By Amanda Durish Cook

FERC last week approved a reduced return on equity for Pioneer Transmission’s portion of a recently completed 765-kV line in Indiana.

The commission’s Aug. 30 order reduces Pioneer’s ROE to 10.82% from the 12.54% approved in 2009, which included a 150-basis-point (bp) adder as a new interregional project (ER18-1159).

Pioneer, a joint venture of American Electric Power and Duke Energy, will use the ROE in its formula rates to recover costs for it and Northern Indiana Public Service Co.’s 65-mile, 765-kV Greentown-to-Reynolds line.

Pioneer in March proposed to adopt MISO’s 10.32% base ROE for transmission owners, with a 50-bp adder for RTO participation and the 150-bp adder for new transmission.

FERC allowed the base ROE and adder for RTO participation but denied the 150-bp adder because the current project does not include PJM.

Regional Processes

The Pioneer Project was intended as a single, $1 billion, 240-mile project across MISO and PJM to address “a critical shortage of high voltage transmission” in Indiana and help transport new wind generation from the state’s southwest to its central and northern regions.

At the time the project was proposed a decade ago, the MISO-PJM interregional planning process did not have “a tariff mechanism in place for evaluating and approving an interregional project such as the Pioneer Project that provided benefits to both RTOs,” according to Pioneer.

The company said it broke the project into smaller segments to be reviewed under PJM’s and MISO’s separate regional processes after encountering difficulties getting the RTOs to approve the line as an interregional project.

Pioneer and NIPSCO took up a $347 million Greentown-Reynolds line, which was approved in MISO’s 2011 multi-value project portfolio. This June, the MISO Board of Directors voted to add Pioneer as a MISO TO, and Pioneer has handed over operational control of the completed line.

FERC said the 150-bp adder would not go into effect “unless and until the project is approved by the regional transmission planning processes of [PJM and MISO] and there is a commission-approved cost allocation methodology in place.”

FERC said because the line had been broken into regional segments, it could not meet the condition that the Pioneer Project be included in both the PJM and MISO transmission plans. Pioneer had argued that the condition was no longer applicable or should be waived because the project “continues to be a large-scale transmission project and the first 765-kV transmission facilities in MISO’s service area.”

In its Aug. 30 order, FERC said Pioneer was free to apply for the new transmission incentive again once it could satisfy the requirement.

“Our denial of the 150-basis-point ROE adder is without prejudice. If Pioneer satisfies the commission’s previously stated conditions, then Pioneer may make a Section 205 filing to seek to prospectively implement the full 150-basis-point ROE incentive that the commission previously granted,” FERC said, adding that it “continues to value transmission rate incentives as a tool to encourage investment in new transmission.”

“In that vein, we encourage Pioneer to continue its efforts to complete the Pioneer Project,” the commission said.