FINANCING ALTERNATIVES FOR TRANSMISSION INFRASTRUCTURE IN CALIFORNIA

California faces a substantial transmission buildout to meet its clean energy mandate, and the cost of financing that infrastructure has direct implications for ratepayers. NetZero California and the Clean Air Task Force (CATF) wanted to understand whether publicly financed transmission lines could reduce financing costs and relieve downward pressure on end-user tariffs—and, if so, what institutional and financing structures would best achieve that goal. DHInfrastructure was engaged to evaluate the alternatives to traditional investor-owned utility approaches, focusing on public financing models and public-private partnerships.

DHInfrastructure reviewed the range of institutional options that would allow for public financing, from wholly public models to lease-type and concession-type public-private partnerships (PPPs), and analyzed which transmission projects would be eligible for alternative financing under the Federal Energy Regulatory Commission's (FERC) Order 1000 competitive procurement rules. Drawing on the California Independent System Operator's 20-Year Transmission Outlook, we identified USD 25.5 billion in transmission infrastructure eligible for alternative financing approaches. We then developed revenue requirement models comparing business-as-usual investor-owned utility financing against each of the public and PPP scenarios, assessing both the direct cost savings from lower-cost public debt and the indirect savings from increased competition and operational efficiencies.

The analysis found potential savings of up to 57 percent—nearly USD 60 billion over 40 years—through public financing approaches. The study became part of a wider California policy conversation around lowering transmission financing costs and expanding the role of public financing and public-private partnerships in transmission development. Legislative proposals including Senate Bill 330 and Assembly Bill 825 reflected many of the institutional and financing concepts evaluated in the analysis, including public transmission sponsors, publicly financed transmission pilot projects, and dedicated transmission financing mechanisms designed to reduce long-term ratepayer costs.