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MMWEC, others oppose transmission owners’ plan to raise rates

From the June 28, 2017 issue of Public Power Daily

Originally published June 27, 2017

By Jeannine Anderson
News Editor

The Federal Energy Regulatory Commission should quickly reject an attempt by transmission owners in New England “to extract hundreds of millions of dollars from consumers,” the Massachusetts Municipal Wholesale Electric Company said on June 27.

MMWEC, representing 20 public power utilities, joined with the Massachusetts Attorney General’s Office, plus other agencies and consumer advocates in the region, to oppose the transmission owners’ plan. The transmission owners’ plan, filed with FERC on June 5, asks FERC to reinstate a base return on equity of 11.14 percent on the owners’ investment of nearly $12 billion in transmission facilities.

In their protest, filed with FERC on June 26, MMWEC and the others asked the commission to reject the June 5 plan.

The move by the transmission owners to raise their return on equity, or ROE, came after a federal appeals court ruling in April 2017. The court ruling vacated orders issued by FERC in 2014 and 2015 establishing base ROE rates for the New England transmission owners.

In the April ruling in Emera Maine et al., v. FERC, the U.S. Court of Appeals for the District of Columbia Circuit said that FERC had “failed to provide any reasoned basis” for choosing 10.57 percent as its new base return on equity. The D.C. Circuit remanded the case back to the commission for further review.

The transmission owners’ position is that because the FERC order establishing the 10.57 percent rate was vacated, the rate should revert to the higher rate of 11.14 percent, MMWEC explained in a June 27 news release.

In their June 26 protest to FERC, MMWEC, the Massachusetts attorney general and others said that the court’s decision was not intended to result in restoration of the higher base rate of 11.14 percent They noted that FERC had found that rate to be unjust and unreasonable.  

Rather, they said, the court decision directed FERC to justify why it had deviated from its typical rate-setting practice, which would have resulted in a rate lower than 10.57 percent.

MMWEC and the others argue that a new base rate should be set below 10.57 percent.

“The commission should not allow the NETOs [New England transmission owners] to increase their rates and collect ROEs between 11.14 percent and 13.5 percent during the interim period as there is no record evidence before the commission that would justify such return levels,” said MMWEC and the others. 
‘An insult to consumers’

“If the New England transmission owners are successful in reinstating the higher rate, it will be a gross miscarriage of justice and an insult to consumers,” said MMWEC CEO Ronald C. DeCurzio.  “They are seeking returns of more than 13 percent on their investments in transmission facilities, which is totally unjustified in today’s interest rate environment.”

Other complainants include the Connecticut attorney general; utility commissions and consumer advocate agencies from Connecticut, Maine and New Hampshire; the New Hampshire Electric Cooperative; and Associated Industries of Massachusetts.

They asked FERC to expedite the case.

The legal issue here “is not difficult,” said MMWEC and the others. The New England transmission owners “have purported to make a compliance filing, but they are not complying with any directive from either the commission or the Court of Appeals.” FERC should quickly reject the transmission owners’ June 5 filing “because it is an unauthorized filing and otherwise does not comply with the Federal Power Act or the commission’s regulations,” they said.

“The question is what rate of return is needed to incentive investment in transmission facilities,” DeCurzio said. “At a time when investors are earning more like half or less than that, rates in the 13 percent range are clearly unreasonable.”


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