FERC Awards Transmission Rate Incentive to Encourage Use of Innovative High-Temperature Superconductor Technology

Commonwealth Edison Company (ComEd) has been granted a plant abandonment transmission rate incentive (the Abandonment Incentive) by the Federal Energy Regulatory Commission (FERC) to reduce potential risks associated with construction of its innovative Superconductor Cable Development Project (Project). Commonwealth Edison Company, 167 FERC ¶ 61,173 (2019). The Project will use high-temperature superconductor technology to connect three existing ComEd substations in a looped transmission installation and thereby increase the redundancy of these existing substations. When completed, the Project will provide enhanced resilience to the transmission grid in downtown Chicago. The Project will also serve as a demonstration and test of the new technology on a commercial scale for potential use in other urban areas.

The Project is being developed pursuant to the Resilient Electric Grid Program of the Department of Homeland Security (DHS) and is partially funded by DHS. As described in the FERC’s order:

Phase 1 of the Project will be an installation of a high-temperature superconductor cable located entirely within the perimeter of the Northwest TSS 114 substation a few miles north of the Chicago business district. The cable will connect two terminals of the substation, thereby increasing the design contingency of that substation to N-2.

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For Phase 2, the main phase of the Project, ComEd proposes to install two underground 12 kV high-temperature superconducting cables to loop together the three substations in order to provide N-3 capability to the substations. ComEd explains that the high-temperature superconductor cable will include circuit breaker equipment that ensures that power flows will “sectionalize” as needed to share service from the other substations if there is an outage impacting the delivery to any of the substations. ComEd states that the high-temperature superconductor cable connections will be at the 12 kV level, on the low-voltage side of the transformers at each substation, but will be able to loop the facilities like conventional transmission and without high-voltage transformation.

The Project Will be Treated as a Transmission Plant for Ratemaking Purposes

The Project will be located on the low side of meters that separate the transmission system controlled by PJM Interconnection from the facilities operated by ComEd and will operate at voltages that are lower than voltages at which transmission facilities typically operate. Nevertheless, ComEd proposed to recover the costs of the Project through its FERC-jurisdictional transmission rates because the Project will (i) provide bi-directional flows of electricity; (ii) increase reliability and resilience of the transmission grid; (iii) provide voltage support and relief from thermal overloads; and (iv) displace the need for transmission upgrades. In its order, the FERC concluded that the Project will serve a transmission function and therefore constitutes a transmission plant for ratemaking purposes.

The Project Qualifies for the Abandonment Incentive

The Project is the first domestic permanent commercial installation of underground high temperature superconductor cable technology. Perhaps significantly, high temperature superconductor cables are capable of transmitting power at relatively low voltages, have a comparatively small footprint, can be installed close to other infrastructure, and do not need conventional transmission system upgrades. The technology therefore has the potential to benefit utilities operating in dense urban centers around the country. Because the Project relies on new technology that has not previously been deployed on a commercial scale in the United States, ComEd is faced with increased development risks that are beyond its control.

The FERC has encouraged the expansion of beneficial transmission projects with unusual development risks by authorizing recovery of 100 percent of the prudently-incurred costs associated with the project if construction is cancelled or abandoned due to factors beyond the control of the developer. Although any grant of the Abandonment Incentive is discretionary, the FERC concluded that the Project reflects an innovative use of an advanced technology to improve reliability of the ComEd system for which the Abandonment Incentive is appropriate. The FERC therefore authorized ComEd to recover its share of the prudently incurred costs of the Project occurring after May 29, 2019, in the event the Project is cancelled or abandoned due to factors beyond its control.

Although it granted the Abandonment Incentive, the FERC emphasized that it was not addressing any prudence issues. Therefore, if ComEd proposes to begin collection of abandoned plant costs, it will be incumbent on ComEd to demonstrate that the costs were prudently incurred and that the abandonment or cancellation of the Project was beyond its control. ComEd will also be required to show that its proposed rate and cost allocation method to recover the abandoned plant costs is just and reasonable.

In March 2019, the FERC initiated a review of its transmission rate incentives to consider potential changes to its policies for awarding such incentives. The grant of the Abandonment Incentive to ComEd reflects FERC’s continued support of both unusually risky transmission projects and system resiliency improvements those projects foster through risk-reducing financial incentives.