Do you often make a typo that turns "Clean Line" into "Clean Lie?" Me, too.
Clean Line has a new shtick that claims Iowa ratepayers will benefit if the IUB allows it to change the process to make it less costly for its investors. Clean Line's claim can be paraphrased like this:
If you don't make it easy for us to build the Rock Island Clean Line (RICL) using the merchant model that charges customers in other regions for the cost of the project, then the Midcontinent Independent Systems Operator (MISO) will order new transmission just like RICL and make Iowa ratepayers pay for it.
Clean Line must really think Iowans and their Utility Board are a bunch of rubes. This argument fails on so many levels, and the reality is that building RICL could actually increase electricity costs for Iowans.
First of all, this is an apples to oranges comparison. RICL is not at all like the transmission projects MISO may order to be built. RICL's stated purpose is to export electricity from the MISO region to the PJM Interconnection region. MISO generally serves midwestern states, while PJM generally serves eastern states. RICL proposes to move large quantities of electricity generated in MISO into PJM, where it may be used by "states farther east." RICL is not proposing to serve any customers in MISO, particularly in Iowa. Contrast that to the transmission projects MISO orders. MISO is concerned only with serving customers within its own region. Therefore, any transmission projects MISO orders will be for the purpose of moving electricity around the MISO region for use by MISO consumers. MISO would never propose a transmission project for the express purpose of exporting electricity to another region, and then turn around and expect MISO consumers to pay for it.
Independent System Operators and Regional Transmission Organizations (which are generally identical constructs) are quite parochial. They are utility member organizations that exist to serve their own regional interests. Interregional planning is extremely fragile, to the point of being non-existent. This is because an ISO/RTO will generally utilize its own resources first, from a cost and reliability standpoint, before importing resources from another region. RTO/ISO members would never agree to pay the cost of export to another region, and moreover, this rubs against the Federal Energy Regulatory Commission's Order No. 1000, that ensures that only beneficiaries pay the cost of transmission built to serve them.
Therefore, the building of RICL would have NO EFFECT on the transmission projects MISO orders to serve its consumers. MISO will still order the transmission it needs to serve consumers in its region, including Iowa. RICL is no substitute for MISO-ordered transmission because it would not serve any consumers in Iowa, or anywhere in the MISO region. At best, RICL is agnostic about costs to Iowa ratepayers. It certainly won't save them any money.
RICL may actually cost Iowans higher electricity prices. Think of electricity produced in Iowa as a reservoir. As long as supply is plentiful, prices remain cheap, and cheap energy is dispatched first to Iowans. However, RICL would turn on a gigantic tap that drains that reservoir and sends the water (or electricity) to other regions with higher prices. This creates an imbalance between supply and demand, where Iowa electricity buyers must now compete with other regions to buy the cheapest Iowa-produced electricity remaining in the reservoir. Transmission lines levelize prices between electricity's source and sink (consumers), lowering prices in other areas by making cheaper energy available to new users, while raising prices at its source by increasing competition for the newly-limited supply. Exporting a plentiful supply of anything raises local prices by lowering supply. It's the simple principle of supply and demand.
Clean Line has come dangerously close to violating its negotiated rate authority granted by the Federal Energy Regulatory Commission. FERC based its grant of authority, in part, on the following:
Clean Line has a new shtick that claims Iowa ratepayers will benefit if the IUB allows it to change the process to make it less costly for its investors. Clean Line's claim can be paraphrased like this:
If you don't make it easy for us to build the Rock Island Clean Line (RICL) using the merchant model that charges customers in other regions for the cost of the project, then the Midcontinent Independent Systems Operator (MISO) will order new transmission just like RICL and make Iowa ratepayers pay for it.
Clean Line must really think Iowans and their Utility Board are a bunch of rubes. This argument fails on so many levels, and the reality is that building RICL could actually increase electricity costs for Iowans.
First of all, this is an apples to oranges comparison. RICL is not at all like the transmission projects MISO may order to be built. RICL's stated purpose is to export electricity from the MISO region to the PJM Interconnection region. MISO generally serves midwestern states, while PJM generally serves eastern states. RICL proposes to move large quantities of electricity generated in MISO into PJM, where it may be used by "states farther east." RICL is not proposing to serve any customers in MISO, particularly in Iowa. Contrast that to the transmission projects MISO orders. MISO is concerned only with serving customers within its own region. Therefore, any transmission projects MISO orders will be for the purpose of moving electricity around the MISO region for use by MISO consumers. MISO would never propose a transmission project for the express purpose of exporting electricity to another region, and then turn around and expect MISO consumers to pay for it.
