Energy Regulator’s Policy Shift Could Save New England Consumers More Than $57 Million Per Year
WASHINGTON (November 21, 2012) – Last Thursday, the Federal Energy Regulatory Commission (FERC) issued a “policy statement” in which the Commission raises the bar that transmission companies must meet in order to receive costly “incentives,” or bonuses from electricity customers for building new transmission lines. These much-needed reforms are consistent with those called for by Rep. Ed Markey (D-Mass.) in a May 11, 2012 letter to FERC.
“In today’s economy, the guaranteed 11 percent rate of return that New England transmission companies earn for doing their job‑‑building new transmission lines when and where they are needed‑‑is a pretty attractive investment,” said Rep. Markey, the Ranking Member of the Natural Resources Committee. “The policy guidance issued by FERC says that electricity consumers are going to be forced to pay more than that to transmission companies that build new facilities only where there is a darn good reason for it. I agree. I commend the Commission for this pro-consumer decision that could save New England electricity consumers $57 million or more annually in the coming years. I urge the Commission to be aggressive in implementing this policy.”
A provision of the Republican 2005 Energy Bill affords transmission developers a chance to seek bonuses from electricity consumers on top of their regular earnings if their projects meet certain criteria. However, since the implementation of this legislation, nearly every transmission project built in New England has qualified for these bonuses, costing electricity consumers millions of additional dollars. Last week’s policy statement from FERC states that these bonuses will be awarded only where the developer has first taken steps to mitigate its financial risks. This policy change should make it more difficult to obtain these bonuses in the future. FERC also states incentive bonuses should be applied only to the project’s budgeted cost, and not to cover cost overruns.
Rep. Markey led opposition the incentive payment legislation when it was debated in Congress, warning that it would force consumers to pay higher rates for transmission projects that would have been built anyway even without the added bonuses. He also held a hearing on transmission issues in 2009 in which he raised concerns about the bonuses.
New England’s current transmission plans include $5.7 billion in new transmission projects that are under development. By avoiding incentive bonuses that would force consumers to pay an additional 1 percent or more on top of the base return, consumers can hope to save $57 million per year or more in coming years.
A copy of the letter sent by Rep. Markey to FERC can be found HERE.
A copy of the FERC policy statement can be found HERE.
Contact: Eben Burnham-Snyder, Rep. Ed Markey, 202-225-6065
Giselle Barry, Rep. Ed Markey, 202-225-2836