Docket No. ER22-1707-000
I concur with today’s order granting Duquesne Light Company (Duquesne) the Construction Work in Progress (CWIP) incentive for its investment in the identified transmission project only because it does so based on the Commission’s existing regulations and precedent established under Order No. 679.[1]
However, as I have previously expressed, I have significant concerns with the Commission’s existing incentives policies and in particular with the CWIP incentive,[2] which the Commission has routinely doled out to anyone who requests it.[3] The Commission recently proposed to eliminate the CWIP Incentive in its April 2022 Transmission Planning and Cost Allocation NOPR, a proposal I continue to strongly support.
For these reasons, I respectfully concur.
[1] Promoting Transmission Investment through Pricing Reform, Order No. 679, 116 FERC ¶ 61,057, order on reh’g, Order No. 679-A, 117 FERC ¶ 61,345 (2006), order on reh’g, 119 FERC ¶ 61,062 (2007); see also Promoting Transmission Investment Through Pricing Reform, 141 FERC ¶ 61,129 (2012) (Transmission Incentives Policy Statement).
[2] See, e.g., Building for the Future Through Electric Regional Transmission Planning and Cost Allocation and Generation Interconnection, 179 FERC ¶ 61,028 (2022) (Transmission Planning and Cost Allocation NOPR) (Comm’r Christie, concurring at P 15) (“CWIP is, of course, passed through as a cost to consumers, making consumers effectively an involuntary lender to the developer. . . . Consumers should be protected from paying CWIP costs during this potentially long period before a project actually enters service, if it ever does. This NOPR proposal represents a major step forward in consumer protection and is a big reason I am voting for it.”).
[3] For example, in Order No. 679, the Commission was clear that “[t]he purpose of our Rule is to benefit customers by providing real incentives to encourage new infrastructure, not simply increase rates in a manner that has no correlation to encouraging new investment.” Order No. 679 at P 6. The Commission further explained that while the Final Rule provided “‘incentives’ to construct new transmission, [] they do not constitute an ‘incentive’ in the sense of a ‘bonus’ for good behavior. Rather . . . each will be applied in a manner that is rationally tailored to the risks and challenges faced in constructing new transmission.” Id. at P 26. Accordingly, while the Commission declined to require a demonstration that “but for” the incentives, the transmission project would not be developed, the Commission did require applicants to “show some nexus between the incentives being requested and the investment made[.]” Id. at P48. In the current case, I will simply note that Duquesne was assigned by PJM the responsibility to construct the reliability project identified and approved by the PJM Board. In support of its request, Duquesne simply states that the project “is not typical or routine for Duquesne” and represents “a significant percentage of Duquesne’s average annual transmission spending.” Duquesne also asserts that the CWIP Incentive will “improve cash flow during construction, which will help maintain [its] credit rating[.]” Today’s order grants Duquesne’s incentive request on these bases, without (a) reconciling the Commission’s incentive policies with the fact that Duquesne would have built this project regardless of the incentive granted, and (b) addressing why the Commission’s traditional ratemaking practice of granting 50 percent of CWIP in rate base—which the Commission has recognized as appropriately “balanc[ing] investor and consumer interests in the ordinary case”—is insufficient here. Id. at P 22.