A notice of inquiry (NOI) issued by FERC Thursday to examine whether to revise its policies on determining the return of equity (ROE) used in setting rates charged by jurisdictional public utilities also seeks comment on whether to change ROE policies for interstate natural gas and oil pipelines.
The NOI follows a 2017 decision by the U.S. Court of Appeals for the District of Columbia that reversed and vacated Opinion No. 531, in which the Federal Energy Regulatory Commission had set the ROE for New England Transmission Owners at the midpoint of the upper half of the zone of reasonableness produced by a two-step discounted cash flow analysis; and two FERC orders proposing an alternative ROE methodology and establishing a paper hearing on whether and how it should apply to ROE complain proceedings in New England and the Midcontinent Independent System Operator [PL19-4].
The NOI recognizes that the importance of ROE policy extends beyond the particular interests of the parties to pending ROE proceedings, FERC said, and therefore establishes a broader inquiry.
Also on Thursday, FERC opened a related inquiry on improvements to electric transmission incentives policy [PL19-3].
"What all this boils down to is the fact that getting these policies right will be critical to ensuring that the energy revolution we're currently undergoing results in more reliable services and lower prices for customers," said FERC Chairman Neil Chatterjee. "To that end, I think the two NOIs we're issuing today are an important step towards getting our transmission policies right...
"I think the transmission incentives NOI really tees up the question of what kinds of transmission projects does the Commission want to incent. In particular, I think it asks very important questions about whether the Commission should be focused on incentivizing projects with risks and challenges, or thinking more broadly about the reliability and economic benefits that transmission projects can provide."
Initial comments on the two NOI are due 90 days after publication in the Federal Register; reply comments are due 30 days after that.