FERC seeks comments on proposal to further reform transmission incentive policy

The April 15 supplemental notice of proposed rulemaking (NOPR) proposes to codify FERC’s current practice of granting a 50-basis-point increase in return on equity (ROE) as an incentive for utilities that join a transmission organization, FERC said

FERC on April 15 said that it has proposed to modify its March 2020 plan to revise its electric transmission incentives policy meant to stimulate infrastructure development to support the country’s evolving electric grid.

The April 15 supplemental notice of proposed rulemaking (NOPR) proposes to codify FERC’s current practice of granting a 50-basis-point increase in return on equity (ROE) as an incentive for utilities that join a transmission organization, FERC said, adding that a utility would be eligible for the incentive for the first three years after the utility transfers operational control of its facilities to the transmission organization.

The commission said that its March 2020 NOPR proposed to increase the incentive for membership in a regional transmission organization (RTO), an independent system operator (ISO), or other FERC-approved transmission organization from 50 basis points to 100 basis points. The incentive currently is available for as long as membership continues, and the March 2020 NOPR proposed no change to that, FERC said.

The April 15 supplemental NOPR would require utilities that have received the incentive for three or more years to submit, within 30 days of the effective date of a final rule, a compliance filing to eliminate the incentive from its tariff. Utilities currently receiving the incentive must either revise their tariffs to eliminate the incentive or to terminate the incentive three years from the date that they turned over operational control of their transmission facilities to a transmission organization, FERC said.

The supplemental NOPR seeks comment on whether the incentive should be available solely to transmitting utilities that join a transmission organization voluntarily, FERC said, adding that if so, it wants to know how it should apply that standard, as well as how to determine whether the decision to join was voluntary.

As noted in the supplemental NOPR, given that the statute only directs an incentive for entities that “join” a transmission organization, FERC believes that it has latitude under the statute to tailor the incentive more narrowly to encourage joining, rather than remaining in, a transmission organization.

“We believe that providing the transmission organization incentive indefinitely may not be necessary to incentivize a transmitting utility to join a transmission organization and, given the large impact that such an incentive has on ratepayers, may not appropriately balance utility and ratepayer interests, particularly given the substantial benefits of transmission organization membership to participating utilities,” FERC said.

Among other things, FERC said that it proposes to revise its regulations to provide that the transmitting utility is only eligible for the transmission organization incentive if it has not previously been a member of a transmission organization.

“We intend for the transmission organization incentive to encourage transmitting and electric utilities to join transmission organizations, not to incent such utilities to change membership between transmission organizations or to alter their ownership structures,” FERC said. “Allowing a utility that changes transmission organizations to extend the transmission organization incentive or receive a new transmission organization incentive would impose costs to ratepayers from integration and exit costs of leaving and joining transmission organizations without providing material benefits.”

FERC said in its statement that comments are due 30 days after publication in the Federal Register, with reply comments due 15 days after that.

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About Corina Rivera-Linares 3286 Articles
Corina Rivera-Linares was TransmissionHub’s chief editor until August 2021, as well as part of the team that established TransmissionHub in 2011. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial from 2005 to 2011. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines.