Commissioner James Danly Statement
September 3, 2021
Docket No. 

I respectfully dissent from today’s order.[1]  It unlawfully extinguishes the filing rights under Federal Power Act (FPA) section 205[2] that the New York Transmission Owners (NYTOs) expressly reserved to themselves in the ISO-TO Agreement.  Today’s decision also runs afoul of well-established Commission and judicial precedent.  

The ISO-TO Agreement expressly grants the NYTOs the right to “change” NYISO’s Open Access Transmission Tariff (OATT) “unilaterally” and “at any time” to recover reasonably incurred costs and a return on investment related to services under the OATT.[3]  This is the precise purpose of the Rate Filing.  If accepted, NYTOs will be afforded the option to elect to initially fund System Upgrade Facilities and System Deliverability Upgrades which will permit them to recover both the cost of the investment and a return on that investment.[4]

In response, the majority narrowly focuses on a single provision in the ISO-TO Agreement.  The majority finds the NYTOs seek to recover alleged uncompensated risks associated with owning, operating, and maintaining interconnection customer upgrades and concludes these are not “costs” under section 3.10 of the ISO-TO Agreement.[5]  The fact that the NYTOs are not earning a return today on these upgrades is completely irrelevant to our analysis under FPA section 205 and we are under no obligation to make a predicate finding that the existing OATT is unjust and unreasonable.  The majority ignores the fact that the NYTOs will make a capital investment under the new funding proposal and would subsequently earn a return on that investment which will then, in turn, compensate them for business risks.  The majority’s analysis is thus logically faulty, and this proceeding cannot therefore be dispatched on the basis of procedural deficiency.  Moreover, this order cannot be squared with our order in April that found the NYTOs had broadly reserved their rights under the ISO-TO Agreement and possess a federal right of first refusal for upgrades to their transmission facilities.  This included upgrades that are part of other developers’ proposed transmission projects that are selected in NYISO’s regional transmission plan.[6] 

By rejecting the Rate Filing on procedural grounds, the majority declines to address the filing on the merits and never reaches a decision on whether the Rate Filing is just and reasonable.[7]  In doing so, it ignores existing section 25.5.4 of Attachment S to the OATT that the NYTOs’ “obligation to implement . . . System Upgrades” entitles them to cost recovery plus a return.[8]  It ignores the recognition in a Commission pleading before the U.S. Court of Appeals for the District of Columbia Circuit that transmission owners have uncompensated risks when forced to operate network upgrades that are paid for through generator funding and that this entitles them to be compensated now for operating the upgrades.[9]  And it ignores well-established Commission and judicial precedent supporting the NYTOs’ position that they are entitled to recover costs and earn a return on property used to provide jurisdictional service.[10]  Given the legal infirmities in the order, I cannot support it and I think it likely that transmission owners everywhere will take note of this order as they witness yet another example of the erosion of rights they thought they had unambiguously reserved.

For these reasons, I respectfully dissent.


[1] N.Y. Indep. Sys. Operator, Inc., 176 FERC ¶ 61,143 (2021) (September 3 Order).

[2] 16 U.S.C. § 824d.

[3] ISO-TO Agreement, § 3.10; see, e.g., Atl. City Elec. Co. v. FERC, 295 F.3d 1, 9 (D.C. Cir. 2002) (holding the Commission lacks authority to require transmission owners to cede their FPA section 205 rights).  I note that non-incumbent transmission owners have identical unilateral FPA section 205 filing rights in NYISO’s OATT.  See N.Y. Indep. Sys. Operator, Inc., 162 FERC ¶ 61,107, at P 134 (2018); N.Y. Indep. Sys. Operator, Inc., Letter Order, Docket Nos. ER13-102-012, 013, and 014 (2018); see also OATT, Attach. Y, § 31.11, Append. H, § 3.08; see also N.Y. Indep. Sys. Operator, Inc., Letter Order, Docket No. ER18-2015-000 (2018).

[4] N.Y. Indep. Sys. Operator, Inc., April 9, 2021 Transmittal at 3; see also id. at 5-7, 11-12, 14-15.

[5] September 3 Order, 176 FERC ¶ 61,143 at P 22.

[6] N.Y. Indep. Sys. Operator, Inc., 175 FERC ¶ 61,038, at P 34 (2021); see also ISO-TO Agreement, § 3.10(d) (right to recover costs plus a return associated with constructing and owning or financing expansions or modifications to its facilities); id. § 3.11 (any rights not specifically transferred to NYISO remain with the NYTOs); ISO-TO Agreement, § 6.09 (in relevant part, in the event of a conflict with the OATT, the ISO-TO Agreement “shall prevail”).

[7] September 3 Order, 176 FERC ¶ 61,143 at P 23.

[8] OATT, Attach. S, § 25.4 (emphasis added).

[9] NYTOs July 8, 2021 Answer to Comments at 5 & n.19 (citing Brief of Respondent Federal Energy Regulatory Commission, ACPA v. FERC, D.C. Cir. Case No. 20-1453, p. 43 (May 3, 2021) (citations omitted)).

[10] See, e.g., Fed. Power Comm’n v. Hope Nat. Gas Co., 320 U.S. 591, 603 (1944)(“[T]he return to the equity owner should be commensurate with returns on investments in other enterprises having corresponding risks.”) ; Bluefield Water Works & Improvement Co. v. Pub. Serv. Comm’n, 262 U.S. 679, 690 (1923) (“Rates which are not sufficient to yield a reasonable return on the value of the property used at the time it is being used to render the service are unjust, unreasonable, and confiscatory, and their enforcement deprives the public utility company of its property in violation of the Fourteenth Amendment.”); Ameren Servs. Co. v. FERC, 880 F.3d 571, 579-80 (D.C. Cir. 2018) (“[A] regulated industry is entitled to a return that is sufficient to ensure that new capital can be attracted and to sustain the financial integrity of the enterprise”); Midcontinent Indep. Sys. Operator, Inc., 171 FERC ¶ 61,075, at P 33 (“the rate of return available to transmission owners when they provide initial funding for network upgrades compensates them for business risk, such as lawsuits, reliability compliance obligations, and environmental and construction risks; in addition, it prevents transmission owners from operating a significant portion of their business on a non-profit basis and ensures that future capital can be attracted”) (citations omitted), reh’g order, 173 FERC ¶ 61,037 (2020) (approving the new pro forma Facilities Service Agreement, which provides a standard agreement for use when a transmission owner elects the transmission owning initial funding option).


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