STATE OF MAINE Docket No. 2008-256 PUBLIC UTILITIES COMMISSION February 5, 2009 CENTRAL MAINE POWER COMPANY and ORDER OF DISMISSAL MAINE PUBLIC SERVICE COMPANY, Request for Certificate of Public Convenience And Necessity to Build a 345 kV Transmission Line between Limestone, ME and Detroit, ME (the “Maine Power Connection” Project) REISHUS, Chairman; VAFIADES, and CASHMAN, Commissioners I. SUMMARY In this Order, we grant the Motion for Reconsideration and Renewed Motion to Dismiss filed by Eastern Maine Electric Cooperative, Inc. (EMEC), Houlton Water Company (HWC), Van Buren Light and Power District (VBL&P) and the Industrial Energy Consumer Group (IECG) (collectively referred to as “the Moving Parties”) and thus dismiss without prejudice the petition of Central Maine Power Company (CMP) and Maine Public Service Company (MPS) (collectively referred to as “the Project Sponsors”) requesting the issuance of a Certificate of Public Convenience and Necessity (CPCN) to construct a 345 kilovolt (kV) transmission line between Limestone, Maine and Detroit, Maine. II. BACKGROUND On July 1, 2008, MPS and CMP filed a petition, pursuant to 35-A M.R.S.A. § 3132, requesting a CPCN to construct a 345 kV electric transmission line from Limestone, Maine to a CMP interconnection near Detroit, Maine. The project referred to as the Maine Power Connection, or MPC, would enable the development of the Aroostook Wind Energy (AWE) Project, a proposed 800 MW wind energy project with various sites in MPS’s service territory, and provide the first direct electrical connection between northern Maine and the southern Maine/New England bulk power grid. The Project Sponsors estimated that the project will cost approximately $625 million. The Project Sponsors stated that they have requested that ISO-New England (ISO-NE) determine that a significant portion of the MPC qualifies as a Market Efficiency Transmission Upgrade (METU), and, therefore, should be eligible for regional (or socialized) cost treatment under Attachment N of the ISO-NE tariff. The Project Sponsors noted that a stakeholder process, led by ISO-New England, is underway to make this determination and ORDER of DISMISSAL 2 Docket No. 2008-256 that they are participating in this regional process with the hope that a final determination will be made by ISO-NE relatively quickly, thus allowing the MPC project to move forward. The Project Sponsors added that any portion of the project not included in regional rates will be considered a generator lead, a generation-related upgrade, or a local network facility, depending on the underlying functions of the upgrades. The Project Sponsors noted in the Petition that MPS and CMP, in conjunction with ISO-NE, initiated a series of system studies to examine (1) the feasibility and impact on reliability of a project that would tie the MPS system to the MEPCO system and thus to the ISO New England transmission grid (the “Part A studies” conducted in the spring and summer of 2007), (2) changes and upgrades to the interconnected system required to interconnect AWE (the “Part B studies” begun in August 2007), and (3) an interconnection extending across the border to a substation in eastern Canada (the “Part C studies”), which was to be conducted in the Fall of 2008. The Part A study was completed in the summer of 2007 and demonstrated that interconnection with the MEPCO system was feasible, however, was not sufficient to meet the requirements of the AWE project. Therefore, the Project Sponsors initiated the Part B study, which was ongoing at the time of the Petition. The Project Sponsors also noted in their Petition that in January 2008, AWE reconfirmed that it intended to develop the full 800 MW of capacity and that its goal was to have the initial 300 MW installation on line by 2010. On August 8, 2008, the Moving Parties filed a motion to dismiss the Project Sponsors’ Petition pursuant to Chapter 330 and Section 934 of Chapter 110 Commission’s Rules. In their Motion, the Moving Parties argued that the Project Sponsors had not met the Chapter 330 filing requirements regarding costs, benefits, alternatives, and effects on system reliability and capability. They also argued that the Petition was premature or not ripe and the pre-filed testimony did not satisfy the Project Sponsors’ burden of proof and, therefore, should be dismissed pursuant to Section 934. With regards to the ripeness issue, the Moving Parties argued that ISO-NE has not made any decision on system design or on cost treatment of the line as market efficiency upgrade nor has ISO-NE given any indication of when such decision might be made. The Moving Parties noted that the Project Sponsors application for METU status has been met with significant opposition from regulators from Massachusetts and Connecticut. Given the vast uncertainty surrounding the project, the transmission project proposed must