Remember these three words: Utilities Hate Risk.
The solicitation for commitments, expected to last about seven weeks, will be a gauge in determining the interest in using the line.
Despite GBE's media push that FERC has "approved" its project, FERC has no jurisdiction to approve the siting and permitting of the project. What FERC does have an interest in is ensuring that the rates GBE charges to its customers are just and reasonable. FERC simply approved GBE's plan to undertake this process fairly. Once GBE completes the negotiation process and assigns capacity, it must make a compliance filing with FERC demonstrating that it complied with the plan as approved. That may be be the tricky part!
Who wants to make a contractual commitment to purchase capacity on a transmission line that may or may not be permitted, and may or may not be built? It could be generators, that Clean Line admits have not yet been built. It could also be utilities, who commit to purchase the capacity. Or it could be no one at all.
In the case of generators, the generators would need to have customers (utilities) that want to purchase their generation delivered to Indiana (and incur additional transmission costs on other systems to get the power to load). Since these generators have yet to be built, and the transmission to Indiana has yet to be built, committing to a purchase price for delivered power could be risky. Utilities hate risk. A utility seeking to add renewable generation to its portfolio has many options, including existing generators and transmission. Utilities plan their resources many years in advance as part of their obligation to provide a public service. They are obligated to seek the cheapest price. They want to know the resources they commit to purchase will actually be there when needed, not possibly unavailable at some later date, which would leave the utility scrambling to fill some hole in its plan at whatever price they can find. Utilities hate risk. Risk is costly.
In the case of utilities purchasing capacity directly... more risk! Purchase of capacity on a transmission line that may or may not be there when needed, connected to unnamed generators that may or may not be there when needed, is risky. Utilities hate risk.
I read an article long ago regarding Clean Line's business plan. Some panned the plan, saying there is no market for this kind of risk. So, I thought about it. If Clean Line's plan is such a sure thing, why aren't there hundreds of transmission companies building merchant lines outside the regional planning process? Utilities have transmission affiliates, and they like to make money, too. Maybe it's because experienced transmission developers know that there truly is no market for Clean Line's business plan?
Last year, Clean Line opened a different FERC-jurisdictional solicitation process for another of its projects, the Plains and Eastern Clean Line. Regarding that process, Clean Line recently claimed:
It was encouraged by the strong response to a solicitation of customers for another power line it plans to build to deliver wind energy from Oklahoma to Southern states.
From May through July of 2014, Clean Line conducted an open solicitation for transmission capacity on the Plains & Eastern Clean Line. 15 potential customers submitted more than 17,000 MW of requests for transmission service.
... make a compliance filing disclosing the results of the capacity allocation process within 30 days after the close of the open solicitation process, as discussed in the body of this order.
It's been 6 months. No compliance filing. No contracts. No customers. What happened? Is Clean Line still negotiating? Doesn't sound very strong and encouraging to me. What if the bids Clean Line received were unacceptably conditioned to manage risk, or not satisfactory to economically support the project? Remember, the bidding window has closed. Would Clean Line have to award capacity to the top bidders, no matter the conditions? If so, then perhaps it is busy evaluating the economic reality of its project.
Or is Clean Line planning to reject the first round of bidders and open a second solicitation window, hoping for better bids? Would that be fair in FERC's eyes?
Don't forget to get your bids in. ;-)
Utilities hate risk.