RTo adder in ohio - update

On February 17, 2022 in Docket No. ER20-1068, FERC issued an order on rehearing on the RTO Adder for Dayton Power and Light Company (“Dayton”).   FERC initially found and continued in the rehearing order to find that Dayton does not qualify for a 50-basis point RTO Adder under FERC’s current incentives policy because:  (1) Order No. 679, as interpreted in CPUC, requires a showing of voluntary membership in such a Transmission Organization,  and (2) Dayton’s membership in a Transmission Organization is not voluntary because the Ohio statute requires it. 

FERC was not persuaded that it erred in concluding that parties must demonstrate voluntariness to qualify for the RTO Adder.  As discussed in the RTO Adder Order,[1] Order No. 679, as interpreted by CPUC, requires a showing of voluntariness.  Section 219(c) states that, “[i]n the rule issued under this section, the Commission shall, to the extent within its jurisdiction, provide for incentives to each transmitting utility or electric utility that joins a Transmission Organization.”  The Commission implemented this directive in Order No. 679, finding that an RTO Adder is appropriate for entities that choose to remain members of a Transmission Organization because, in relevant part, continuing membership is “generally voluntary.”[2]  As the court in CPUC observed, the Commission:
has a longstanding policy that rate incentives must be prospective and that there must be a connection between the incentive and the conduct meant to be induced.  This policy is incorporated in Order 679.  The policy prohibits FERC from rewarding utilities for past conduct or for conduct which they are otherwise obligated to undertake.[3] 

FERC reasserted in the Rehearing Order that it continues to believe that “only providing incentives to induce future voluntary conduct” is good policy and appropriately balances Congress’s direction in FPA section 219(c) with section 219(d)’s requirement that rates, including incentive adders, must remain just and reasonable and not unduly discriminatory or preferential.  In addition, that policy has been incorporated into Commission precedent on incentives through notice-and-comment rulemaking, and FERC believes it would be inappropriate to unilaterally abandon that policy in an adjudication involving a single public utility, especially when the Commission has opened a rulemaking proceeding to consider this very issue, among others (this rulemaking is pending at the Commission).

Commissioner Danly dissented.  He stated that he would grant rehearing and approve Dayton’s 50 basis point adder for Regional Transmission Organization (RTO) participation.  He repeated that section 219(c) of the FPA states that “the Commission shall . . . provide for incentives to each transmitting utility or electric utility that joins a Transmission Organization.”  There is no requirement in the statute for the utility to voluntarily join an RTO.  The Commission itself established that extra-statutory requirement in Order No. 679 and subsequent orders.  He stated that he is not aware of an instance where an appellate court has ruled that the Commission’s Order No. 679 interpretation is consistent with the statute, for he concludes that it is not.  Nothing in the majority’s opinion on rehearing changed his mind about the plain language of section 219(c).  He concludes that the “voluntariness” requirement is the Commission’s creation and remains at odds with the statute.
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In February 2022, in Docket No. ER22-34, the Office of the Ohio Consumer Counsel filed a complaint against AEP, ATSI and Duke Energy Ohio, asserting that each companies’ Ohio transmission rates are excessive as they contain the RTO Adder which the Commission had just determined Dayton was not eligible because its membership in a transmission organization is mandatory under Ohio law.  This complaint remains pending before the Commission.

In April, Dayton, AEP, ATSI and Duke Energy Ohio appealed FERC’s orders to the DC Court of Appeal. 


[1] RTO Adder Order, 176 FERC ¶ 61,025 at PP 26-30.

[2] Order No. 679, 116 FERC ¶ 61,057 at P 331.

[3] CPUC, 879 F.3d at 977.