NextEra Energy Transmission MidAtlantic, designated entity for the MidAtlantic Resiliency Link, or MARL, project recently announced its Actual Net Revenue Requirement and Annual True-up Meeting. The meeting will be held on June 12 at 3:30 p.m. and probably won't last more than an hour (depending on how many questions you ask). Interested parties can attend via Webex or telephone. NextEra requests that you répondez s'il vous plaît, but it's not required. See meeting notice linked above.
An interested party is defined in NextEra's Formula Rate Protocols (PJM OATT Attachment H-33-A). "For purposes of these protocols, the term Interested Party includes, but is not limited to, customers under the PJM Tariff, state utility regulatory commissions, consumer advocacy agencies, and state attorneys general." If you pay an electric bill in the PJM region, NextEra's transmission costs are flowing through into your bill and therefore you are an interested party by definition. This issue has been litigated before FERC many times and FERC has emphatically found every time that consumers are interested parties.
At the meeting, NextEra will be presenting its Formula Rate Update to true up its estimated 2024 revenue requirement with its actual expenditures. It will also be presenting its estimate of its revenue requirement for 2025.
What's a revenue requirement? It's the total amount NextEra gets to collect from ratepayers in the PJM region for each year. Once NextEra calculates its revenue requirement, PJM collects that amount from responsible load serving entities (LSE -- the company that actually sends you your bill). The LSE in turn collects the transmission rate from you in your bill. This is how the costs of new transmission get included in your monthly electric bill.
NextEra will NOT be discussing or entertaining any questions about its transmission projects. This meeting is ONLY about NextEra's transmission formula rates.
What's a formula rate? It's a series of mathematical calculations into which the utility plugs certain numbers. It calculates the utility's annual revenue requirement. Formula rates take the place of a stated rate, which is a set dollar amount that the utility would collect from its customers. Instead of a set number, the regulator sets a formula for calculating yearly rates so that there doesn't need to be a full blown rate case every year. The formula is the rate, not a fixed number. The revenue requirement can therefore fluctuate from year to year.
Now take a deep breath.
This is NextEra's formula rate, populated with numbers from 2024.
It's not as hard as it looks. Each calculation names where the numbers it plugs in come from. The numbers used come from NextEra's FERC Form No. 1.
The Form No. 1 is an accounting of NextEra Energy Transmission MidAtlantic's finances for 2024 that is organized into various accounts. If you've ever worked in accounting, or taken an accounting course, you know that an entity's finances are organized into certain accounts that describe each general class of expense. The list of descriptive accounts for an entity is called its Chart of Accounts. All utilities regulated by the Federal Energy Regulatory Commission use FERC's Chart of Accounts, called the Uniform System of Accounts (USofA). Each account listed on the Form No. 1 (and transferred to the formula rate) has a description and rules for its use. Not every account in the USofA gets transferred to the formula rate template. Only certain accounts are included in the formula rate. Other accounts are not included in the rate. For instance, FERC Account Number 426.4, Expenditures for certain civic, political and related activities, is not included in a formula rate. That's because those kinds of expenses are not recoverable from ratepayers under FERC's accounting rules. A utility that chooses to make those kind of expenditures pays for them out of its own funds. When a utility does not follow the descriptions and rules, this can happen.
Sometimes, utility accountants accidentally record expenses in an incorrect account. Not a problem if both accounts are either recoverable or non-recoverable. However if a non-recoverable expense is accidentally recorded in a recoverable account, it would get transferred to the formula rate and recovered from ratepayers in error. In that case, the utility must refund that expense to ratepayers.
NextEra will also be discussing its projections for 2025. These numbers are based on historic averages or company budgets. The estimated revenue requirement is what will be recovered from ratepayers in 2025. However, it is just an estimate. This estimate will be compared with actual 2025 expenses in 2026 (called a true-up) and any overage will be refunded, or any under collection will be wrapped into the next year's rate. This way, the utility only collects its actual expenditures from ratepayers.
As an interested party, you will be able to ask about specific numbers that are plugged into the formula rate, the accounts included in that line item, and how the actual expenses were classified for accounting purposes. If the utility cannot provide detailed answers during the meeting, there is a process for interested parties to submit information requests to seek more details about the expenses and/or calculations to make sure that the rate was calculated correctly. If you are not satisfied with the answer you receive to your question, feel free to ask them how to submit additional written information requests.
Yes, this is heady stuff, but it can be mastered by regular people. Having an accounting background helps.
You might wonder why this process exists. Doesn't FERC check NextEra's math when they file their annual revenue requirement? The answer is NO. No, they do not. FERC relies on the entities that pay these rates to examine and question them. Occasionally FERC may audit some of these utilities, but that's a random process that never looks at every one filed. Because the formula rate has been determined to be just and reasonable, FERC assumes that the utility that uses it follows all the rules when it fills out the rate template every year. Therefore, FERC doesn't need to even look at the filings. They leave that job to you. You might think that your LSE or your state regulator or other state office reviews these filings for accuracy. NO. No, they do not. Your electric company just pays the bill to PJM and passes these costs on to you. It doesn't care how much they are. Your state offices usually don't have the skills or resources to review formula rate filings. In a lot of cases, they don't understand them at all. That leaves it up to you...
