FERC last Wednesday ruled that San Diego Gas & Electric Co. (SDG&E) can roll into its rates the costs associated with two proposed transmission upgrades that the utility has said will allow for significant levels of new generation to serve load in the western part of the country.

“This is a good order to look at when we’re thinking about what it takes to get transmission built,” FERC Chairman Pat Wood said at the Commission’s regular agenda meeting. “At a minimum, we’re talking about 1,360 MW of new generation.”

The Sempra Energy subsidiary detailed the two transmission upgrade projects in a late January filing made at the Federal Energy Regulatory Commission.

The first project, dubbed the Miguel-Mission upgrade, calls for SDG&E to modify approximately 25 miles of existing 138 kV steel lattice towers to accommodate a new 230 kV circuit. The utility would also use spare positions on existing 230 kV structures to complete a path of approximately 35 miles from its Miguel substation to the Mission substation. Preliminary estimates as of late January indicated that this project will cost $26 million, although SDG&E noted that figure could change.

According to SDG&E, the Miguel-Mission upgrade would increase the delivery capability from the southern portion of the utility’s system to the northern portion of its system by 560 MW. With the Miguel-Mission transmission upgrade, the delivery capability north of Miguel increases to 2,250 MW. SDG&E said it considered alternatives to the Miguel-Mission upgrades, but they were more expensive.

The second upgrade, which would modify the company’s Imperial Valley substation, calls for SDG&E to install a new 500/230 kV transformer bank and associated 500 kV and 230 kV termination facilities at the substation. Preliminary cost estimates indicate that this project will cost $29.4 million. SDG&E told FERC that the Imperial Valley substation upgrade would help minimize congestion when there is high export traffic from Mexico combined with various SDG&E contingencies.

FERC last week signed off on SDG&E’s bids to roll into its rates the costs tied to the two proposed transmission system upgrades. The action comes in the wake of a recent Commission staff report on the need for additional infrastructure to support California’s growing energy markets.

Wood noted that the upgrades are expected to produce net benefits of $3 million per year for ratepayers in the San Diego area and over $10 million per year for customers of the California Independent System Operator (Cal-ISO).

“If that just ramps up to the full amount of capacity that is allowed to be handled by these lines, 3,800 MW, that would be economic benefits for San Diego and Cal-ISO of $26 million and $174 million, respectively,” Wood said. “That is a phenomenal little fact that I think we ought to carry around as we think about the tradeoffs and cost-benefit of adding new transmission to broaden the reach of new generation and how those cost-tradeoffs get made.”

At the same time, the Commission denied SDG&E’s request for assurances of its entitlement to recover its project costs in the case of abandonment. However, FERC also indicated a willingness to consider full recovery of these costs, when and if such circumstances are presented to the Commission for its review.

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