Docket No. ER23-2744-000

Today’s order is consistent with the Commission’s existing policies regarding the Abandoned Plant Incentive, as articulated in Order No. 679;[1] thus, I will concur rather than dissent.  This order illustrates, however, why I believe the Commission needs to revisit the array of incentives offered to transmission developers, including the Abandoned Plant Incentive addressed in this order as well as the Construction Work in Progress (CWIP) Incentive and the RTO participation adder.[2]

A core principle of utility law and regulation for decades is that consumers can only be forced to pay costs for assets that are “used and useful” to them.  In Order No. 679, the Commission determined that it may be necessary to depart from this long-standing ratemaking principle to “address the substantial challenges and risks in constructing new transmission.”[3]  In prior statements, I questioned, among other concerns, whether the Commission’s determination of whether “substantial challenges and risks” exist when granting the Abandoned Plant Incentive and other incentives has become nothing more than a check-the-box exercise.[4]

As I noted previously:

The Commission’s incentive policies—particularly the CWIP Incentive, which allows recovery of costs before a project has been put into service—run the risk of making consumers “the bank” for the transmission developer; but, unlike a real bank, which gets to charge interest for the money it loans, under our existing incentives policies the consumer not only effectively “loans” the money through the formula rates mechanism, but also pays the utility a profit, known as Return on Equity, or “ROE,” for the privilege of serving as the utility’s de facto lender.[5] 

Further, just as the CWIP Incentive effectively makes consumers the bank for transmission developers, the Abandoned Plant Incentive effectively makes them the insurer of last resort as well.  This incentive allows transmission developers to recover from consumers the costs of investments in projects that fail to materialize and thus do not benefit consumers.  Just as consumers receive no interest for the money they effectively loan transmission developers through CWIP, they receive no premiums for the insurance they provide through the Abandoned Plant Incentive if the project is never built.  And if the CWIP Incentive is a de facto loan and the Abandoned Plant Incentive is de facto insurance — both provided by consumers — then the RTO participation adder, which increases the transmission owner’s ROE above the market cost of equity capital, is an involuntary gift from consumers.[6]  There is something really wrong with this picture.

As this Commission considers other potential reforms related to regional transmission planning and development, it is imperative that incentives like the CWIP Incentive, Abandoned Plant Incentive, and RTO participation adder are all revisited to ensure that all the costs and risks associated with transmission construction are not unfairly inflicted on consumers while transmission developers and owners stand to gain all the financial reward.  Moreover, if the Commission determines it is appropriate to channel risks to consumers, those risks must be carefully weighed and considered and not simply be mitigated at the expense of consumers in an exercise of “check-the-box.” 

Early in 2021, a majority of this Commission voted to approve a supplemental notice of proposed rulemaking which proposed, among other things, to limit the RTO participation adder to the three years following a transmitting utility’s initial membership in an RTO.[7]  I joined in that vote and continue to support such a time limit.  That supplemental notice of proposed rulemaking remains pending.  Likewise, the Commission proposed to eliminate the CWIP Incentive in its April 2022 Transmission Planning and Cost Allocation NOPR,[8] which I described as “a major step forward in consumer protection and is a big reason I am voting for [the NOPR].”[9]  It is clear to me that the Commission’s procedures and criteria for awarding the Abandoned Plant Incentive should also be reconsidered.  In short, revisiting all these incentives is imperative at a time of rapidly rising customer power bills.    

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).

[2] I recognize that the CWIP Incentive and the RTO participation adder are not at issue in this proceeding.

[3] Order No. 679, 116 FERC ¶ 61,057 at PP 26, 117.

[4] See, e.g., Montana-Dakota Utils. Co., 185 FERC ¶ 61,015 (2023) (Christie, Comm’r, concurring at P 2), https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-montana-dakota-utilities-co-regarding; Midcontinent Indep. Sys. Operator, Inc., 184 FERC ¶ 61,136 (2023) (Christie, Comm’r, concurring at P 2), https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-midcontinent-independent-system-operator-inc-0; GridLiance West LLC, 184 FERC ¶ 61,129 (2023) (Christie, Comm’r, concurring at P 2), https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-gridliance-west-regarding-transmission; Midcontinent Indep. Sys. Operator, Inc., 184 FERC ¶ 61,034 (2023) (Christie, Comm’r, dissenting at P 2), https://www.ferc.gov/news-events/news/commissioner-christies-dissent-award-transmission-incentives-nipsco-er23-1904; Otter Tail Power Co., 183 FERC ¶ 61,121 (2023) (Christie, Comm’r, concurring at P 2), https://www.ferc.gov/news-events/news/e-18-commissioner-christies-concurrence-otter-tail-power-company-regarding; LS Power Grid Cal., LLC, 182 FERC ¶ 61,201 (2023) (Christie, Comm’r, concurring at P 2), https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-ls-power-grid-regarding-transmission-incentives; Nev. Power Co., 182 FERC ¶ 61,186 (2023) (Christie, Comm’r, concurring at P 2), https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-nv-energy-regarding-transmission-incentives; The Dayton Power and Light Co., 182 FERC ¶ 61,147 (2023) (Christie, Comm’r, concurring at P 2), https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-dayton-power-and-light-company-regarding; Midcontinent Indep. Sys. Operator, Inc., 182 FERC ¶ 61,039 (2023) (Christie, Comm’r, concurring at P 2), https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-midcontinent-independent-system-operator-inc; NextEra Energy Transmission Sw., LLC, 180 FERC ¶ 61,032 (2022) (Christie, Comm’r, concurring at P 2) (July 2022 Concurrence), https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-nextera-energy-transmission-southwest-llc; NextEra Energy Transmission Sw., LLC, 178 FERC ¶ 61,082 (2022) (Christie, Comm’r, concurring at P 2) (February 2022 Concurrence), https://www.ferc.gov/news-events/news/commissioner-mark-c-christie-concurrence-nextera-energy-transmission-southwest-llc.  See also DCR Transmission, L.L.C., 184 FERC ¶ 61,199 (2023) (Christie, Comm’r, concurring at P 6), https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-dcr-transmission-regarding-transmission-cost.

[5] February 2022 Concurrence at P 3 (emphasis in original); July 2022 Concurrence at P 3 (citation omitted); see also Bldg. for the Future Through Elec. Reg’l Transmission Plan. & Cost Allocation & Generator Interconnection, 179 FERC ¶ 61,028 (2022) (Transmission Planning and Cost Allocation NOPR) (Christie, Comm’r, 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.”), https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-e-1-regional-transmission-planning-and-cost.

[6] See, e.g., Rockland Elec. Co., 178 FERC ¶ 61,232 (2022) (Christie, Comm’r, concurring at P 4), https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-rockland-electric-er22-910.

[7] Elec. Transmission Incentives Policy Under Section 219 of the Fed. Power Act, Supplemental Notice of Proposed Rulemaking, 175 FERC ¶ 61,035, at P 9 (2021).

[8] Transmission Planning and Cost Allocation NOPR, 179 FERC ¶ 61,028 at P 333 & n.530.

[9] Id. (Christie, Comm’r, concurring at P 15).

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