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FERC reverses position, grants ROE adder based on risk for only 3rd time

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FERC reverses position, grants ROE adder based on risk for only 3rd time

The Federal Energy Regulatory Commission on Nov. 5 rethought an earlier decision and granted a rate incentive sought by Ameren Services Co. The order represents only the third time the agency has granted a return-on-equity incentive based on a project's risks and challenges.

Ameren, along with the Midcontinent ISO, in December 2017 asked FERC to approve a 100-basis-point incentive adder to the company's ROE for the Illinois Rivers and Mark Twain components of Ameren's Grand Rivers transmission project.

The Illinois Rivers component consists of approximately 375 miles of new 345-kV transmission line and 10 new or expanded substations across 19 counties in Illinois and Missouri. The Mark Twain component involves the construction of around 96 miles of new 345-kV line in Missouri. While FERC previously granted a series of rate incentives for the two project components, Ameren subsidiary Ameren Transmission Co. argued that those incentives failed to fully address the unprecedented risks and challenges it was facing in trying to complete the projects.

FERC in February disagreed, reasoning that the Illinois Rivers component already was mostly complete. But in seeking rehearing, Ameren Transmission noted that the Mark Twain component still is far from being finished and that the record supports granting an ROE incentive for the Mark Twain component standing alone.

Upon further consideration, FERC agreed that the Mark Twain component should be evaluated on its own merits and found that it indeed is worthy of the requested incentive. Unlike the Illinois Rivers component, FERC recalled that work had not yet begun on the Mark Twain component when the application was filed. The agency also found that Ameren Transmission continues to face risks and challenges for the Mark Twain component that warrant the ROE incentive.

However, FERC decided that given the circumstances surrounding the Mark Twain component, a 50-basis-point adder, rather than the requested 100-basis-point adder, is more appropriate. And while this is just the third time FERC has granted an ROE incentive based on a project's risks and challenges, the agency stressed that it "will continue to carefully scrutinize each incentives application filed in the future."

The agency refused to grant rehearing on all other aspects of the February order. (FERC docket ER18-463)