APPA, others ask FERC to reconsider decision on New England transmission rates of return
Originally published July 23, 2014
The Federal Energy Regulatory Commission did not provide justification for its decision to grant New England transmission owners a base rate of return on equity—10.57 percent—that is "far above the central value" of a zone of reasonableness, the American Public Power Association and others said in a July 21 request for rehearing. The commission’s June 19 order adopted a return on equity (ROE) that is above the 90th percentile of returns for a proxy group of 38 companies, said APPA, the National Rural Electric Cooperative Association, New Hampshire Electric Cooperative, and Maine Public Utilities Commission. The June 19 order will saddle New England consumers "with hundreds of millions of dollars of unjust and unreasonable charges," they said.
FERC purported to grant a ROE in the 75th percentile of the proxy group and its decision to set the rate above the 90th percentile is not acknowledged in the order "and, worse, is supported by rationales that do not withstand scrutiny," APPA and the others said. There is no justification even for setting the base rate of return at the actual 75th percentile, though that would be less unreasonable, they added.
The commission should reverse its June 19 order and set a ROE that does not exceed the median (9.11 percent) or midpoint (9.39 percent) of the proxy group, or "at the very most," the 75th percentile (9.84 percent), APPA and the others said. Pending the final outcome of the proceeding, the New England transmission owners should be ordered to pay refunds for the full 15-month refund period at issue in this case, and for the full difference between the rates charged and rates reflecting a lowered base ROE and an 11.74 cap on ROEs including incentives, they added. FERC should protect New England consumers by implementing an interim base rate of return, they said.
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