By William Opalka

Thirteen municipally owned electric systems in Massachusetts have asked FERC to reduce the return on equity earned by New England transmission owners (EL16-64), the fourth such challenge in ISO-NE since 2011.

The Eastern Massachusetts Consumer-Owned Systems, a group of municipal distribution companies that surround Boston, want the base ROE lowered from 10.57% to 8.67%. They also called for reducing the upper end of the zone of reasonableness, which serves as a cap on incentive adders, to no more than 11.24%, from the current 11.74%.

EMCOS said it brought the new complaint for several reasons, including the continuing decline in the cost of equity capital since FERC adopted a two-step discounted cash flow (DCF) model in Opinion 531, the 2014 ruling that resulted from the first of the four recent challenges (EL11-66-001). (See FERC Splits over ROE.)

They also cited “divergent commission rulings” since Opinion 531, noting administrative law judge findings of “anomalous” capital market conditions in cases involving MISO (EL14-12-002) and ISO-NE (EL14-86, EL13-33-002) and a finding that such conditions did not exist in one concerning Entergy Arkansas (ER13-1508, et. al). “This complaint offers an opportunity to reconcile these decisions,” the group said.

It also said it is unclear “the extent to which the commission’s anomalous-conditions rationale in Opinion No. 531 is intended to reflect changes in its long-standing reliance on the DCF methodology, and particularly the DCF midpoint, for determining ROE.”

Commission action is pending on the two other New England dockets cited by the group, following a proposed decision by an administrative law judge in March. The ALJ recommended an ROE for two time periods that was lower than what transmission owners sought but higher than what states and commission trial staff advocated. (See New England ROEs Set in Initial Decision.)