying for MVP status based on economic factors must demonstrate multiple economic benefits in multiple zones. Projects that seek to qualify for reliability reasons must address at least one projected reliability violation and provide regional economic benefits. Further, for a project to qualify for aiding to achieve public policy goals, it must support documented public policy goals and enable the delivery of such energy in a manner that is more reliable/efficient than it would otherwise be without the upgrade.

MVPs are limited to projects that are included in the transmission planning process, and cannot be network upgrades that are constructed only as the result of a generator interconnection or transmission service request. "Interconnecting generators in areas without proposed MVPs (i.e., areas that lack robust transmission), and whose requests drive the need for significant upgrades, will bear the costs either alone or with other interconnection customers." Furthermore, MVPs are limited to transmission projects that are 100 kV or higher and that cost greater than the lesser of $20 million or five percent of the applicable Transmission Owner's reported net transmission plant. MVP projects cannot have been in service, under construction, or approved by MISO's board prior to July 16, 2010, or the date the constructing Transmission Owner becomes a MISO Transmission Owner, whichever is later. MVPs also exclude certain underwater, underground, and direct current transmission lines.

The costs of MVPs will not be assigned to generators. When MVPs are identified and approved by the MISO board, the costs of those projects (and supporting underbuilds) will be allocated across MISO's system and charged to load, exports, and wheel-through transactions based on actual energy usage over time (thus recognizing changing beneficiaries), with the exception of export and wheel-through transactions that sink in the PJM region. Loads served under grandfathered agreements specified in Schedule 26-A of MISO's Open Access Transmission Tariff will also be exempt from sharing in MVP costs.

MISO will be required to review potential MVPs on a portfolio basis through the stakeholder process, such that MISO focuses on its entire region when considering proposals. The portfolio approach was not a part of MISO's original proposal, and must be submitted by compliance within 60 days of FERC's order.

B. Generator Interconnection Reimbursement Policy.

FERC also accepted MISO's proposal to make permanent the temporary cost allocation methodology for network upgrades that MISO has had in place since July 2009. Consequently, interconnecting generators in MISO will continue to pay 100 percent of the costs of network upgrades caused by their interconnection, with a reimbursement of 10 percent for upgrades rated at 345 kV or above. However, a network upgrade identified through the interconnection process may become eligible for MVP treatment if the upgrade is approved as an MVP in MTEP Appendix A within the later of one year from the execution or unexecuted filing of an interconnection agreement or the issuance of the next MTEP Report. If a network upgrade is not identified as an MVP within that "contingency period," then the interconnection customer(s) will bear the costs. Upgrades that can make this transition will be listed as contingencies in an interconnection customer's interconnection agreement.

FERC also accepted MISO's proposal to create a new category of network upgrades—Shared Network Upgrades—that benefit later-coming interconnection customers. This new category of network upgrades addresses the "first mover/free rider" problem where a first party pays for an upgrade and subsequent generators are able to interconnect at no cost. Under the accepted proposal, a later-coming interconnection customer may now be required to pay a portion of the costs of network upgrades that benefit the customer.

A network upgrade is eligible for Shared Network Upgrade status if it (i) is associated with an interconnection agreement effective after July 15, 2010, (ii) has an actual in-service date that is less than five years from a System Impact Study that identifies the upgrade as eligible for contribution, and (iii) is determined by MISO to benefit later-coming interconnection customers. A later-coming customer will be required to contribute to the cost of the network upgrade in proportion to its use of the upgrade.

Yesterday's order significantly changes how transmission upgrades are funded in the MISO region, and potentially relieves roadblocks that have recently stalled the development of renewable resources in the Midwest. Generators remain responsible for the cost of network upgrades associated with their interconnection requests, but, as FERC noted in yesterday's order, the magnitude of these costs for generators could be significantly mitigated as MVPs are approved and added to Appendix A of MTEP.

If you have any questions about the order, how it may affect your generation or transmission project, or wind energy development in the Midwest, please contact one of the following attorneys:

Minneapolis, MN
Mark Hanson at (612) 373-8823 or mjhanson@stoel.com
Kevin Johnson at (612) 373-8803 or kdjohnson@stoel.com
Kevin Prohaska at (612) 373-8805 or krprohaska@stoel.com
David Quinby at (612) 373-8825 or dtquinby@stoel.com
Joe Thompson at (612) 373-8822 or jrthompson@stoel.com
Sarah Johnson Phillips at (612) 373-8843 or sjphillips@stoel.com

Portland, OR
Jennifer Martin at (503) 294-9852 or jhmartin@stoel.com
Marcus Wood at (503) 294-9434 or mwood@stoel.com
Sara Bergan at (503) 294-9336 or sebergan@stoel.com
Jason Johns at (503) 294-9618 or jajohns@stoel.com

Stoel Rives Wind Team Representative Projects

As of the end of 2009, Stoel Rives attorneys have advised on significant legal aspects of nearly 25% of the total installed capacity of wind energy in the United States. Our attorneys have worked on the following operational and publically announced projects in the Upper Midwest:

Project *Denotes project is currently online	Location	MW
Barton (I and II)*	Worth County, Iowa	160
Century Wind*	Hamilton and Wright Counties, Iowa	150
Flying Cloud*	Dickinson County, Iowa	43.5
Pomeroy*	Pomeroy, Iowa	198
Baileyville*	Ogle County, Illinois	80
Cayuga Ridge*	Livingston County, Illinois	300
Mendota Hills*	Lee County, Illinois	52
Fowler Ridge Wind Farm*	Benton County, Indiana	750
Stoney Corners Wind Farm*	Missaukee County, Michigan	19
Chanarambie*	Murray County, Minnesota	85
Elm Creek*	Jackson County, Minnesota	99
Elm Creek II	Jackson County and Martin County, Minnesota	150
Fenton*	Chandler, Minnesota	206
Lakefield	Lakefield, Minnesota	201
MinnDakota*	Lincoln County, Minnesota andBrookings County, South Dakota	150
Moraine*	Murray and Pipestone Counties,Minnesota	51
Nobles	Nobles, Minnesota	201
Ridgewind	Murray and Pipestone Counties, Minnesota	24
Trimont Wind I*	Martin and Jackson Counties, Minnesota	100
Viking*	Murray County, Minnesota	12
Merricourt	Merricourt, North Dakota	150
Rugby*	Pierce County, North Dakota	149
Buffalo Ridge I*	Brookings County, South Dakota	50
Buffalo Ridge II	Brookings County, South Dakota	210
Blue Sky	Fond du Lac County, Wisconsin	80
Blue Sky Greenfield	Marshfield & Calumet Counties, Wisconsin	145
Green Field	Wood County, Wisconsin	80
Sugar Creek	Walworth County, Wisconsin	99