Although it was not the primary focus, a recent Seventh Circuit Decision about allocation of transmission project costs could be a game changer for renewable energy. The main purpose of the appeal by the Illinois Commerce Commission (“ICC”), Michigan Public Service Commission (“MPSC”) and others was to contest FERC’s approval of the Midwest Independent Transmission System Operator, Inc.’s (MISO) tariff on its members to fund the construction of new high-voltage power lines that MISO calls “multi-value projects” (MVPs). Designed to finance the construction of transmission lines for electricity generated by remote wind farms, the tariff allocates MVP costs among all utilities drawing power from the grid according to the amount of electrical energy used, placing most of those costs on urban centers, where demand for energy is greatest.

The court addressed six major issues, including RTO departure fees. But what got my attention was the bench’s response to the Michigan Public Service Commission’s argument that its benefit from the MVP’s is limited because the law in Michigan prohibits its utilities from using out-of-state renewable energy to meet their renewable energy requirements.

Michigan’s first argument—that its law forbids it to credit wind power from out of state against the state’s required use of renewable energy by its utilities — trips over an insurmountable constitutional objection. Michigan cannot, without violating the commerce clause of Article I of the Constitution, discriminate against out-of-state renewable energy.

Order 15

Many states have geographical limitations on what qualifies to meet their renewable energy standards. And while the Seventh Circuit is not the US Supreme Court, this statement is a nice volley for renewable energy companies looking to expand their business. Regardless of your position, the beautifully written 26-page decision is a must read. I am impressed with the bench’s understanding of complex energy issues that many long timers in the business don’t know. In addition to a nice review of the RTO structure, you will learn what the 1810 German novella Michael Kohlhaas has to do with rate pancaking.