D.C. Circuit Upholds Cutting of Transmission Incentives by FERC

George D. Billinson

On February 19, 2021, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) upheld a decision by the Federal Energy Regulatory Commission (“FERC” or the “Commission”) cutting transmission incentives previously granted to three electric transmission companies.

The Energy Policy Act of 2005[1] amended the Federal Power Act to require FERC to promulgate a rule creating incentive-based rate treatment for electric transmission.[2] The rule was intended to “promote reliable and economically efficient transmission and generation of electricity by promoting capital investment in the enlargement, improvement, maintenance, and operation of all [transmission] facilities, . . . provide a return on equity that attracts new investment in transmission facilities, . . . [and] encourage deployment of transmission technologies and other measures to increase the capacity and efficiency of existing transmission facilities and improve the operation of the facilities . . . .”[3] FERC promulgated such a rule, which is codified in the Commission’s regulations.[4] One incentive available to a stand-alone transmission company (a “Transco”)[5] is “[a] return on equity [“ROE”] that both encourages Transco formation and is sufficient to attract investment.”[6]

Because FERC has traditionally viewed independence as a hallmark of a Transco, it considers the ownership and business structure of the Transco to ensure that the Transco operates independently of other market participants when deciding whether to grant such incentives. FERC has declined to establish a particular methodology for reflecting the degree of a Transco’s independence or specific incentive levels.[7] However, the Commission has made clear that it “will consider the level of independence of a Transco as part of our analysis when we determine the proper ROE for the Transco, and evaluate the specific attributes of a particular proposal, including the level of independence, to determine appropriate incentives.”[8] Continue reading “D.C. Circuit Upholds Cutting of Transmission Incentives by FERC”

FERC Issues Notice of Inquiry Regarding Electric Transmission Incentives Policy

Mark R. Haskell, George D. Billinson, and Lamiya N. Rahman

According to FERC Chairman Chatterjee, the electric transmission incentives NOI and a concurrently-released NOI on the Commission’s ROE policy “will be critical to ensuring that the energy revolution we’re currently undergoing results in more reliable services and lower prices for customers.” The electric transmission incentives NOI “asks very important questions about whether the Commission should be focused on incentivizing projects with risks and challenges or thinking more broadly about the reliability and economic benefits that transmission projects can provide.” Comments are due 90 days, and reply comments are due 120 days, after publication in the Federal Register.

On March 21, 2019, the Federal Energy Regulatory Commission (“FERC” or “the Commission”) issued a Notice of Inquiry Regarding the Commission’s Electric Transmission Incentives Policy (the “NOI”) in Docket No. PL19-3-000.1 The NOI seeks comments on the scope and implementation of the Commission’s transmission incentives policy, citing numerous developments in transmission planning and development in the 13 years since FERC first promulgated its electric transmission incentives regulations and the seven years since FERC issued its last policy statement on the topic.

Section 219 of the Federal Power Act (“FPA”) requires the Commission to establish rules providing incentive-based rate treatment for electric transmission in interstate commerce by public utilities, for the purpose of benefitting consumers by ensuring reliability and reducing the cost of delivered power by reducing transmission congestion.2 Continue reading “FERC Issues Notice of Inquiry Regarding Electric Transmission Incentives Policy”