FERC orders ROE complaint in New York be set for hearing, settlement judge procedures

FERC on Sept. 8 set for hearing and settlement judge procedures a complaint the Municipal Electric Utility Association of New York(MEUA) in 2012 brought against Niagara Mohawk Power and the New York ISO (NYISO) for imposing on consumers unjust and unreasonable rates (Docket No. EL13-16).

Niagara Mohawk d/b/a National Grid recovers its transmission revenue requirements through a transmission charge, which is calculated using a formula rate contained in the NYISO’s tariff. Niagara Mohawk’s current return on equity (ROE) is 11.5%, which includes of a 50 basis point adder for the company’s participation in NYISO.

FERC consolidated the MEUA complaint with two that the New York Association of Public Power (NYAPP) filed in 2012 (Docket No. EL12-101) and 2014 (Docket No. EL14-29), which alleged the 11.5% ROE should be lowered to 9.49% and 9.36%, respectively.

FERC set refund effective dates of Nov. 2, 2012, for the 2012 complaints, and Feb. 6, 2014, for the 2014 complaint.

FERC on June 19 issued Opinion No. 531, in which the commission changed its practice for determining ROEs for public utilities, eliminating the practice of updating the ROE based on changes in U.S. Treasury bond yields and replacing a one-step methodology with a two-step methodology.

Due to the establishment of two refund periods, FERC said a separate ROE should be litigated for each refund period: the ROE for the 2012 complaints’ particular 15-month refund period should be based on the most recent financial data available during that period , or the last six months of that period, FERC said. For the refund period in the 2014 complaint, FERC said the ROE should be based on the most recent financial data in the record, consistent with the commission’s holding in Opinion No. 531 that a single ROE should be established for the most recent refund period addressed at the hearing and for the prospective period based on the most recent financial data in the record.

MEUA also argued that Niagara Mohawk’s transmission labor allocator in its formula rate should be reduced from a fixed 13% to 10.68%, which would reduce Niagara Mohawk’s historical transmission revenue requirement by approximately $9.9m.

The municipal also alleged that Niagara Mohawk has inappropriately collected more than $2m in costs related to National Grid’s 2007 merger with KeySpan Corp. from wholesale transmission customers.

“Based on our review of the record, we expect that, if this case does not settle, the presiding judge should be able to render a decision within twelve months of the commencement of hearing procedures, or, if the case were to go to hearing immediately, by Sept. 30, 2015,” FERC said in the order. “We estimate that we would be able to issue our decision within approximately eight months of the filing of briefs opposing exceptions, or, if the case were to go to hearing immediately, we would be able to issue our decision by July 31, 2016.”

About Rosy Lum 525 Articles
Rosy Lum, Analyst for TransmissionHub, has been covering the U.S. energy industry since 2007. She began her career in energy journalism at SNL Financial, for which she established a New York news desk. She covered topics ranging from energy finance and renewable policies and incentives, to master limited partnerships and ETFs. Thereafter, she honed her energy and utility focus at the Financial Times' dealReporter, where she covered and broke oil and gas and utility mergers and acquisitions.