Nescoe

Letter to FERC on Transmission Incentive Rates

correspondence

Dated: December 20, 2018

Posted in:

Authored by:

December 20, 2018

The Honorable Neil Chatterjee                                  The Honorable Cheryl A. LaFleur
Chairman                                                                    Commissioner
Federal Energy Regulatory Commission                   Federal Energy Regulatory Commission
888 First Street, NE                                                    888 First Street, NE
Washington, DC  20426                                             Washington, DC  20426

The Honorable Richard Glick                                    The Honorable Kevin J. McIntyre
Commissioner                                                             Commissioner
Federal Energy Regulatory Commission                   Federal Energy Regulatory Commission
888 First Street, NE                                                    888 First Street, NE
Washington, DC  20426                                             Washington, DC  20426

The Honorable Bernard J. McNamee
Commissioner
Federal Energy Regulatory Commission
888 First Street, NE
Washington, DC  20426

RE: New England States’ Comments on Transmission Incentive Rates

Dear Chair Chatterjee and Commissioners LaFleur, Glick, McIntyre, and McNamee:

The New England States Committee on Electricity (NESCOE) strongly endorses the Organization of MISO States’ December 19, 2018 request to the Federal Energy Regulatory Commission (FERC) that FERC commence a process to review on a generic basis its incentive policies associated with transmission owners’ Return on Equity (ROE).

NESCOE, New England’s Regional State Committee, is governed by a board of managers appointed by the Governors of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont and is funded through a regional tariff administered by the ISO New England.  NESCOE advances policies that will provide electricity at the lowest reasonable cost over the long term, consistent with maintaining reliable service and environmental quality.

NESCOE understands the reliability and economic value that transmission infrastructure provides. New England consumer investment in transmission has grown steadily: consumers have invested more than $10 billion in transmission infrastructure for reliability needs since 2002.  Another $2.3 billion is planned through 2023, with most of that investment happening through 2019.  Today, transmission is one of the major contributors to consumer electric bill increases in New England.   Moreover, in New England, Participating Transmission Owners (PTOs) are obligated to build all reliability projects that are not subject to competition – New England has not had a competitive transmission process to date – and are guaranteed cost recovery and return, including on abandoned projects.  The PTOs’ shareholder risk for such projects remains relatively minimal.

It is in our view appropriate for FERC to assess on a periodic basis whether Order No. 679’s[1] economic incentives remain just and reasonable, whether they are today necessary to provide incentives for specific actions that would not otherwise happen, and whether, as designed, they deliver recognizable value for electricity customers and further Congressional objectives in the Energy Policy Act of 2005.

Like any economic incentive, ROE adders and other transmission incentives should not be assumed to be necessary in perpetuity.  Consistent with its statutory obligation to ensure a just and reasonable rate, it is appropriate for FERC to assess from time to time which if any incentives are required to deliver tangible consumer benefits.  For any incentives that are needed, FERC should recalibrate them to ensure they are likely to result in specific desired outcomes that would not otherwise occur and are set at a level required to provide a recognizable commensurate benefit so as to strike a proper balance between those who pay them and those who receive them.

NESCOE appreciates FERC’s consideration of this request to review its transmission incentive policies to ensure that customers pay no more than is necessary to maintain a reliable and efficient transmission grid.

Sincerely,

 

NESCOE Board of Managers

 

/s/ Katie Scharf Dykes                                                /s/ Angela M O’Connor
Katie Scharf Dykes                                                     Angela M O’Connor Chair                                                                           Chair
Public Utilities Regulatory Authority                        Department of Public Utilities
Connecticut                                                                 Massachusetts

/s/ Mark Vannoy                                                         /s/ Kathryn Bailey
Mark Vannoy                                                              Kathryn Bailey
Chair                                                                           Commissioner
Public Utilities Commission                                       Public Utilities Commission
Maine                                                                          New Hampshire

/s/ Nicholas S. Ucci                                                    /s/ June E. Tierney
Nicholas S. Ucci                                                         June E. Tierney
Deputy Commissioner                                                Commissioner
Office of Energy Resources                                       Department of Public Service
Rhode Island                                                               Vermont

/s/ Ed McNamara
Ed McNamara
Director of Energy Policy and Planning
Department of Public Service
Vermont

 

Document Source Citations

[1] Promoting Transmission Investment through Pricing Reform, Order No. 679, 71 FR 43294 (Jul. 31, 2006), FERC Stats. & Regs. ¶ 31,222 (2006), order on reh’g, Order No. 679-A, 72 FR 1152 (Jan. 10, 2007), FERC Stats. & Regs. ¶ 31,236, order on reh’g, 119 FERC ¶ 61,062 (2007).