Although it granted Pepco the right to recover its prudently incurred investment yesterday, FERC denied the continuation of MAPP's 150 basis point incentive ROE on abandoned plant. No big surprise -- Pepco's arguments were absurd.
"We find that the continuation of the additional 200 basis points of incentives, on top of the base ROE, on an abandoned project is not appropriate. Once a project has been canceled, none of the incentives granted other than the ability to recover prudently incurred abandonment costs continues to apply, as explained below."
FERC also denied Pepco its 50 basis point incentive for continued membership in PJM. The Commission reconfirmed its determination in the PATH abandonment order:
"We therefore find that the 50 basis point adder for RTO participation is not appropriate for recovery in an abandonment application. This finding is appropriate in the context of abandonment even though the Commission has found that the RTO participation incentive is unrelated to any particular project but instead is intended as an incentive for joining and remaining in an RTO. This is because even though the public utility project developer has joined an RTO, the facility at issue in an abandoned plant cost recovery situation will not be transferred to the RTO's control, and therefore the benefits from that project’s inclusion in an RTO will not materialize.
This outcome is consistent with the PATH Abandonment Order, where the Commission clarified that continued recovery of a 50 basis point adder for RTO participation is not appropriate for recovery in an abandonment application."*
Do you think the Commission was clear enough this time? Greed seems to be interfering with utility understanding of this concept.
In addition, the Commission also determined that Pepco can recover only 50% of its incurred costs prior to issuance of their incentives order in 2008. Because Pepco incurred these costs before being granted the 100% abandonment recovery incentive, they are only eligible for 50% recovery. Pepco wasn't greedy enough to ask for amortization of its pre-incentive costs over its construction period like PATH did. Silly Pepco, that's going to cost ya...
However, the Commission also awarded Pepco a 10.8% ROE on its recovery of abandoned plant, instead of setting ROE for hearing like it did on PATH's abandonment. Pepco's brazenly ridiculous request to recover an incentive ROE on abandoned plant captured the attention of all the protestors, who failed to advance any arguments against Pepco's base ROE. You gotta admit, it was pretty smart. Maybe PATH's counsel could take some lessons from Pepco's. Or maybe PATH just needs smarter counsel.
As it did with PATH, the Commission set the prudence of MAPP's abandoned plant costs for settlement and hearing.
Before you get all carried away praising the Commission for this Order, remember that it is because the Commission continually fails to enforce any discipline on their little darling PJM that consumers in 13 states and D.C. will have paid nearly half a billion dollars for these two abandoned transmission projects. PATH and MAPP (and TrAIL and Susquehanna Roseland) were never truly needed. It was all about increasing the use of coal-fired resources, not reliability or economics. The utility cartel that is PJM has cost us all higher electric bills that we can ill afford and will not be held accountable for its machinations.
*This bodes well for PATH's rehearing, doesn't it?