FERC said Wednesday that ITC Midwest can keep the capital structure it has had in place since 2007, blocking an Alliant Energy-led complaint in the process (EL22-56).

Alliant’s coalition of Iowa utilities, industrial customers and consumer advocates in May challenged ITC’s capital structure as excessive and too skewed toward equity. They asked the commission to reduce ITC’s equity ratio to 53% and establish hearing and settlement procedures to grant refunds to transmission customers. (See Alliant Energy Leads Challenge of ITC Midwest Capital Structure.)

ITC Midwest, an independent transmission company, uses a capital structure reflecting 60% equity and 40% debt in its formula rate to calculate its overall rate of return.

FERC said the coalition did not prove that the utility’s existing capital structure is unjust and unreasonable. It ruled that ITC’s target capital structure is comparable with those used by other investor-owned MISO transmission owners and is not unusually high.

The commission also pointed to its policy of using the actual capital structure “of the entity that provides the financing, whether that entity is the utility or its parent company.”

Iowa customers argued that FERC’s approval of ITC’s 60% target equity ratio 15 years ago was “based on the expectation that ITC Midwest would have its own credit rating separate from its parent company,” ITC Holdings. They argued that both the utility and MISO have undergone seismic changes since the capital structure was approved, with ITC Midwest’s rate base increasing 550% since 2008 and ITC Holdings being acquired by Fortis, Inc.

Both the Iowa Utilities Board and the Minnesota Department of Commerce intervened at FERC in support of the complaint.

However, the commission said the Iowa customers didn’t establish that either ITC Holdings or Fortis guarantees ITC Midwest’s debt or that they would assume its debt obligations if the utility defaulted. FERC also said that contrary to allegations, ITC Midwest has a different bond rating from ITC Holdings and Fortis.

“Although ITC Midwest does not have its own management-level employees and relies on ITC Holdings’ management, this does not demonstrate that ITC Holdings guarantees ITC Midwest’s long-term debt,” FERC said.