Electric utilities are urging the Federal Energy Regulatory Commission to terminate a long-dormant proceeding on transmission incentives in a bid to secure more policy certainty amid changing US power system conditions and rising geopolitical tensions.
WIRES, the Edison Electric Institute (EEI) and GridWise Alliance, industry trade groups representing electric transmission owners, filed the joint request with FERC on April 3 in a rulemaking proceeding (RM20-10) initiated six years ago.
The proceeding at issue was originally launched under former FERC Chairman Neil Chatterjee. A divided commission in March 2020 proposed to revamp its transmission incentive policies to focus on economic benefits instead of the risks and challenges projects face.
Groups say existing incentives are 'essential'
In launching the proceeding, FERC proposed to boost from 50 basis points to 100 basis points its existing incentive for joining or remaining a member of a regional transmission organization (RTO).
In April 2021, however, former FERC Chairman Richard Glick led the commission in issuing a supplemental proposal — supported at the time by current Chairman Mark Christie — to eliminate the RTO participation adder after three years. As a consumer-minded former state utility regulator, Christie has made controlling transmission costs a top priority.
The supplemental proposal sparked fierce pushback from investor-owned utilities, with EEI arguing that the move would stall efforts to expand US wholesale power markets.
The Energy Policy Act of 2005 directed FERC to provide incentives for transmission investment that will help ensure the reliability of the grid and lower the cost of delivered power to customers by reducing transmission congestion.
In their April 3 comments, the industry groups argued that FERC's existing incentives policies are "well-structured to achieve the commission's and Congress's goals, while remaining aligned with broader national energy policy considerations."
Consistent with the Trump administration's new "energy dominance" agenda, the groups said that the public interest would be best served by terminating pending proposals "to diminish existing transmission incentives."
New developments since the March 2020 proceeding was launched, such as unforeseen power demand from datacenters and the heightened prioritization of US energy independence, have made FERC's existing transmission incentives policies "even more essential," the groups said.
RTO adder, abandoned plant and CWIP incentives
The trade groups reiterated earlier arguments that the Energy Policy Act of 2005 specifically directed FERC to establish an RTO adder without explicitly or implicitly limiting the duration of the incentive.
"There is no ambiguity to this statutory language, nor is there any express or implied delegation of authority to the commission to make any manner of interpretation as to how and under what circumstances the commission is required to provide this incentive," the groups said.
Moreover, the groups warned FERC against changes to its abandoned plant and construction work in progress (CWIP) incentives.
FERC's abandoned plant incentive allows utilities to seek preapproval to recover 100% of prudently incurred costs for certain transmission projects that are canceled or abandoned due to factors beyond the developer's control.
The groups noted that FERC has granted the abandoned plant incentive for more than 190 projects nationwide since it was first established nearly 20 years ago.
Those projects amounted to more than $70 billion in operational transmission infrastructure, and only 10 projects receiving the incentive were ultimately canceled — accounting for just 0.4% of planned capital costs, according to the groups.
"Any restriction on the availability of the abandoned plant incentive prior to a project receiving state permits could be at odds with the need for early-stage capital commitments in light of current supply chain challenges and resultant long lead times," they said.
The CWIP incentive similarly allows transmission owners to include 100% of construction costs in their customer rate base prior to commercial operation of the facilities.
FERC has granted the CWIP incentive for more than 130 projects since it was first established, with projects representing $30 billion in transmission infrastructure ultimately claiming the incentive, the groups said.
"Recovering a return on investment as it unfolds overtime costs customers less than accruing that return and then capitalizing it over the life of the project," the groups said.
If FERC wishes to continue reviewing its incentives policies, the groups said the commission should either provide an opportunity for additional comments in the existing docket or commence a new generic rulemaking proceeding on the issue.
