New England transmission owners seek FERC clarification on base ROE

Transmission owners in New England are seeking clarification from FERC that rulings in Order 531-A apply only to their base return on equity (ROE) rates and do not change the incentive adders previously approved for those rates, according to TransmissionHub.

In a Nov. 17 filing to FERC, 11 transmission-owning companies in New England jointly reaffirmed their July 21 request for rehearing and clarification of FERC’s tentative findings in Order 531 (Docket No. EL11-66). After establishing in a paper hearing the appropriate long-term growth rate to use in the methodology adopted in Opinion 531, FERC on Oct. 16 in Opinion 531-A confirmed its tentative findings.

Opinion 531-A establishes that the owners’ 11.14 percent base ROE is unjust and unreasonable, the just and reasonable base ROE is 10.57 percent, and the zone of reasonableness for the ROE is 7.03 percent to 11.74 percent.

In addition to seeking clarification that Opinion 531 is directed solely to the base ROE, the owners seek clarification that the ruling does not require any of the owners to reduce their total ROE by anything other than the 57 basis point decrease in the base ROE that FERC ordered. In the event that FERC declines to issue a clarification, the owners are seeking rehearing on the ruling.

In the filing, the owners said that FERC approved each of their incentive adders based on a full record, and the orders granting those incentives do not provide for them to be changed automatically when FERC determines a new ROE zone of reasonableness. Instead, they said, the adders are subject to change only through separate proceedings.

According to the filing, the owners receive a 50 basis point ROE adder for RTO membership, a 100 basis point adder for regional system plan projects placed in service between January 2004 and December 2008, and project-specific adders.

The project-specific adders are:

·      125 basis points for the New England East-West solution, sponsored by UIL Holdings Corp. unit The United Illuminating Co., Narragansett Electric Co. d/b/a National Grid, National Grid unit New England Power Co., and Northeast Utilities Service Co. units Connecticut Light and Power Co. and Western Massachusetts Electric Co.

·      50 basis points for the Middletown to Norwalk project, sponsored by CL&P and UI

·      125 basis points for the Maine Power Reliability project, sponsored by Iberdrola USA unit Central Maine Power Co.

The owners further claimed that, if FERC determines that the ROE adders should be reduced based on the new zone of reasonableness, the determination would violate the owners’ rights to due process. They said that the FERC hearing order did not include any indication that ROE adders were at issue and no party introduced evidence regarding the justness or reasonableness of those adders. The hearing order stated only that the issues were limited to the original complaint that the base ROE for New England transmission owners was unjust and unreasonable.

As part of the filing, the owners also seek clarification regarding FERC’s use of the term ‘total ROE’ in Opinion 531-A, and they asked that FERC confirm that the term refers to overall ROE of the utility rather than project-specific ROE. In practice, they said, this clarification would mean that, as long as the entire utility’s ROE falls within the zone of reasonableness, no change would be needed to the project-specific incentive ROE, even if it exceeds a utility’s zone of reasonableness.

If FERC confirms that total ROE are meant to apply on a project-by-project analysis of incentive ROEs, the owners claim Opinion 531-A should be reversed as inconsistent with statutory requirements.

The owners also seek rehearing on FERC’s finding that their approved base ROE is unjust and unreasonable. They said that parties to the complaint proceedings did not meet the burden of proof to support that finding, and FERC, therefore, is without authority to change the base ROE.

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