Wednesday, June 22 2022

On May 6, 2022, the U.S. Department of Energy (“DOE”) issued a Notice of intent and request for information (“Notice”) regarding the establishment of a Transmission Facilitation Program (“TFP”) to support the construction of power transmission lines and related facilities. Under the Infrastructure Investment and Jobs Act, the DOE can borrow up to $2.5 billion to carry out the TFP. According to a DOE May 10, 2022 announcement“[t]The TFP is an innovative revolving fund program that will provide federal support to overcome financial barriers to new large-scale transmission lines and improve existing transmission as well as microgrid connection in select U.S. states and territories.

The PTF will assist in the construction of new and upgraded high-capacity transmission lines through three financing tools for eligible projects: capacity contracts, DOE loans, and DOE participation in public-private partnerships. Eligible projects are generally defined in the Notice as a project “(a) to construct a new qualifying power line or to replace an existing power line; (b) to increase the transmission capacity of an existing Qualifying Power Line; or (c) to connect an isolated microgrid to an existing transmission, transportation, or telecommunications infrastructure corridor located in Alaska, Hawaii, or any United States territory. Beyond this general definition, the applicant wishing to carry out the project must also certify that the project meets certain eligibility criteria. The DOE will then assess whether the given project is eligible for TFP support based on the application information described in the notice.

The DOE proposes to launch an initial solicitation in 2022 for capacity contracts for eligible projects that will enter commercial operation no later than December 31, 2027. Here, the DOE can purchase the right to use transmission capacity up to 50% of the total transmission capacity offered. transmission line of an eligible project up to 40 years. The objective of this financing tool is to “provide certainty to developers, operators and marketers that customer revenues will be sufficient to justify the construction of a transmission line that meets current and future needs”.

The DOE indicates in the advisory that it plans to solicit applications for all forms of PTF support, including DOE loans and public-private partnerships (in addition to capacity contracts) in early 2023. For DOE loans, DOE may make loans for the costs of carrying out a qualifying project and the interest rate will be set by DOE, taking into account market yields on outstanding marketable bonds of the United States of comparable maturities at the date of the loan. For public-private partnerships, the DOE may enter into public-private partnerships in which the DOE will partner with an eligible entity to “design, develop, construct, operate, maintain, or own an eligible project.” The notice also solicits comments on certain elements of TFP in addition to other related topics such as how to ensure the availability of skilled labour. Comments should be provided by June 13, 2022. The DOE is offering a public webinar provide additional information on May 26, 2022.

As we noted in Utility Dive article on the release of the Advisorymarket watchers will look to see if the tools available in the TFP will be sufficient to provide developers and investors with the certainty needed to turn more potential transmission projects into viable and bankable ones.

Foley is committed to helping our energy customers in markets nationwide. If you have any questions about these developments, please contact Lynn Parins, Rikaela Greane or your Foley attorney.

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