LS Power Rate Settlement Reduces Transmission Project Cost Estimate by $200+ Million
*Marcy to New Scotland Transmission Upgrade Project is a Significant Investment to Advance New York’s Nation-Leading Clean Energy Goals and Create Clean Energy Jobs
*Watch a Video of Installation of the Project’s First Poles
*View a Map of the Project
LS Power Grid New York filed a settlement at the Federal Energy Regulatory Commission (FERC) that reduces costs to New York State electricity ratepayers by more than $200 million for the Marcy to New Scotland Transmission Upgrade Project, which began construction earlier this year.
The New York Independent System Operator (NYISO) selected LS Power Grid New York, together with the New York Power Authority (NYPA), as the developer of the Marcy to New Scotland Project in April 2019 through a competitive solicitation process (NYISO Selection Report). Since selection, LS Power Grid New York has achieved a number of milestones, including routing, permitting, engineering, and executing key construction and supply contracts. Construction is now underway, already providing new jobs for surrounding communities.
In the proposed rate case settlement, LS Power Grid New York has committed to a cost-containment amount that reduces the total projected cost of the project to $615 million, more than $200 million less than the estimated cost provided by NYISO’s independent evaluation. The $200 million cost savings will be passed through to New York ratepayers under the settlement proposal. The settlement was filed in FERC Docket No. ER20-716 to govern LS Power Grid New York’s cost recovery for its portion of the project.
The proposed settlement also adopts the risk-sharing cost-containment standard defined in the New York Public Service Commission’s AC Transmission Order. Under this previously adopted standard, if final project costs are greater than the estimated project costs, LS Power Grid New York would not earn a return on 20% of overruns. NYPA will be filing a similar risk-sharing and cost-containment request in a separate proceeding at FERC for recovery of its share of the project’s costs.
In addition to NYPA, the parties to the settlement are the New York Public Service Commission, the City of New York, the Municipal Electric Utilities Association and Multiple Intervenors, a group of New York State industrial customers.
Transmission Competition Benefits Consumers
The Marcy to New Scotland project represents the largest-to-date competitively awarded transmission project in the United States under FERC Order No. 1000, and is the latest example of the benefits competition brings to consumers. NYISO selected LS Power Grid New York’s Marcy to New Scotland Project as the more efficient / cost-effective proposal out of seven competing proposals. NYISO’s evaluation report noted that LS Power Grid New York’s proposal provided more than double the incremental interface capability and did so at a lower cost per megawatt (MW) than any competing third-party proposal. NYISO also determined that the project provides greater production cost savings, renewable integration, grid resiliency, and congestion relief relative to competing third-party solutions. On top of these benefits, the project cost is now estimated to be approximately 25% less than NYISO’s initial estimate at the time of selection.
In April 2019 the Brattle Group completed a report which estimated the cost savings from transmission competition to be 20% to 30%. Since the publication of the Brattle Report, the benefits of competition for transmission have been repeatedly demonstrated across the United States, including with LS Power Grid New York’s Marcy to New Scotland project. As one of the largest non-incumbent developers of transmission in the U.S., LS Power is proud to contribute to these market changes. In 2020, LS Power successfully placed three transmission projects in service. All three projects were delivered on schedule and with final costs below the contractual cost caps.
The projects are:
- Republic Transmission, LLC’s Duff to Coleman Project;
- Silver Run Electric, LLC’s Hope Creek to Silver Run Project; and
- DesertLink, LLC’s Harry Allen to Eldorado Project.
Had these projects not been awarded under a competitive process, consumers would be paying significantly more. For example, the Hope Creek to Silver Run Project, connecting New Jersey and Delaware, is saving consumers hundreds of millions of dollars compared to proposals made by the incumbent transmission owner.
LS Power Grid New York will build on this track record of delivering cost savings and other benefits to ratepayers, leading the way for New York’s clean energy future.
Paul Thessen, President of LS Power, said, “Where it has been enabled, competition under FERC Order No. 1000 has repeatedly provided significant cost savings, risk protection and innovation to consumers. However, transmission investment eligible for competition is still quite limited. The Brattle Report estimated that transmission projects subject to competition represented only 3% of U.S. transmission investments between 2013 and 2017. Consumers would be well served by the expansion of transmission competition and the removal of barriers to competition, especially in light of the significant grid build out that will be necessary over the coming years to combat climate change.”
“The New York Power Authority is pleased to see the cost reductions that our partner, LS Power, has secured for this project,” said Gil C. Quiniones, President and CEO of the New York Power Authority. “An integral part of NYPA’s VISION2030 strategic plan is the rapid development of transmission assets that will help our great state meet its clean energy goals. With this major transmission investment, LS Power and NYPA are demonstrating our commitment to making New York’s transmission system more resilient, reliable and affordable.”