By William Opalka
New England transmission owners and a coalition of state officials and consumer groups are expected to conclude a Federal Energy Regulatory Commission evidentiary hearing this week in their long-running transmission rate dispute.
The hearing, which began last week, concerns the return on equity earned by the transmission owners. It is a consolidation of two complaints initiated by the states’ attorneys general, combining a docket about transmission charges from December 2012 to March 2014 (EL13-33) with a second dispute over the ROE from June 2014 through October 2015 (EL14-86).
The hearing is being conducted under the new framework FERC set in its June 2014 ruling that switched to a two-step discounted cash flow (DCF) model incorporating short-term and long-term growth rate estimates. The commission previously had relied on only short-term growth rates as benchmarks for electric transmission ROEs. (See FERC Splits over ROE.)
The ruling lowered the New England TOs’ base ROE from 11.14% to 10.57%, the 75th percentile of a “zone of reasonableness” of 7.03% to 11.74%.
The plaintiffs seek a base ROE of 8.75% for the period ending March 2014 and 8.12 to 8.82% for the later time period.
FERC trial staff is recommending ROEs of less than 10%.
“The evidence confirms what the complainants’ prima facie showing indicated: all of the ROEs at issue have become unjust and unreasonable. … Even if — contrary to the evidence — it were found that these base ROEs should again be set at the top quarter of the DCF range, the resulting values would be 9.52% and 9.91%,” trial staff wrote in a prehearing brief. “Either way, the 11.14% and 10.57% base ROEs that customers have paid and continue to pay are well above any just and reasonable level.”
A recommended decision by the administrative law judge is expected by the end of the year with FERC issuing a final ruling in mid-2016.
The plaintiffs are seeking refunds of up to $180 million and say their proposed ROE reduction would save New England ratepayers an additional $74 million annually.