Markey Blasts FERC; Calls Transmission Incentive Rates Excessive

In a May 11 letter to Federal Energy Regulatory Commission (FERC) Chairman Jon Wellinghoff, Rep. Ed Markey (D-MA), a senior member on the House Energy and Commerce Committee and ranking member on the Natural Resources Committee, voiced concern that the Commission’s transmission rate incentives are excessive. "While investments in new transmission facilities can be a part of [a] modernization effort, I am concerned that the Commission’s policies regarding transmission investment...have resulted in consumers paying excessive charges," Markey said. He hopes FERC will "implement needed reforms" after considering all comments filed in an ongoing FERC proceeding.

NEPPA and its members have consistently raised concerns about the impact on customers of the increasing transmission costs in New England and the need for FERC to be more judicious when approving transmission rate "adders." NEPPA Massachusetts members specifically asked Markey to weigh in with the Commission when they met with his office during the APPA Legislative Rally.

Markey said he also strongly supports FERC’s recent order setting a hearing for the New England transmission base return on equity (ROE) complaint led by the Massachusetts Attorney General (AG).

"The boom in transmission construction in New England since 2003 has led to a 500% increase in transmission costs for consumers and pushed the region’s transmission rates to some of the highest in the country," Markey said. "As a percentage of total power costs, transmission costs will increase from less than 6% in 2008 to approximately 21% in 2014."

Markey said that while transmission investments may be necessary, in the last few years there has been a "prolific use of return-on-equity ‘adders’ for new transmission that, in some cases, have given transmission owners risk-free, formula-based returns of up to 13.5% on new projects." He said that, given current economic growth and interest rates, "such [ROE] for predictable infrastructure investments seem even more inflated."

With large, well-capitalized companies increasingly dominating the regional market for new transmission, "excessive and unwarranted incentive transmission rates are disproportionately benefitting the bottom lines of transmission builders at the expense of electricity consumers," Markey said.

He called on FERC to establish a regulatory framework that will ensure incentive rates "are not simply an added cost borne by consumers on an investment that would have been made in any event."

Along with addressing incentive policies, the best way to address rising transmission costs in New England would be for FERC to reduce the base ROE for the region’s transmission owners from the current level of 11.1% to 9.2%, as requested by the Massachusetts AG and others. Reducing the base ROE, Markey said, could save New England ratepayers $100-$200 million per year.

To read the complete legislative update including the following topics, click here.

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