By Chris O’Malley
Industrial customers, consumer advocates and state regulators called on the Federal Energy Regulatory Commission to reject a request by MISO transmission owners for a 50-basis-point adder as an incentive for their participation in the RTO.
The Nov. 6 filing by MISO and its transmission owners (ER15-358) came weeks after the commission ordered an evidentiary hearing on complaints from industrial customers that the base rate of return of MISO’s 24 transmission operators is not just and reasonable (EL14-12). (See FERC Orders ROE Hearing on MISO TOs.)
FERC made return on equity (ROE) adders available to RTO members in Order 679, a response to a Congressional mandate in the 2005 Energy Policy Act. “Subsequent commission orders have made clear that this incentive for RTO participation remains available both to new and continuing RTO members,” the TOs said.
In filings last week and in late November, opponents said that many TOs have been members of MISO for more than a decade and there’s no threat that they would leave if they couldn’t collect the adder.
“Instead, at a time when base ROEs must decrease to remain consistent with prevailing conditions in capital markets, the MISO TOs are simply using the RTO adder as a means for attempting to claw back some of that revenue,” industrial consumers from Illinois, Indiana, Minnesota and Wisconsin said in a Nov. 28 filing.
They contend that electric customers would pay about $50 million annually toward the adder without any corresponding benefits. “The MISO TOs have not demonstrated whether an additional $50 million in revenue each year plays a pivotal role in their economic analysis of MISO membership.”
The Organization of MISO States also filed a protest to the proposed adder, saying it “appears intended to mitigate against any refunds that may result” from the pending ROE reduction case.
OMS said the adder should be awarded only when it influences decisions to join or remain in an RTO. “The historical record has simply shown there are no instances of MISO members leaving its membership except to transfer to a different RTO,” OMS said.
OMS asked the commission to consolidate the adder filing with docket EL14-12, contending “that the TOs’ waiver and deferral requests clearly demonstrate the linkage between the RTO adder and the level of the base ROE and the zone of reasonableness.” A settlement conference in the ROE case is set for Dec. 16.
A number of other groups also have asked FERC to deny the adder, including Hoosier Energy Rural Electric Cooperative, Southern Illinois Power Cooperative and Dairyland Power Cooperative. They contend that the TOs included no rate of return analysis as part of the adder request.
FERC opened the door to ROE fights in June, when it changed the way it sets ROE rates for electric utilities to a two-step discounted cash flow methodology similar to what it uses for natural gas and oil pipelines. (See FERC Splits over ROE.)