Electricity Markets

FERC urged to keep transmission costs at a reasonable level

Against the backdrop of increasing transmission costs, the Federal Energy Regulatory Commission should strive to ensure that those costs remain at a reasonable level for consumers as it weighs possible changes to its transmission incentives and return on equity (ROE) policies.

That was the message delivered by more than 40 entities including public power utilities, state public utility commissions, state attorneys general, consumer advocates, electric cooperatives, groups representing industrial energy consumers, and other associations in an Aug. 23 letter to FERC Commissioners. The American Public Power Association, California Municipal Utilities Association, National Rural Electric Cooperative Association, and Transmission Access Policy Study Group were among the associations that signed on to the letter.

FERC in March issued two notices of inquiry, one in which the Commission sought comments on possible changes to its electric transmission incentives policy, and one in which FERC is examining whether, and if so how, to revise its policies on determining the ROE used in setting rates charged by utilities it regulates (Docket Nos. PL19-3, PL19-4).

As FERC considers comments filed in response to those NOIs, the Commission should “bear in mind the substantial transmission cost increases borne by customers in many regions of the country in recent years,” the letter said. The comments on the NOIs “described and documented this sharp escalation in wholesale transmission rates and the concerns it has generated.”

The letter, which was sent to FERC Chairman Neil Chatterjee and Commissioners Richard Glick, Cheryl LaFleur and Bernard McNamee, said that a number of the policy changes under consideration in the NOIs could contribute to further increases in transmission costs, while other NOI proposals would likely mitigate these expenses.

The parties emphasized their collective concern about increasing transmission costs and encouraged the Commission to remain mindful of this concern as it weighs its transmission incentives and ROE policies. 

“While the comments submitted in response to the NOIs were numerous and offered a diversity of views, maintaining transmission costs at a reasonable level for consumers must be a key touchstone in evaluating all policy recommendations,” they said.

At the same time, the American Public Power Association and the other signatories to the letter said that FERC should not equate their concern about rising transmission costs with opposition to transmission investment in general. 

“Prudently planned and constructed transmission facilities can increase supply options, reduce congestion-related costs, integrate renewable resources, and promote grid reliability. We support such beneficial transmission investment and Commission policies that promote it.  In evaluating transmission incentives and ROE policies in the NOI proceedings, however, the potential increased cost burden on transmission customers must always remain a principal consideration, particularly in light of recent substantial cost increases.”

Parties weighed in on incentives NOI

The letter reiterated a message that parties have expressed in their comments on the pending NOIs.  In response to the transmission incentives NOI, for example, a large group of state utility regulators, industrial power customers, public power utilities, consumer advocates and related associations (including the American Public Power Association) said that as FERC considers possible changes to its electric transmission incentives policy, it is vital that the federal agency consider the possible effects on consumers in the process, citing concerns about rising transmission costs in particular.

Glick addressed transmission incentives in Q&A with Association

Commissioner Glick discussed transmission incentives in a recent Q&A with the Association.

Among other things, Glick said that he hopes that the open notice of inquiry “will provide a forum for taking a hard look at our incentives policy and ensuring that the incentives we authorize are money well‐spent.”