FERC approves ITC Midwest transmission incentive despite uncertainty over Iowa’s ROFR law

The Federal Energy Regulatory Commission’s decision affects a $594 million transmission project between Iowa and Illinois approved by the Midcontinent grid operator.

The Federal Energy Regulatory Commission on Tuesday approved a transmission incentive for a transmission project slated to be built by ITC Midwest, despite uncertainty created by a court decision that put Iowa’s “right of first refusal,” or ROFR, law on hold.

ITC Midwest, an independent transmission company that mainly operates in Iowa, will be able to recover all prudently incurred costs in the project if it is canceled or abandoned for reasons beyond the company’s control under FERC’s 3-1 decision.

“We find that ITC Midwest has demonstrated that the project faces certain regulatory, environmental, and siting risks that are beyond ITC Midwest’s control and could lead to the project’s abandonment, and that approval of the Abandoned Plant Incentive will address those risks,” FERC said.

The $594 million, 345-kV transmission project is set to run about 125 miles between Henry County, Iowa, and Fulton County, Illinois. The Midcontinent Independent System Operator assigned the Iowa portion of the project to ITC Midwest because of the state’s ROFR law. The Illinois part of the project is slated to go out to bid.

However, the Illinois General Assembly passed a bill in June giving incumbent utility Ameren Illinois a right of first refusal to build the Illinois portion of the project. Illinois Gov. J.B. Pritzker, D, plans to veto the bill.

The project, set to come online by the end of 2029, is part of a broader set of projects in MISO’s $10.3 billion Long-Range Transmission Plan that was approved in July 2022.

In its decision, FERC dismissed arguments from a coalition of energy users that the incentive should be rejected because the Iowa Supreme Court put a hold on the state ROFR law that gave Iowa utilities the right of first refusal to build transmission lines. The coalition includes Industrial Energy Consumers of America, Coalition of MISO Transmission Customers, Resale Power Group of Iowa and Wisconsin Industrial Energy Group.

“The presence of regulatory or litigation uncertainty does not preclude the commission from evaluating or granting a request for transmission incentives,” FERC said.

FERC Commissioner Mark Christie dissented from the decision, saying there was no compelling reason to immediately grant the incentive.

“Should the Iowa ROFR law ultimately be struck down by the Iowa courts, presumably the bidding for the project would have to be rerun by MISO on a competitive basis and only then would the award of the project be certain,” he said. “In the alternative, should the Iowa ROFR law be upheld, the Commission could grant the incentive at that time.”

ITC Midwest is a subsidiary of Novi, Michigan-based ITC Holdings, which is owned by Fortis and GIC Private.