be considered hypothetical and that requiring the Moving Parties to litigate the case based on the hypothetical nature of the project would be both burdensome and unfair. On November 24, 2008, the Commission issued an Order denying the Moving Parties Motion to Dismiss. In denying the Motion to Dismiss, the Commission concluded that the Petition satisfied the criteria for completeness of Chapter 330; that even if the Petition was found to be incomplete, the proper remedy, at such time would not be dismissal; that dismissal of the Petition at this stage was a matter of discretion; and that in exercising its discretion, the public interest in addressing the issues involving serving load in northern Maine warranted going forward with the processing of the case. ORDER of DISMISSAL 3 Docket No. 2008-256 Following the issuance of the Commission’s Order Denying Motion to Dismiss, a case conference to discuss the processing of the case was held on December 2, 2008. At such time, the Project Sponsors, MPS and CMP, stated that the System Impact Study (SIS) being performed by ISO-NE had indicated some unanticipated “significant impact” on the system resulting from the project as proposed and that the study would not be finalized for some time. The Project Sponsors said that they could not provide additional information due to the confidentiality provisions covering such information and AWE’s refusal to allow the Project Sponsors to disclose such information even under protective order. Pursuant to the provisions of a Procedural Order of December 2, 2008, the Project Sponsors filed summaries for the SIS on December 5, 2008. In a letter to the Commission dated December 8, 2008, a representative for AWE stated: At the time it began exploring interconnection with the Project Sponsors, moreover, AWE contemplated individual wind generation projects of 300 MW, 250 MW, 150 MW, and 100 MW. To date, however, the draft system impact studies have evaluated an 800 MW block of capacity and draft studies identify a number of significant issues as explained in the December 5, 2008, submission to the Commission by the Project Sponsors. These issues can affect AWE project generation size and MPC Project costs. Thus, AWE’s project design and interconnection require further study and will likely undergo revision as a result. The original projection of a 2010 start date is no longer operative, and it is not possible at this time to project reliably a new start date. While AWE is committed to addressing the obstacles identified by ISO-NE and the system impact studies, and continues to advance development efforts associated with the project, the characteristics of the project remain unsettled. On December 10, 2008, a follow-up case conference was held to have the Project Sponsors explain the system studies and to address, among other issues, the status of such studies and the status of the Petition. The Project Sponsors indicated that further study was contemplated to address the problems that were identified in the preliminary SIS analysis and that the Project Sponsors would, in the near term, be discussing the scope of this work with AWE to determine whether AWE wished to proceed with the project. On December 15, 2008, the Moving Parties filed a Motion for Reconsideration and Renewed Motion to Dismiss. On December 31, 2008, the Project Sponsors filed their response to the renewed Motion to Dismiss. On that same date, a representative of AWE filed a letter informing the Commission that AWE had told the MPC Project Sponsors that “in light of the cost estimates and related data, they should stop any further work on the SIS” and that, subsequently, AWE had told the MPC Project Sponsors “that it has decided not to move ahead with the studies.” In addition, the letter stated that AWE had informed the Project Sponsors that recent changes in the wholesale power market rendered it uneconomic for AWE to invest in transmission infrastructure and that any such investment could not be sustained under current conditions. On January 5, 2009, the Moving Parties ORDER of DISMISSAL 4 Docket No. 2008-256 filed a letter replying to the Project Sponsors response and to the AWE letter of December 31st. III. POSITIONS OF THE PARTIES The Moving Parties argue that their renewed Motion to Dismiss is based on newly presented facts which demonstrate that there is no basis for the Petition at this point and that there is no case here which justifies any further proceedings in this docket. This new factual information can be summarized as follows: 1. The Project Sponsors counsel announcement at the December 2, 2008 conference, that there were significant problems discovered as a result of the system impact studies. 2. The December 5 System Impact Study summary which is confidential and is incorporated by reference. 3. AWE’s letter of December 8, 2008. 