Atlantic Wind Connection Backs US FERC Incentive Rate Request (USA)

Protests to the Atlantic Wind Connection’s requested return on equity, filed with federal regulators, are based on “misunderstandings,” a spokesman for the developer said Friday.

Atlantic Wind Connection spokesman Bryan Lee said the return on equity requested from the US Federal Energy Regulatory Commission is well within FERC’s zone of reasonableness for incentive rates, and “less than some have sought and received for far less innovative and transformative projects.”

Trans-Elect and Atlantic Grid Development are developing the high-voltage offshore transmission line with backing from Google and Tokyo-based investor Marubeni. It is proposed to be built in sections and eventually run from New Jersey to Virginia.

Although the project made a big media splash when announced and raised a lot of positive interest for its potential to access offshore wind, Atlantic Wind Connection’s ROE request met with a number of protests from utilities, consumer advocates from East Coast states, and others who said the request is premature since the project has not been made part of the PJM Interconnection’s regional transmission expansion plan.

Lee said Atlantic Wind Connection plans to submit the project for inclusion in PJM’s transmission plan. He would not speculate on what path the developer might take if it is not granted the ROE requested from FERC. The company in a recent FERC filing said the incentives will help raise capital.

Lee also said that getting a declaratory order from FERC on the incentives would have no impact on consumers until the project is operational.

“None of these costs can be incurred by consumers until we complete the RTEP process in PJM and there is a rate on file with the commission,” Lee said.

Atlantic Wind Connection in December asked FERC to approve a package of incentive rate treatments for the project, including a 13.8% rate of return on equity.

The developers said the ROE would reflect 300 basis points in adders to the base ROE to compensate for the risk, difficulty, and complex nature of the project (150 points), and for forming an independent transmission company (50 points), joining PJM (50 points), and using advanced technologies (50 points).

Atlantic Wind Connection also wants to include in rate base the full costs of construction work in progress as well as recovery of prudently incurred costs if the project is abandoned for reasons outside the developers’ control. The companies sought to use a hypothetical capital structure of 60% equity and 40% debt until any phase of the project is put in service.



Source: platts, February 28, 2011