FERC on March 11 approved including additional expense accounts in New York Transco’s new company-wide formula rate over the protests of the New York Public Service Commission and New York City, but set its proposed return on equity for hearing and settlement procedures (ER25-885).
Transco was formed by Consolidated Edison, Avangrid, National Grid and Central Hudson Gas & Electric in 2014 in response to a state solicitation for transmission projects in case the Indian Point nuclear plant retired (which it did in 2021). The company’s rate formula and ROE for those Transmission Owner Transmission Solutions (TOTS) projects were approved, but it has had to submit project-specific cost recoveries for each new project since then.
The company proposed a new formula rate across all of its projects and a company-wide ROE of 10.9%. Included in the rate were expense accounts under FERC’s Uniform System of Accounts related to general transmission operations and maintenance, including interconnection service studies.
Transco said these expenses were already included in its project-specific rates but under a different account for third-party vendors. It argued “that its significant growth suggests that it may be more efficient and cost effective if [it] were to open its own control center and utilize its own employees to perform these and other tasks.” Other NYISO transmission owners have the accounts as part of their approved formula rates, it contended.
The PSC argued that the rate change had not been vetted enough to ensure it would not raise rates for consumers. New York City and Multiple Intervenors, a group of industrial consumers, jointly claimed that Transco was improperly booking the expenses in the third-party vendor account, allowing the company to improperly collect transmission operating expenses via its formula rate.
FERC dismissed these arguments. In response to the PSC, FERC noted that Transco was not seeking to raise its rates through the new accounts, but to change the accounts under which certain expenses are booked. “We find no evidence in this record to conclude that this change will necessarily lead to cost increases,” it said.
The commission also said that the city and Multiple Intervenors’ concerns were beyond the scope of the proceeding. “Challenges to costs included in the formula rate may be raised in the annual update process in accordance with New York Transco’s formula rate protocols,” it said.
FERC found that Transco’s proposed base ROE was not demonstrably just and reasonable and set the matter for hearing and settlement judge procedures.
The company said the new ROE would apply to its existing transmission assets, including TOTS, and any future projects it develops and owns. This excludes the Propel NY Energy project, in development with the New York Power Authority, because its cost recovery is the subject of a separate settlement agreement.
Transco submitted testimony from an expert witness, which determined the zone of reasonableness to be 9.08 to 12.72%, resulting in a 10.9% midpoint. For comparison, Transco’s ROE for TOTS is 9.65%.