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Commissioner Honorable Statement
December 5, 2016
Docket Nos. ER15-2114-000 pdf

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Dissenting Statement of Commissioner Colette D. Honorable on Settlement among Transource West Virginia, LLC; Old Dominion Electric Cooperative; and Midcontinent MCN LLC

“In today’s order, the Commission approves the Offer of Settlement (Settlement) among Transource West Virginia, LLC (Transource West Virginia), Old Dominion Electric Cooperative (ODEC), and Midcontinent MCN LLC (collectively, Settling Parties). I respectfully disagree with the Commission’s decision and would reject this Settlement because it has not been shown to be fair and reasonable and in the public interest.

“The Commission has stated that considerable weight should be given to Commission Trial Staff’s (Trial Staff) objections to settlements, especially when Trial Staff is the lone participant representing the ultimate consumer. In Ohio Power, the Commission stated:

    Our decision should in no way indicate that settlements automatically will be approved if staff is the only participant to object….There might well be a situation where a utility's customers agree to a settlement's terms but those customers' interests and the interests of the ultimate consumers are not necessarily the same. One could envision a case where the Commission staff is the only participant to represent the interests of the ultimate consumer. In that situation, the Commission would likely give greater weight to the staff's objections and might find that a proposed settlement is not in the public interest1.

This Settlement is the situation envisioned by the Commission in Ohio Power.

“Based on the record in this proceeding, I am unable to conclude that the Settling Parties represent all aspects of the public interest and accordingly, I believe greater weight should be given to Trial Staff’s objections to the Settlement. Relying upon Transource West Virginia’s reply comments, today’s order concludes that because ODEC will pay a ‘proportional share’ of the Thorofare Project, consumer interests have been considered in this Settlement and that consumers will benefit. However, the record does not quantify ODEC’s proportional share of the costs associated with the Thorofare Project or describe ODEC’s participation in the AEP Zone2. Further, PJM documentation states that ODEC is associated with the APS, DOM, and DPL Zones, but not the AEP Zone3. Based on this record, I am unable to conclude that ODEC will, in fact, be allocated any costs for the Thorofare Project. Accordingly, given Trial Staff is the only participant to represent the interests of the ultimate consumer - which is part of their representation of the broader public interest - greater weight should be given to Trial Staff’s objections to this Settlement4.

“In its comments opposing the Settlement, Trial Staff demonstrates that genuine issues of material fact remain concerning Transource West Virginia’s ROE. Therefore, Trial Staff opposes the ROE and seeks a determination on a hearing record as to the appropriate base and maximum ROE. Trial Staff’s Discounted Cash Flow (DCF) analysis arrived at several potential just and reasonable placements for Transource West Virginia’s base ROE. However, each of the potential base ROE placements calculated by Trial Staff is below the base ROE in the Settlement approved in today’s order5. As Trial Staff points out, while a settlement involving representation of the interests for the ultimate consumer might be sufficient to assuage these concerns that is not the case here6.

“Today’s order approves the Settlement on the grounds that it provides for a base ROE lower than the ROE initially proposed in this proceeding. Given the circumstances of this proceeding, I am concerned that weighing this comparison so heavily sends the wrong message to market participants. Furthermore, approval of the Settlement on these grounds ignores market conditions and financial information.

“As a consideration going forward, it is important to note that this Settlement does not specify a maximum ROE or zone of reasonableness. Although we have approved settlements previously without these safeguards, the Commission has a statutory obligation to ensure all rates it approves are just and reasonable, inclusive of any incentives. In applying this mandate the Commission caps total ROE - or base ROE plus ROE incentive adders - at the top of the zone of reasonableness7. By failing to specify a maximum ROE in their settlement, Transource West Virginia has increased uncertainty in the event they decide to seek additional ROE incentives, and we do so as well with our approval. Any future requests will have to be assessed while keeping this critical consumer protection requirement in mind.

“I recognize the administrative efficiency and reduced litigation expenses that result from settling disputes, and that participants should be encouraged to resolve their disputes through settlement. However, when the Commission approves a settlement, the Commission relies in part on the fact that the interests of the active parties in the case are generally similar to the interests of the inactive parties and consumers. Here, that is not the case. Trial Staff has demonstrated the unique factors associated with this settlement and presented evidence showing that the base ROE may be unjust and unreasonable. In weighing Trial Staff’s concerns with the deference contemplated in Ohio Power, I believe the Settlement approved by the Commission today should be rejected.

“Accordingly, I respectfully dissent.”




                                               

    1 Ohio Power Co., 23 FERC ¶ 61,236, at 61,497-98 (1983) (Ohio Power).
    2 See Transource West Virginia Reply Comments at p. 17
    4 Trial Staff Initial Comments at p. 18. See also Tejas Power Corp. v. FERC, 908 F.2d 998, 1003 (D.C. Cir. 1990) (stating that the public interest that the Commission must protect always includes the interest of consumers).
    5 Trial Staff Initial Comments at 15. Trial Staff asserts that “[b]ecause Transource West Virginia is a single utility, the base ROE should be set at 8.89 percent, the median of the range of reasonableness resulting from Mr. Keyton’s analysis.” Trial Staff also calculated base ROE values for the Midpoint (8.78 percent), the 75th percentile (9.48 percent), and the middle of the upper half (9.81 percent).
    6 Id. at 7.
    7 See Promoting Transmission Investment through Pricing Reform, Order No. 679. FERC Stats. & Regs. ¶ 31,222 at PP 2, 93, and 278 (2006), order on reh’g, Order No. 679-A, FERC Stats. & Regs. ¶ 31,236, order on reh’g, 119 FERC ¶ 61,062 (2007).
    8 See e.g., High Island Offshore System, L.L.C., 110 FERC ¶ 61043, at P 33 (2005)