Independent System Operators and Regional Transmission Organizations (which are generally identical constructs) are quite parochial. They are utility member organizations that exist to serve their own regional interests. Interregional planning is extremely fragile, to the point of being non-existent. This is because an ISO/RTO will generally utilize its own resources first, from a cost and reliability standpoint, before importing resources from another region. RTO/ISO members would never agree to pay the cost of export to another region, and moreover, this rubs against the Federal Energy Regulatory Commission's Order No. 1000, that ensures that only beneficiaries pay the cost of transmission built to serve them.
Therefore, the building of RICL would have NO EFFECT on the transmission projects MISO orders to serve its consumers. MISO will still order the transmission it needs to serve consumers in its region, including Iowa. RICL is no substitute for MISO-ordered transmission because it would not serve any consumers in Iowa, or anywhere in the MISO region. At best, RICL is agnostic about costs to Iowa ratepayers. It certainly won't save them any money.
RICL may actually cost Iowans higher electricity prices. Think of electricity produced in Iowa as a reservoir. As long as supply is plentiful, prices remain cheap, and cheap energy is dispatched first to Iowans. However, RICL would turn on a gigantic tap that drains that reservoir and sends the water (or electricity) to other regions with higher prices. This creates an imbalance between supply and demand, where Iowa electricity buyers must now compete with other regions to buy the cheapest Iowa-produced electricity remaining in the reservoir. Transmission lines levelize prices between electricity's source and sink (consumers), lowering prices in other areas by making cheaper energy available to new users, while raising prices at its source by increasing competition for the newly-limited supply. Exporting a plentiful supply of anything raises local prices by lowering supply. It's the simple principle of supply and demand.
Clean Line has come dangerously close to violating its negotiated rate authority granted by the Federal Energy Regulatory Commission. FERC based its grant of authority, in part, on the following:
To approve negotiated rates for a transmission project, the Commission must find that the rates are just and reasonable. To do so, the Commission must determine that the merchant transmission owner has assumed the full market risk for the cost of constructing its proposed transmission project.
Rock Island meets the definition of a merchant transmission owner because it assumes all market risk associated with the Project and has no captive customers. Rock Island has agreed to bear all the risk that the Project will succeed or fail based on whether a market exists for its services.
What RICL proposed in Iowa is a shifting of risk to Iowans. RICL believes it should not be subject to the financial risk presented by Iowa's long-standing permitting process that requires it to negotiate voluntary easements or prepare time-consuming Exhibit E material before being granted a permit. Instead, RICL believes Iowans should be subject to a confusing, inconvenient, and more costly bifurcated permitting process in order to absolve RICL of any financial risk during the permitting process. This is a shifting of financial risk to Iowans.
In its application to FERC, RICL talked big about sharing the risk with its customers, the load-serving entities (LSEs) that would buy its capacity.
In its application to FERC, RICL talked big about sharing the risk with its customers, the load-serving entities (LSEs) that would buy its capacity.
Rock Island also argues that wind generators, whose energy the Project will likely transmit, present numerous risks that transmission project developers and investors must overcome. For example, Rock Island states that wind energy projects are typically constructed with shorter lead times than other generators and are less willing to commit to large transmission projects well in advance of generator construction. Rock Island argues that pre-subscription of capacity with creditworthy anchor customers can reduce financing obstacles because lenders demand to see a secure source of revenue as a predicate to project financing.
Here, it appears that RICL is suggesting that it can sell its capacity to LSEs before the project is built. These entities with a guaranteed spot on RICL's wind highway would later buy electricity from wind farms connected to RICL. Not only would it lower RICL's financial risk by providing the company with capital before its project is online, it would also provide a future revenue stream that wind farms could use to secure their own financing. Perhaps RICL should be looking to share its financial risk in Iowa with its potential customers by pre-subscribing its capacity to LSE customers at this time? Let the LSEs pony up the funds necessary to negotiate voluntary easements or create Exhibit E materials. That would shift the financial risk from RICL to its customers, where it belongs, instead of to Iowans.
Except RICL doesn't have any customers. Potential customers have been unwilling to shoulder any of RICL's financial risk during the permitting process. Chicken/egg. This demonstrates why Clean Line's business model will never work unless states agree to shift Clean Line's risk onto their own citizens by permitting a project that has no customers. Iowa said no on Monday. Arkansas said no in 2011. Missouri said no last summer.
In order to hide its failure to share risk with its own customers, RICL whined that the Iowa process is flawed and must be changed to shift risk from RICL to Iowans.
I'm not buying it. How about you?
Except RICL doesn't have any customers. Potential customers have been unwilling to shoulder any of RICL's financial risk during the permitting process. Chicken/egg. This demonstrates why Clean Line's business model will never work unless states agree to shift Clean Line's risk onto their own citizens by permitting a project that has no customers. Iowa said no on Monday. Arkansas said no in 2011. Missouri said no last summer.
In order to hide its failure to share risk with its own customers, RICL whined that the Iowa process is flawed and must be changed to shift risk from RICL to Iowans.
I'm not buying it. How about you?
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