Docket No. ER26-65-000
Today, the Commission appropriately denies a proposed amended Network Integration Transmission Service Agreement (Proposed NITSA) between Duke Energy Carolinas, LLC (DEC) and Lockhart Power Company (Lockhart).[1] I write separately to highlight a customer protection issue raised by the Proposed NITSA and encourage DEC and Lockhart to address that issue in any future amended Proposed NITSA.
Lockhart is an existing network transmission customer of DEC and pays DEC’s Network Integration Transmission Service (NITS) rate for its load. Under the terms of the Proposed NITSA, Lockhart seeks to take service for an additional 200 MW of its load, which triggers approximately $40 million in new transmission system upgrades. The Proposed NITSA is for a five-year term and charges Lockhart for service through an incremental rate rather than the rolled-in (or embedded) rate paid by the remainder of Lockhart’s load. The entire capital costs of any upgrades needed for this additional 200 MW of service would be paid by Lockhart through that incremental rate. However, the Proposed NITSA also conveys rollover rights to Lockhart, which would allow it to continue taking service beyond that initial five-year term without paying for transmission service during the rollover period(s). Today’s order today appropriately rejects the Proposed NITSA for lack of cost support and highlights additional customer protection concerns.
The Commission’s “higher of” transmission pricing policy protects existing transmission customers by allowing transmission owners to charge new customers the higher of an incremental rate or the rolled-in rate for NITS or point-to-point transmission service.[2] The “higher of” transmission pricing policy ensures that new customers or incremental demand from existing customers do not significantly and directly increase the cost of transmission for other customers and aims to hold native load customers harmless.[3]
In this case, the Proposed NITSA’s limited five-year term posits a front-loaded capital recovery for the full transmission upgrade costs, resulting in a proposed incremental rate for service. DEC proposes that such a five-year upfront incremental rate would be the “higher of” the incremental and rolled-in rates. However, as the order notes, if Lockhart renews its service pursuant to its rollover rights, it would not pay for any of the system’s going-forward costs even though it continues to take service from DEC’s transmission system. This outcome would unacceptably shift costs to other transmission customers and fail to account for the continued service (and associated benefits) that Lockhart would receive from DEC’s system during any rollover period(s).
If DEC and Lockhart amend the Proposed NITSA in response to today’s order, they must address this cost shifting concern, in addition to addressing the inadequate cost support for their proposed incremental rate. Any transmission service taken through a rollover provision must be priced at a rate that reflects Lockhart’s ongoing use of the transmission system and protects other customers against unjustified cost shifts. I encourage DEC and Lockhart to price service during a rollover period at DEC’s embedded NITS rate, which would provide the maximum level of protection for DEC’s other customers. Paying DEC’s NITS rate would reflect that Lockhart benefits from its continued use of DEC’s overall transmission system, not just the upgrades triggered by Lockhart’s incremental 200 MW load. To the extent that DEC and Lockhart propose a different pricing structure, they will need to justify why that rate appropriately reflects Lockhart’s continued use of the transmission system and how it protects other customers. In the meantime, I will continue to review novel agreements like the Proposed NITSA with customer protection in mind to ensure that customers pay their fair share of system costs.
For these reasons, I respectfully concur.
[1] Duke Energy Carolinas, LLC, [OSEC please add cite] (2025).
[2] See, e.g., Inquiry Concerning the Commission’s Pricing Policy for Transmission Servs. Provided by Pub. Utils. Under the Fed. Power Act, 59 FR 55031 (Nov. 3, 1994), FERC Stats. and Regs. ¶ 31,005 (1994).
[3] Id. n.7 (stating that the “current pricing policy is based on three goals[]: (1) to hold native load customers harmless, (2) to provide the lowest reasonable cost-based price to third-party firm transmission customers, and (3) to prevent the collection of monopoly rents by transmission owners and promote efficient transmission decisions”).