So, if you want to plunge into NextEra Energy Transmission MidAtlantic's annual transmission revenue requirement to check their math, don't miss the meeting. It's your first step.
An interested party is defined in NextEra's Formula Rate Protocols (PJM OATT Attachment H-33-A). "For purposes of these protocols, the term Interested Party includes, but is not limited to, customers under the PJM Tariff, state utility regulatory commissions, consumer advocacy agencies, and state attorneys general." If you pay an electric bill in the PJM region, NextEra's transmission costs are flowing through into your bill and therefore you are an interested party by definition. This issue has been litigated before FERC many times and FERC has emphatically found every time that consumers are interested parties.
At the meeting, NextEra will be presenting its Formula Rate Update to true up its estimated 2024 revenue requirement with its actual expenditures. It will also be presenting its estimate of its revenue requirement for 2025.
What's a revenue requirement? It's the total amount NextEra gets to collect from ratepayers in the PJM region for each year. Once NextEra calculates its revenue requirement, PJM collects that amount from responsible load serving entities (LSE -- the company that actually sends you your bill). The LSE in turn collects the transmission rate from you in your bill. This is how the costs of new transmission get included in your monthly electric bill.
NextEra will NOT be discussing or entertaining any questions about its transmission projects. This meeting is ONLY about NextEra's transmission formula rates.
What's a formula rate? It's a series of mathematical calculations into which the utility plugs certain numbers. It calculates the utility's annual revenue requirement. Formula rates take the place of a stated rate, which is a set dollar amount that the utility would collect from its customers. Instead of a set number, the regulator sets a formula for calculating yearly rates so that there doesn't need to be a full blown rate case every year. The formula is the rate, not a fixed number. The revenue requirement can therefore fluctuate from year to year.
Now take a deep breath.
This is NextEra's formula rate, populated with numbers from 2024.
It's not as hard as it looks. Each calculation names where the numbers it plugs in come from. The numbers used come from NextEra's FERC Form No. 1.
The Form No. 1 is an accounting of NextEra Energy Transmission MidAtlantic's finances for 2024 that is organized into various accounts. If you've ever worked in accounting, or taken an accounting course, you know that an entity's finances are organized into certain accounts that describe each general class of expense. The list of descriptive accounts for an entity is called its Chart of Accounts. All utilities regulated by the Federal Energy Regulatory Commission use FERC's Chart of Accounts, called the Uniform System of Accounts (USofA). Each account listed on the Form No. 1 (and transferred to the formula rate) has a description and rules for its use. Not every account in the USofA gets transferred to the formula rate template. Only certain accounts are included in the formula rate. Other accounts are not included in the rate. For instance, FERC Account Number 426.4, Expenditures for certain civic, political and related activities, is not included in a formula rate. That's because those kinds of expenses are not recoverable from ratepayers under FERC's accounting rules. A utility that chooses to make those kind of expenditures pays for them out of its own funds. When a utility does not follow the descriptions and rules, this can happen.
Sometimes, utility accountants accidentally record expenses in an incorrect account. Not a problem if both accounts are either recoverable or non-recoverable. However if a non-recoverable expense is accidentally recorded in a recoverable account, it would get transferred to the formula rate and recovered from ratepayers in error. In that case, the utility must refund that expense to ratepayers.
NextEra will also be discussing its projections for 2025. These numbers are based on historic averages or company budgets. The estimated revenue requirement is what will be recovered from ratepayers in 2025. However, it is just an estimate. This estimate will be compared with actual 2025 expenses in 2026 (called a true-up) and any overage will be refunded, or any under collection will be wrapped into the next year's rate. This way, the utility only collects its actual expenditures from ratepayers.
As an interested party, you will be able to ask about specific numbers that are plugged into the formula rate, the accounts included in that line item, and how the actual expenses were classified for accounting purposes. If the utility cannot provide detailed answers during the meeting, there is a process for interested parties to submit information requests to seek more details about the expenses and/or calculations to make sure that the rate was calculated correctly. If you are not satisfied with the answer you receive to your question, feel free to ask them how to submit additional written information requests.
Yes, this is heady stuff, but it can be mastered by regular people. Having an accounting background helps.
You might wonder why this process exists. Doesn't FERC check NextEra's math when they file their annual revenue requirement? The answer is NO. No, they do not. FERC relies on the entities that pay these rates to examine and question them. Occasionally FERC may audit some of these utilities, but that's a random process that never looks at every one filed. Because the formula rate has been determined to be just and reasonable, FERC assumes that the utility that uses it follows all the rules when it fills out the rate template every year. Therefore, FERC doesn't need to even look at the filings. They leave that job to you. You might think that your LSE or your state regulator or other state office reviews these filings for accuracy. NO. No, they do not. Your electric company just pays the bill to PJM and passes these costs on to you. It doesn't care how much they are. Your state offices usually don't have the skills or resources to review formula rate filings. In a lot of cases, they don't understand them at all. That leaves it up to you...
So, if you want to plunge into NextEra Energy Transmission MidAtlantic's annual transmission revenue requirement to check their math, don't miss the meeting. It's your first step.
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