In the NOI, Promoting Transmission Investment Through Pricing Reform, FERC is seeking comments about the effect of its incentives on promoting transmission. If you're going to comment, you need to understand what the incentives are, and what they are intended to do.
FERC says that the granting of an incentive to a transmission project does not preclude the same project from receiving other incentives. Therefore, they often grant multiple incentives and create a total incentive package that involves absolutely no risk for the transmission owner and their shareholders, and the promise of big financial rewards if a project is completed. For example, the abandonment incentive allows the transmission owner to recover 100% of prudently incurred costs if the project is abandoned through no fault of their own. Right there, all risk is removed from the transmission owners and investors and put upon the ratepayers, who shoulder all the burden without any stake in the process. Once all risk is removed by the granting of this incentive, are any others necessary?
A project can also receive the CWIP in rate base incentive, which allows them to begin earning a return immediately, while the project is in the planning and construction stages. And about that return, it's very lucrative, with incentive ROE adders in addition to an already generous base rate. After that, FERC can also add in a generous hypothetical capital structure and recovery of pre-commercial costs, and then let the transmission owner recover their rewards at a faster rate through accelerated depreciation. The effect of all this creates a sickeningly sweet feast that no corporation can resist.
Because they can't lose, transmission owners will propose all sorts of projects that aren't needed and then try to hold on to them long after they should have rightfully been abandoned. The transmission owners feel justified to go to whatever devious lengths and stoop to whatever nefarious deeds are necessary to obtain right-of-way and get needed state project approvals because the promised rewards are huge and there is no financial risk involved in failure.
As you contemplate the interrelationship of multiple incentives, keep in mind that FERC is attempting to strike an acceptable balance between consumer and investor interests and reduce your cost of delivered power! On the investor side of the scale you have zero risk and huge financial incentives and on the consumer side of the scale you have all the risk of badly planned and executed transmission projects and huge financial costs. Where's the balance?
In the real world, we know that too much of a good thing often has catastrophic results. You need to explain that to FERC, in as plain a manner as possible. On page 19 of the NOI, FERC asks a few questions about the interrelationship of incentives. I'm sure you creative consumer "stakeholders" can make suggestions that the industry won't even ponder. The industry will be letting FERC know how they can and should sweeten the pot even further for them. It's up to you to provide balance with a little real world sanity.
If you found this helpful in crafting your comments, you are encouraged to browse the entire FERC Transmission NOI category at StopPATHwv.com for other useful material. You don't have to comment on all aspects of the NOI if that's too burdensome. In fact, if you want to concentrate in detail on just one aspect that interests you and about which you have strong feelings, that's a perfectly acceptable approach to producing effective comments.
FERC says that the granting of an incentive to a transmission project does not preclude the same project from receiving other incentives. Therefore, they often grant multiple incentives and create a total incentive package that involves absolutely no risk for the transmission owner and their shareholders, and the promise of big financial rewards if a project is completed. For example, the abandonment incentive allows the transmission owner to recover 100% of prudently incurred costs if the project is abandoned through no fault of their own. Right there, all risk is removed from the transmission owners and investors and put upon the ratepayers, who shoulder all the burden without any stake in the process. Once all risk is removed by the granting of this incentive, are any others necessary?
A project can also receive the CWIP in rate base incentive, which allows them to begin earning a return immediately, while the project is in the planning and construction stages. And about that return, it's very lucrative, with incentive ROE adders in addition to an already generous base rate. After that, FERC can also add in a generous hypothetical capital structure and recovery of pre-commercial costs, and then let the transmission owner recover their rewards at a faster rate through accelerated depreciation. The effect of all this creates a sickeningly sweet feast that no corporation can resist.
Because they can't lose, transmission owners will propose all sorts of projects that aren't needed and then try to hold on to them long after they should have rightfully been abandoned. The transmission owners feel justified to go to whatever devious lengths and stoop to whatever nefarious deeds are necessary to obtain right-of-way and get needed state project approvals because the promised rewards are huge and there is no financial risk involved in failure.
As you contemplate the interrelationship of multiple incentives, keep in mind that FERC is attempting to strike an acceptable balance between consumer and investor interests and reduce your cost of delivered power! On the investor side of the scale you have zero risk and huge financial incentives and on the consumer side of the scale you have all the risk of badly planned and executed transmission projects and huge financial costs. Where's the balance?
In the real world, we know that too much of a good thing often has catastrophic results. You need to explain that to FERC, in as plain a manner as possible. On page 19 of the NOI, FERC asks a few questions about the interrelationship of incentives. I'm sure you creative consumer "stakeholders" can make suggestions that the industry won't even ponder. The industry will be letting FERC know how they can and should sweeten the pot even further for them. It's up to you to provide balance with a little real world sanity.
If you found this helpful in crafting your comments, you are encouraged to browse the entire FERC Transmission NOI category at StopPATHwv.com for other useful material. You don't have to comment on all aspects of the NOI if that's too burdensome. In fact, if you want to concentrate in detail on just one aspect that interests you and about which you have strong feelings, that's a perfectly acceptable approach to producing effective comments.
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