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Transmission Incentive Overhaul

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

Fortnightly Magazine - February 2009

New Energy For America at 8, available at http://www.barackobama.com/pdf/factsheet_energy_speech_080308.pdf.

2. Broad Coalition Shaping Grid Upgrade Plan Aimed At Congress, Obama ,” ENERGYWASHINGTON WEEK (Dec. 3, 2008) .

3. Pub. L. No. 109-58, 119 Stat. 594 (2005) (“EPACT 2005”).

4. Available at http://www.eei.org/industry_issues/energy_infrastructure/transmission/Trans_Survey_Web.pdf.

5. Promoting Transmission Investment through Pricing Reform , Order No. 679, 71 Fed. Reg. 43,294 (July 31, 2006), [2006-2007 Regs. Preambles] F.E.R.C. Stat. & Regs. ¶ 31,222 (“Order No. 679”), on reh’g, Order No. 679-A, 72 Fed. Reg. 1152 (Jan. 10, 2007), [2006-2007 Regs. Preambles] F.E.R.C. Stats. & Regs. ¶ 31,236 (“Order No. 679-A”), clarified, 119 F.E.R.C. ¶ 61,062 (2007) (“Order No. 679-B”)

6. E.g., Pac. Gas & Elec. Co., 124 F.E.R.C. ¶ 61,305 (2008); N.Y. Reg’l Interconnection, Inc. , 124 F.E.R.C. ¶ 61,259 (2008).

7. The Commission has made clear that not every rate within the zone is per se just and reasonable. Bangor Hydro-Elec. Co. , 122 F.E.R.C. ¶ 61,038, P 11 (2008).

8. Louisville Gas & Elec. Co. , 62 F.E.R.C. ¶ 61,016, at 61,143 (1993) (“One of the Commission’s primary regulatory goals is to ensure the lowest, reasonable cost energy to consumers, consistent with reliable service.”). The same standards are applicable to ISOs and RTOs. ISO New England Inc. , 118 F.E.R.C. ¶ 61,105, P 21 (“ISO-NE … seeks only to provide reliable service at the lowest reasonable cost.”), reh’g denied, 120 F.E.R.C. ¶ 61,122 (2007); PJM Interconnection, LLC , 119 F.E.R.C. ¶ 61,063, P 6 (2007), reh’g denied, 122 F.E.R.C. ¶ 61,082 (2008). See also Atl. Ref. Co. v. Pub. Serv. Comm’n , 360 U.S. 378, 388 (1959) (Natural gas “shall be sold in interstate commerce … at the lowest possible reasonable rate consistent with the maintenance of adequate service in the public interest.”).

9. E.g., Pepco Holdings, Inc. , 125 F.E.R.C. ¶ 61,130 (2008); Duquesne Light Co. , 123 F.E.R.C. ¶ 61,139 (2008).

10. E.g., Centr. Me. Power , 125 F.E.R.C. ¶ 61,079 (2008); Ne. Utils. Serv. Co., 125 F.E.R.C. ¶ 61,183 (2008) (“NEEWS Order”); PPL Elec. Utils. Corp. , 124 F.E.R.C. ¶ 61,229 (2008); S. Cal. Edison Co. , 123 F.E.R.C. ¶ 61,293 (2008).

11. The few instances in which the Commission has denied an ROE adder have been situations in which the Commission has denied any incentive treatment of the project at issue. Commonwealth Edison Co., 119 F.E.R.C. ¶ 61,238 (2007), on reh’g, 122 F.E.R.C. ¶ 61,037 (2008), on reh’g, 124 F.E.R.C. ¶ 61,231 (2008) (no incentives for project that was completed before incentives were requested); Commonwealth Edison Co. , 125 F.E.R.C. ¶ 61,250 (2008) (no incentives for project that does not meet “nexus” or “advanced technology” requirements). NSTAR Electric Co. , 125 F.E.R.C. ¶ 61,313 (2008) (same).

12. Compare Order No. 679 P 386 with Cent. Me. Power Co., supra.

13. E.g., Cent. Me. Power Co., supra, P 45; Ne. Utils. Serv. Co. , 124 F.E.R.C. ¶ 61,044, P 89 (2008). The Commission previously approved (by a 3-2 vote) an across-the-board, 100 basis point ROE