4. Discussions during the December 10 Conference of Counsel which called into question the size of the MPC, its terminus, its timing and its status as a METU. The Moving Parties note that so long as this case is pursued, CMP and MPS can continue to recover all of their costs under the cancelled plant precedent of the Federal Energy Regulatory Commission (FERC). Were the Commission to dismiss the case without prejudice, the Project Sponsors could file a new application once a new proposal is complete and ripe for review. To the extent the Commission wishes to open a generic investigation into issues associated with northern Maine, the Commission could do so by initiation of a separate investigation. In their response to the Motion, the Project Sponsors state that they recognize that the facts underlying the Petition have changed. First, the AWE letter indicates that AWE has decided not to move ahead with the additional reliability study work as it had previously indicated, and that AWE would not be able to fund transmission investment not socialized under the METU process as the Project Sponsors previously thought possible. In addition to these issues, the Project Sponsors recognize the challenges caused by the continued difficulties of securing regional cost support through the METU process at ISO, the SIS problems discussed at the December 10 conference, and finally, securing a package of benefits sufficient to offset the impact on northern Maine customers of MPS joining ISO-NE as part of developing the MPC. As a result of these difficulties, the Project Sponsors stated that they were reviewing their options for reformulating the MPC which include: ORDER of DISMISSAL 5 Docket No. 2008-256 Revising the physical scope of the project to make it a smaller project (a 300-MW Houlton-to-MEPCO or Houlton-to-Chester project), or a larger project (extending the Project to Canada). Pursuing alternatives to the market efficiency transmission upgrade model. Alternatives might include a participant-funded approach such as has recently been proposed by Northeast Utilities and NSTAR (FERC Docket No. EL09-20- 000). Identifying an approach that avoids having MPS join ISO New England. The Project Sponsors intend to review these, and possibly other options, during the first quarter of 2009 and propose to file a report with the Commission and the parties regarding their findings and intentions. The Project Sponsors request that the Commission defer consideration of the Motion pending the completion of their review and the filing of the Project Sponsors’ report on, or before, March 31, 2009. Depending on the outcome of their review process, the Project Sponsors may amend their Petition and seek to continue this docket as a vehicle for Commission review of a revised project, or ask that the case be dismissed without prejudice. In its reply to the Project Sponsors’ response, the Moving Parties argue that in light of AWE’s letter of December 31, there clearly is no basis for the request to defer action on the Motion for an additional 90 days and that failure to immediately dismiss this case will only result in economic harm to customers, who could find themselves financing exploratory investigations to alternatives that should not properly burden them. To the extent the Project Sponsors wish to explore other options, such exploration can occur without this docket being open. IV. DECISION The Commission’s Order of November 24, 2008, denying the Moving Parties initial Motion to Dismiss, fully describes the standard for dismissal under section 934 of Chapter 110 of our Rules of Practice and Procedure and will not be repeated here. In that Order, we concluded that given our concerns with the status of the competitive market in northern Maine, the public interest would best be served by letting the case go forward and therefore denied the Motion. The Commission noted that: While the ongoing discussions of the cost recovery treatment of the MPC as a METU at the ISO are clearly a complicating factor, the Commission believes that the case before us can properly be managed to allow all parties an opportunity to respond appropriately as information related to ISO matters, including ISO’s cost allocation findings and transmission impact study, becomes available. ORDER of DISMISSAL 6 Docket No. 2008-256 The evidence before us now, however, demonstrates that the status of the MPC project has significantly changed since the time of our Order denying the Moving Parties’ Motion to Dismiss. First, the preliminary system impact studies which were not available to the Commission at the time of the Order1, have indicated significant system reliability problems caused by the project as proposed (the construction of the MPC line and the addition of AWE’s 800 MW of wind generation). While it might have been possible that further system studies would have demonstrated that such problems were curable, AWE