NY Merchant Transmission Project Folds

A merchant transmission project in New York State dubbed "Empire Connection LLC" recently filed a request to withdraw a previous filing made at FERC related to the project, and said that in the absence of "national leadership," merchant transmission projects not already built or financed "cannot succeed in the foreseeable future" [ER03-1353-000].

At issue is a filing made by Empire Connection at the Commission on Sept. 11, 2003. Through the filing, Empire Connection sought to state in rate schedule form the authority the Commission granted in a May 21, 2003 order. That decision allowed Empire Connection to sell all transmission rights on yet-to-be-constructed facilities in New York at negotiated rates, subject to the tariff requirements of the New York Independent System Operator. Subsequently, on Oct. 30, 2003, Empire Connection filed a motion to hold in abeyance this proceeding based upon Empire Connection's belief that Commission action on the rate schedule would be premature at such time, since the transmission facilities of Empire Connection were not yet constructed and operational. "Empire Connection has therefore suspended development of its transmission facilities, obviating the need for Empire Connection's September 2003 filing or any subsequent progress reports in this docket."

While Empire Connection "failed to garner the necessary capacity commitments either through an auction, as originally contemplated by the Commission, or through a competitive request for proposal process, Conjunction LLC [the project's sponsor] concludes that the merits of the project from the siting, clean air, reliability, technology, economics, and ratepayer perspectives far exceeded the ability of the current market to sustain such a nonutility effort," Empire Connection noted.

"Notwithstanding the well recognized deficit in transmission relative to demand that the nation has experienced in the past decade and one-half and the additional power costs and threats to reliability which electricity 'islands' like New York City must endure (especially if new generation cannot be sited close to load), the 'merchant' alternative to rate-based transmission utility investment currently faces overwhelming obstacles in meeting those challenges," Empire Connection said in its Dec. 9 filing at FERC.

Empire Connection said it "is not alone in demonstrating this. Without national leadership on the issue and without a willingness among load-serving entities to buy such capacity, merchant transmission projects not already built or financed cannot succeed in the foreseeable future. Private equity will find the risks far too great to hazard, and even traditional transmission-owning utilities, especially in jurisdictions like New York, will be discouraged from making investments in the grid sufficient to meet growing demand."

Empire Connection said the "current inability to marshal capital to expand the grid in proportion to the needs of the economy, the need to exploit renewable resources, and the need for reliability and resource diversity must be alleviated."

Conjunction LLC "had hoped to demonstrate how that might be done without direct recourse to the rate-paying public which, sooner or later, will shoulder the consequences of our collective failure to have met these needs as they developed."

(Copyright 2004 NGI, Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of NGI, Inc.