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Transmission Incentive Overhaul

FERC’s ROE incentive adder policy sends the wrong signals.

Fortnightly Magazine - February 2009

adder for any new transmission project included in ISO New England’s regional system plan, notwithstanding that the region’s transmission owners were under an express contractual obligation to construct all such facilities. The decision is now before the D.C. Circuit. Conn. Dept. Pub. Util. Control v. FERC, No. 08-1199 (D.C. Cir. filed May 23, 2008).

14. NEEWS Order, supra .

15. Protestors asserted that the requested 150-point adder would cost customers between $370 million and $400 million over the estimated 30-year life of the project. NEEWS Order P 72. Based on those figures, a 125-point adder would cost between $300 million and $333 million over that period.

16. Cent. Maine Power Co., supra , P 59 (footnote omitted).

17. New England Power Pool , 97 F.E.R.C. ¶ 61,093, at 61,477 (2001), on reh’g, 98 F.E.R.C. ¶ 61,249 (2002).

18. Tallgrass Transmission, LLC, et al. , 125 F.E.R.C. ¶ 61,248, P 61 (2008).

19. Ironically, the net result may be to increase the probability of project abandonment and the magnitude of costs to be recovered under abandoned-plant incentives.

20. Baltimore Gas & Elec. Co. , 121 F.E.R.C. ¶ 61,167, P 28 (2007) (“BG&E”), reh’g denied, 123 F.E.R.C. ¶ 61,262 (2008); Baltimore Gas & Elec. Co. , 120 F.E.R.C. ¶ 61,084, P 53 (2007), reh’g denied, 122 F.E.R.C. ¶ 61,034 (2008).

21. See Cent. Me. Power Co., supra , P 55 (“Over the last five years, Central Maine has spent approximately $17 million annually on transmission projects,” whereas the project will “require an average annual investment of nearly $280 million” and will increase six-fold the company’s total plant in service).

22. Id. PP 47, 56 (rejecting argument that massive investment needs were self-imposed and holding that “[t]here is nothing in Order No. 679, Order No. 679-A, or subsequent Commission precedent that requires an applicant for incentives to show that it … addressed reliability concerns in a ‘timely fashion.’”).

23. Order No. 679-A P 37 n.59 (“We believe that the requirement of a cost benefit analysis [for innovative rate treatment under Order No. 2000] was perceived as an insurmountable hurdle which inhibited the utilities from seeking innovative rate treatments.”)