has decided not to fund such further studies and has also indicated that it is unwilling to pay for the additional transmission work indicated to be needed by such studies or for the investment not socialized under the METU process. AWE has also stated that the original projected start date of 2010 is no longer operative and that it is not possible to reliably project a new start date. The Commission, therefore agrees with the assertion of the Moving Parties that, at this time, the underlying rationale for the MPC project has evaporated and there is in fact no project before the Commission to approve. The Project Sponsors have requested that the Commission hold open this docket for an initial term of 90 days, and possibly longer, for them to develop possible alternatives to the MPC line as proposed. While we believe that there certainly is merit in trying to both promote development of renewable resources in northern Maine consistent with the provisions of the Maine Wind Energy Act, 35-A M.R.S.A. §3402, and also in attempting to address northern Maine’s competitive market and reliability issues, the Commission does not believe that it is necessary to keep this docket open for such exploratory activities to occur. The Commission is also sensitive to the issue raised by the Moving Parties that keeping this docket open will impose additional and unnecessary costs on consumers. The Commission, therefore, concludes that dismissal of the petition without prejudice is appropriate at this time. In doing so, we encourage the Project Sponsors, as well as the other stakeholders in this proceeding, to seek creative solutions which address the reliability and competitive market issues in northern Maine and to draw on the work that has already been done in this proceeding. The Commission would also note that we do not rule out the possibility of the Commission initiating an investigation on its own motion intended to address the northern Maine market and reliability issues should the situation so warrant and should it appear that no additional proposals are forthcoming from the stakeholders here. 1 Based on the information provided at the December 10, 2009 conference, it appears that the preliminary system impact study results were issued in late September/early October and prior to the time of the oral argument and certainly prior to the time of the release of the Commission’s written Order denying the initial motion to dismiss. The Commission, however, was not advised of its existence until the December 2, 2008 conference. This lack of disclosure was not the only issue of concern to the Commission but certainly weakened the credibility of the Project Sponsors request to keep the docket open for consideration of alternatives. ORDER of DISMISSAL 7 Docket No. 2008-256 Accordingly, we ORDER 1. That the Motion for Reconsideration and Renewed Motion to Dismiss of EMEC, HWC, VBL&P and the IECG is granted; and 2. That the Petition for a Certificate of Public Convenience and Necessity filed by Maine Public Service Company and Central Maine Power Company be dismissed without prejudice and that this docket now be closed. Dated at Augusta, Maine, this 5th day of February, 2009. BY ORDER OF THE COMMISSION _______________________________ Karen Geraghty Administrative Director COMMISSIONERS VOTING FOR: Reishus Vafiades Cashman ORDER of DISMISSAL 8 Docket No. 2008-256 NOTICE OF RIGHTS TO REVIEW OR APPEAL 5 M.R.S.A. § 9061 requires the Public Utilities Commission to give each party to an adjudicatory proceeding written notice of the party's rights to review or appeal of its decision made at the conclusion of the adjudicatory proceeding. The methods of review or appeal of PUC decisions at the conclusion of an adjudicatory proceeding are as follows: 1. Reconsideration of the Commission's Order may be requested under Section 1004 of the Commission's Rules of Practice and Procedure (65-407 C.M.R.110) within 20 days of the date of the Order by filing a petition with the Commission stating the grounds upon which reconsideration is sought. 2. Appeal of a final decision of the Commission may be taken to the Law Court by filing, within 21 days of the date of the Order, a Notice of Appeal with the Administrative Director of the Commission, pursuant to 35-A M.R.S.A. § 1320(1)- (4) and the Maine Rules of Appellate Procedure. 3. Additional court review of constitutional issues or issues involving the justness or reasonableness of rates may be had by the filing of an appeal with the Law Court, pursuant to 35-A M.R.S.A. § 1320(5). Note: The attachment of this Notice to a document does not indicate the Commission's view that the particular document may be subject to review or appeal. Similarly, the failure of the Commission to attach a copy of this Notice to a document does not indicate the Commission's view that the document is not subject to review or appeal.