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Power & Pipes

FERC, CFTC, and State Energy Law Developments

FERC issued a Notice of Inquiry (NOI) on March 21 seeking stakeholder comment on the scope and implementation of its electric transmission infrastructure development incentives regulations and policy. The NOI seeks answers to whether and how FERC should update its rules and policies in this area through more than 100 questions organized into four broad categories:

  • FERC’s incentive policies and how it should approach evaluating applicants’ requests for transmission development incentives, including its Return on Equity (ROE) adder policy
  • What expected benefits or project characteristics warrant incentives, including whether the Commission should consider reliability benefits, economic efficiency benefits, security, or resilience in that determination
  • Whether existing incentives, including the ROE adder, remain relevant and appropriate today
  • Whether particular types of infrastructure development incentives should automatically sunset, and under what certain circumstances that should happen

FERC is using the NOI to reassess its efforts over the last 13 years to spur transmission infrastructure development, typically through cost recovery–driven incentives. Under its current rules and policy, an applicant’s transmission facilities must either ensure reliability or reduce the cost of delivered power by reducing transmission congestion to receive an incentive. If that threshold is met, the applicant must then show a nexus between the incentive sought and the investment being made, which is assessed on a case-by-case basis.

Currently, incentives could come in different forms, including adders to base ROE, full recovery of prudently incurred costs of certain cancelled or abandoned transmission facilities, and accelerated depreciation for rate recovery, among other options. For applicants seeking ROE adders, the Commission explained in a 2012 policy statement that rather than demonstrating nexus, an applicant must meet specific criteria to show that the transmission project faces unique risks and challenges warranting that incentive treatment.

FERC believes that a reassessment of its rules and policy may be warranted because the landscape for planning, developing, operating, and maintaining transmission infrastructure has changed considerably in recent years. FERC also noted that its regional transmission planning process requirements, an evolution in the generation mix, shifts in load patterns, and an increased emphasis on transmission infrastructure reliability have also made it necessary to reexamine the state of its regulations.

Initial comments are due by June 25 and reply comments are due by July 25 in FERC Docket No. PL19-3-000.