Industry expectations are high that FERC will take up the base return on equity (ROE) proceedings that have been pending before the commission and come to a resolution within the next two months.
FERC Acting Chair Cheryl LaFleur at the U.S. House Energy & Commerce Committee hearing on Dec. 5 said that though she was reluctant to comment on a pending proceeding, namely the Coakley vs. New England transmission owners base ROE complaint (FERC Docket Nos. EL11-66, EL11-66-001), she and her fellow commissioners were committed to giving the issue a “very high priority.”
“I take that to mean that the commission may do something in January or February,” the first industry source told TransmissionHub. “I don’t expect her to rush if the commission isn’t ready but they’ve been thinking about this for a long time, so I’m sure they’ve been thinking about what their options are and they’ll be ready to do something one way or another pretty soon.”
Two other industry sources echoed this belief, telling TransmissionHub that it is likely FERC will act on the base ROE complaints within the next two months.
The action FERC may finally take may come in the form of a generic proceeding, a final order in the New England proceeding, a policy statement or some combination thereof, the first source said.
“There’s no reason FERC couldn’t make a decision” before April 2014, the second industry source said, referring to a date by which FERC had previously projected it would have made a decision. “They certainly have all the paper they need to decide in front of them.”
This source said that it may be possible for a stalemate to occur in a commission vote, now that FERC has a four-member commission, divided equally amongst Democrats and Republicans.
The first source, however, said it was unlikely LaFleur would bring to the docket an issue that could result in a deadlock.
“The new chair is somebody who will take a measured approach, especially given the fact that she probably will seek re-confirmation at the end of her term this summer,” the first source said. “If there’s that kind of divide, she will know in advance and my guess is she wouldn’t bring it to the agenda. I think it if it pops up on the agenda, there are at least three votes or four votes” in the bank, he said.
LaFleur’s current term expires on June 30, 2014, at which time she would need to be reappointed to FERC and receive U.S. Senate confirmation. She was nominated by President Barack Obama, confirmed by the Senate in 2010, and appointed acting chairman on Nov. 25, after the rout of presidential appointee Ron Binz. Because LaFleur is an existing commissioner, she is not required to seek Senate confirmation of her seat as chairman.
It is not news that the base ROE issue is a high priority at FERC. FERC Commissioners Philip Moeller and John Norris in recent months have been vocal about the exigency of the issue. Moeller said at TransmissionHub’s TransForum East in October that the base ROE issue was a “live” one “under major discussion,” and to expect greater clarity within the “near future.”
FERC Administrative Law Judge Michael Cianci in an initial decision in August found that the current base ROE of 11.14% in New England was indeed unjust and unreasonable. He ruled for a just and reasonable ROE for the locked in/refund period of 10.6% and for the subsequent period of 9.7%.
“I fully expect that ROEs are going to go down,” the third source told TransmissionHub. “I don’t see how they cannot under the circumstances. Federal monetary policy almost dictates that. Whether it goes down 50 basis points or 75 basis points or 350 basis points really involves some big policy considerations about whether FERC is trying to do or undo what Congress told them to do, which is to get transmission built.”
If the base ROE issue happens not to be the first one that FERC takes up under LaFleur’s leadership, a runner-up could be capacity markets, and perhaps demand-side management requirements stipulated in FERC Order 745 and in contention in front of the D.C. Court of Appeals, the second source speculated.