By Rory D. Sweeney

FERC delivered a split decision in approving a rate settlement on a West Virginia transmission project that was opposed by both FERC staff and Commissioner Colette Honorable.

Chairman Norman Bay and Commissioner Cheryl LaFleur said the settlement between Transource West Virginia, Old Dominion Electric Cooperative and Midcontinent MCN was more favorable to the public interest than the uncertainty of litigation (ER15-2114). Honorable opposed the Dec. 5 order, however, saying the only party to the docket truly representing the public interest was FERC staff, which opposed the settlement.

At question was Transource’s rate of return on equity for its Thorofare Creek–Goff Run–Powell Mountain 138-kV project awarded through PJM’s Regional Transmission Expansion Plan. Transource had initially proposed a 10.5% base ROE, which was reduced to 10% in the settlement. FERC staff argued a discounted cash flow analysis indicated an 8.89% rate was appropriate.

The settlement also negotiated a moratorium on changes to the base rate until Sept. 5, 2018, along with finalizing depreciation rates and clarifying the formula-rate template. Incentive rates had already received FERC approval and weren’t part of the settlement.

Noting support for the settlement from ODEC and Midcontinent, Bay and LaFleur said the commission “favors settlements, as they provide parties with certainty, reduce litigation cost, and permit parties to reach reasonable compromise in resolving difficult issues.” The 10% rate is consistent with rates approved in other recent uncontested settlements, they said, and denying it might upset the settlement’s other agreements. Staff’s DCF analysis would certainly be challenged in litigation, which might produce a rate well above the settled one, they said.

Honorable noted language in FERC’s approval of one of the recent uncontested settlements that describes “a case where the commission staff is the only participant to represent the interests of the ultimate consumer.”

“This settlement is the situation envisioned by the commission,” she wrote in her dissent. “Based on the record in this proceeding, I am unable to conclude that the settling parties represent all aspects of the public interest.”

While ODEC had intervened in the case, Honorable said she couldn’t determine whether the cooperative would be allocated any costs for the project, thereby giving it little stake in the case’s result and reducing the significance of its acceptance of the settlement. Staff’s determination, she said, should have received more consideration and ultimately informed the commission’s decision.