By Rich Heidorn Jr.

FERC last week ordered hearing and settlement proceedings on Southern California Edison’s proposal to revise its transmission formula rate, while approving an incentive for RTO participation over the objections of new Commissioner Richard Glick (ER18-169, EL18-44.)

The commission accepted the company’s filing effective Jan. 1 subject to refund. Although SCE proposed a reduction in its transmission revenue requirement, the commission said “a further decrease may be warranted.”

SCE proposed a base return on equity of 10.3%, saying the range resulting from FERC’s two-step discounted cash flow model — 6.97 to 9.15% — was too low.

The commission approved a 50-basis-point ROE adder for SCE’s participation in CAISO over the objections of the California Public Utilities Commission, which said the incentive is “an unjust and unreasonable windfall to SoCal Edison shareholders because SoCal Edison’s participation in CAISO is required by state law and the state of California determines whether SoCal Edison remains a member of CAISO.”

“The CPUC’s arguments … have been considered and rejected by the commission in earlier orders, and we reject them for the same reasons here,” the commission said. “We also note that companies continue to confront decisions about whether to form and join ISO/RTOs, and we believe the stability of the incentive adder for ISO/RTO participation (albeit capped by the top of the zone of reasonableness) is important to the congressional and commission policy of promoting ISO/RTO membership,” it added.

Glick sided with the CPUC, saying, “I do not believe that this summary approval is the product of reasoned decision-making.”

“SoCal Edison’s membership in CAISO is not voluntary and, therefore, awarding a 50-basis-point RTO participation adder does nothing to harness for consumers the benefits of RTO membership,” Glick wrote in a dissent.

Glick said the ruling belied the commission’s “repeated statements that the RTO participation adder is not a ‘generic’ adder awarded to all public utility members of an RTO.

“Although I do not question the benefits of membership in an RTO — and I support using an RTO participation adder where it incentivizes RTO membership — I believe that the commission’s approach in this proceeding essentially transforms the ‘case-by-case’ evaluation of a request for an RTO participation adder that the commission described in Order No. 679 into exactly the type of generic determination that the commission forswore in Order No. 679 and subsequent orders.”