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MMWEC, others press FERC to reject transmission owners’ rate hike plan

From the August 11, 2017 issue of Public Power Daily

Originally published August 10, 2017

By Paul Ciampoli
News Director

The Massachusetts Municipal Wholesale Electric Company, the Massachusetts attorney general, state utility regulators and consumer advocates from throughout New England have asked the Federal Energy Regulatory Commission’s Office of Energy Market Regulation, or OEMR, to exercise seldom-used authority to reject a recent rate filing made by owners of New England’s electric transmission system.

MMWEC and others have previously said that the plan is an effort by the transmission owners “to extract hundreds of millions of dollars from consumers.”

MMWEC and the other parties made their request in an Aug. 2 letter to Kurt Longo, FERC’s director for the division of Electric Power Regulation East in the commission’s OEMR (Docket No. ER15-414-002).

June 5 filing at FERC

At issue is a June 5 filing submitted at the commission by the New England Transmission owners. In that filing, the transmission owners asked FERC to reinstate a base return on equity of 11.14 percent on the owners’ investment of nearly $12 billion in transmission facilities.

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 response to the June 5 filing, MMWEC joined with the Massachusetts Attorney General’s Office, plus other agencies and consumer advocates in the region, to oppose the transmission owners’ plan through a protest filed at FERC on June 26. MMWEC and the others asked the commission to reject the transmission owners’ plan.

In the protest, MMWEC and the others argued 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.

Parties say FERC official can and should reject transmission owners’ plan

Now, MMWEC, Massachusetts Attorney General Maura Healey, state utility regulators in New England and consumer advocates have returned to the commission and renewed their effort to have the transmission owners’ plan rejected.

In their letter to Longo, they asked that he exercise his delegated authority as director and reject the June 5 filing.

MMWEC and the other parties said that Longo in his capacity as director is authorized by rule to reject the New England transmission owners’ rate schedule filing if it fails patently to comply with applicable statutory requirements and with all applicable commission rules, regulations and orders.

The filing made by the transmission owners is contrary to both the Federal Power Act and commission rules, MMWEC and the others said, “as there is no legal basis for NETOs’ [New England transmission owners’] assertion that they are entitled unilaterally to reset their base ROE (or the cap on the combination of the base ROE and any ROE incentive adders) upon and by virtue of the Court of Appeals vacatur and remand in Emera Maine v. FERC.”

The Aug. 2 letter to Longo goes on to note that ISO New England, the region’s grid operator, “has advised us informally that, absent commission direction otherwise, it intends to implement revised transmission charges in accordance with instructions from the NETOs based on the June 5 filing.”

Therefore, in the absence of a commission quorum, OEMR “stands as the sole defense against NETOs’ patently unlawful rate increase,” MMWEC and the other parties said.

“Given the anticipated press of business that the commission will face upon the re-establishment of a quorum, and ISO New England’s expressed intention to implement whatever transmission charges the NETOs instruct in reference to the June 5 filing, there is a legitimate concern that New England transmission customers will be subject to illegally increased charges before the commission is able to act on this matter.  As such, we urge the Director to reject this filing now.”

“Ideally, we believe a reconstituted FERC will weigh in and clarify that the current ROE of 10.57% will remain in effect until the FERC reaches a decision on remand from the federal appeals court,” said David Tuohey, MMWEC’s director of communications and external affairs.

“Otherwise, OEMR has the authority to reject the unauthorized transmission owner filing, which states their intention to reinstitute the 11.14% ROE,” he went on to say.

FERC’s quorum was recently reinstated after Neil Chatterjee and Robert Powelson were sworn in as commissioners.

Chatterjee, who previously served as a senior energy adviser to Senate Majority Leader Mitch McConnell, R-Ky., will serve out the remainder of a term that ends in June 2021.

Powelson most recently served as a member of the Pennsylvania Public Utility Commission and president of the National Association of Regulatory Utility Commissioners. He will serve out the remainder of a term that ends in June 2020.

Earlier this year, President Trump selected Cheryl LaFleur to be acting chairman of FERC.

Trump on Aug. 10 named Chatterjee as FERC chairman. Chatterjee will serve in that role until Kevin McIntyre is confirmed by the Senate to serve on the commission and become chairman.


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