State complaints over FERC-granted equity returns could dry up funding for transmission expansion.
Bruce W. Radford is publisher of Public Utilities Fortnightly. Contact him at email@example.com.
Massachusetts Attorney General Martha Coakley’s landmark complaint against New England’s electric transmission owners (the NETOs) finally went to trial last month, over the four days May 6 through 9. The complaint—filed at the Federal Energy Regulatory Commission back in September 2011, and joined by all six New England state public utility commissions (PUCs), plus assorted public advocates, industrial users, and consumer groups—alleges that New England’s RTO-wide base-level 11.14-percent return on equity no longer qualifies as just and reasonable.
If the past is any guide—that is, if presiding administrative law judge Michael J. Cianci, Jr., should favor the generally accepted FERC case precedents for applying the discounted cash flow (DCF) model to calculate an allowed ROE—the case looks pretty much open and shut: a slam dunk for consumers.
That’s because, of the various expert ROE witnesses who have testified in the case, all have come in with recommended ROEs that lie significantly below the current FERC-authorized rate, provided you apply FERC’s standard DCF model to data they have collected, and follow FERC precedent regarding statistical outliers, calculation of mean, median, and midpoint, and so forth.