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FERC Grants Otter Tail's Request for Incentive Rate Treatment for Two Transmission Projects

On May 18, 2023, the Federal Energy Regulatory Commission (FERC) issued an order granting the Otter Tail Power Company’s (Otter Tail) request for incentive rate treatment for its investments in two regional transmission projects, the Jamestown Project and the Big Stone South Project.  The projects were approved by the Midcontinent Independent System Operator, Inc. (MISO) as part of a Portfolio of eighteen Long Range Transmission Plan (LRTP) Tranche 1 projects that together will provide benefits to the MISO Midwest Subregion, including congestion and fuel savings, avoided capital cost of local resources, avoided transmission investment, resource adequacy savings, avoided risk of load shedding, and decarbonization. 

FERC granted Otter Tail’s request for authorization to include 100% of prudently incurred Construction Work in Progress (CWIP) for the LRTP projects in Otter Tail’s rate base and to recover 100% of prudently incurred costs of the projects that are cancelled or abandoned for reasons beyond Otter Tail’s control (also known as Abandoned Plant Incentive), effective May 31, 2023, as requested.  Otter Tail will implement these incentives through its existing formula rate mechanisms as found in MISO’s Open Access Transmission, Energy and Operating Reserve Markets Tariff (Tariff). 

In granting the incentive rate treatment, FERC found that the LRTP projects are entitled to the rebuttable presumption that they satisfy the requirement under section 219 of the Federal Power Act (FPA) to ensure reliability and/or reduction of the cost of delivered power by reducing congestion, since the MISO’s transmission planning process evaluated and approved them for doing just that.  FERC granted the CWIP incentive for the LRTP projects, finding that Otter Tail demonstrated that the requested incentive is tailored to the risks and challenges faced by the projects. 

FERC found that Otter Tail demonstrated that the LRTP projects face certain regulatory, environmental, and siting risks that are beyond Otter Tail’s control and could lead to the projects’ abandonment, and approval of the Abandoned Plant Incentive will address such risks by protecting Otter Tail and its members if cancellation of the projects occurs for reasons outside of its control. 

Ultimately, after evaluating each element of the package of incentives and the interrelationship of all elements of that package, FERC found that the total package of incentives requested is tailored to address the demonstrable risks or challenges faced by Otter Tail with these projects.

In a concurrence, Commissioner Christie highlighted the policy reasons for why he believes FERC should revisit the array of incentives offered to transmission developers. 

Wright & Talisman, P.C. represents Otter Tail Power Company in this proceeding.