In Docket Nos. EL21-66 and ER21-1647, FERC issued an order on rehearing dated March 24, 2022 which denied the NY Transmission Owners’ (NYTO) request to self-fund system Upgrades associated with interconnections and charge interconnection customers a revenue requirement over time that includes a return component. The NYTOs asserted in these cases that the existing funding mechanism is unjust and unreasonable because it does not allow transmission owners to recover a reasonable rate of return to compensate them for the risks and costs associated with owning, operating, and maintaining the System Upgrades. The NYTOs asked FERC to direct NYISO to amend the OATT and Market Administration and Control Area Services Tariff (collectively, Tariffs) to allow the NYTOs to provide initial funding for System Upgrades caused by generator interconnections and charge the interconnection customer to recover a return on and of this cost. In an earlier order, FERC found that the NYTOs did not meet their initial burden under section 206 of the FPA to demonstrate that the existing funding mechanism is unjust, unreasonable, unduly discriminatory, or preferential and therefore did not reach the question of whether the NYTOs’ proposed replacement rate, TO Initial Funding, is just, reasonable, and not unduly discriminatory or preferential. FERC explained that: (1) the precedent cited by the NYTOs – Bluefield Water Works & Improvement Co. v. Public Service Commission, FPC v. Hope Natural Gas Co., and Ameren Services Co. v. FERC – does not require a change to NYISO’s existing funding mechanism for System Upgrades; and (2) the NYTOs had not presented sufficient evidence to show that the existing funding mechanism results in the NYTOs facing uncompensated risks and costs associated with the System Upgrades that force the NYTOs to operate segments of their business on a non-profit basis or prevent the NYTOs from attracting needed capital. FERC affirmed this finding in its rehearing order.
Dr. Paul Dumais
CEO of Dumais Consulting with expertise in FERC regulatory matters, including transmission formula rates, reactive power and more.