In their complaint, they allege that the Base ROE FERC set for all New England ISO transmission owners in 2007 is much too high. The 11.14% ROE was based on a very different 2004 - 2006 pre-recession market. The complainants provide expert testimony whereby a more reasonable 9.2% is arrived at through an updated DCF analysis. This Base ROE is the rate of return (or interest) transmission owners will earn on their investment in new transmission projects. The Base ROE is exclusive of any transmission incentive adders, which were dealt with separately in a joint filing in the transmission NOI. It wasn't lost on me that the same law firm, Spiegel McDiarmid, seems to be behind both filings. As I mentioned last month when all the NOI comments began flooding in, pay particular attention to the comments Spiegel McDiarmid wrote for various clients. They really get it.
Therefore, ratepayers in New England are being overcharged. How much?
"The Complainants calculate that, assuming a forecasted 2011 investment base of $6.309 billion, New England electric consumers would be required to overcompensate New England Transmission Owners by $113 million annually under the current 11.14 percent Base ROE, compared to rates using the recommended ROE of 9.2 percent. With New England’s Pool Transmission Facility investment base expected to increase to approximately $11.474 billion by 2015, that overpayment would increase to $206 million annually."
Here's a copy of the complaint. For the sake of file size efficiency, I have stripped off the exhibits. If your idea of fun is reading the supporting DCF analysis, get yourself on over to FERC's e-library and search for Docket EL11-66 and download the whole complaint.
If you've read and understand FERC's PATH decisions, you'll appreciate all the snide little references to PATH in the complaint, which were used to bolster the case. PATH will live in on infamy for a long, long, long time in FERC's legal world.
While one could argue that this complaint is collateral damage resulting from FERC's Transmission Incentives NOI, it also represents another symptom of a bigger problem. FERC's favored RTO model and its attendant bias toward the interests of a particular RTO's most powerful members, to the detriment of smaller industry players and consumers, is coming under increasing scrutiny. Yet to be factored into the larger argument is the way FERC is stomping on state authority with its end run around Congress in an attempt to claim federal transmission siting authority. Retaliatory complaints and other issues related to FERC's power grab haven't even begun yet.
This complaint is another concrete example that the transmission party is over for FERC, the RTOs and the industry players who have been making a bundle of cash at ratepayer expense. There ARE cheaper, easier and smarter non-transmission alternatives that will ultimately be deployed, and that's where the energy policy train is now heading. All aboard!!!