In late 2015, FERC initiated a Section 206 investigation of the New England transmission formula rate. FERC found that the existing formula rate lacked transparency, may not be treating certain cost components correctly, and may not synchronize local and regional revenue requirements such that overcollections could be occurring. After over two and one-half years of settlement negotiations with the six New England state regulators and municipal customers in Massachusetts, along with FERC trial staff, the New England Transmission Owners (“NETOs”) filed a settlement in August 2018. The Massachusetts municipal customers and FERC trial staff filed comments opposing the settlement. Last week, the Massachusetts Attorney General (“MA AG”) and the New England States Committee on Electricity (“NESCOE”) (on behalf the New England Governors) filed comments supporting the settlement, as did the NETOs. The MA AG stated that the proposed Settlement provides 1) transparency and uniformity of computation and reporting of transmission costs that is light years ahead of the current methodology and 2) robust information sharing and dispute resolution protocols. The MA AG believes that the settling parties struck an acceptable balance that results in just and reasonable rates as well as compliance with the 2015 FERC Order. NESCOE’s supports the Settlement as it provides reforms that provide consumers with greater confidence in the accuracy of the formula rate, enhances transparency, and establishes a formal structure for challenging formula rate inputs.
The Settlement is supported by the consumer advocates for Massachusetts, Connecticut and Maine as well as NESCOE. The consumer advocates and the states had technical experts and experienced counsel to assist them in the negotiations. ISO-NE stakeholders approved the Settlement by a vote of 96% in favor.
The NETOs in their comments state that the Commission now has a simple choice. It can give effect to a carefully negotiated resolution of an extraordinarily complex matter among many sophisticated parties and approve this Settlement. Or, it can choose to find, consistent with Trial Staff’s apparent position, that compromise settlements of rate proceedings will never be acceptable because there is only one acceptable method for calculating every single component of rates and only one method of presenting this in a rate formula, in which event this case will go to hearing, and the settlement documents and substantial other analyses and associated materials developed during the negotiation will remain privileged, and two and a half years of negotiations among multiple parties with a range of different interests will be tossed aside.
The Commission may approve contested settlements under the following scenarios: (1) the Commission may make a decision on the merits of each contested issue; (2) the Commission determines that the settlement provides an overall just and reasonable result; (3) the Commission determines that the benefits of the settlement outweigh the nature of the objections, and the contesting parties’ interests are too attenuated; and (4) the Commission determines that the contesting parties can be severed longstanding principle that it is the “end result” of the rate setting process that counts, not each individual component of the rate.
The Settlement Administrative Law Judge will now decide if he will certify the settlement for Commission decision.
Dr. Paul Dumais
CEO of Dumais Consulting with expertise in FERC regulatory matters, including transmission formula rates.