End-Users Seek Reduction in Base ROEs for Midwest Transmission Owners

Nov 13, 2013

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The complainants also argue that the MISO TOs’ ROE incentive adders are no longer just and reasonable and should be removed from their formula rates.  They argue that those adders, which were originally intended to encourage membership in Regional Transmission Organizations and the divestiture of transmission facilities to independent companies, are no longer necessary to promote FERC’s policy goals.  In addition, the complainants allege that some of the MISO TOs employ capital structures with greater than 50 percent equity that are no longer just and reasonable, because a 50 percent common equity ratio is sufficient to support a strong credit standing for the MISO TOs.  They request that FERC establish a 50 percent common equity cap for all MISO TOs, while permitting individual MISO TOs to justify a higher equity ratio as just and reasonable.  We anticipate that FERC will establish hearing and settlement procedures to address the issues raised in the complaint.  

The filing of a complaint by the Midwestern end-users to lower the Midwest TOs’ base ROEs does not come as a surprise given the similar complaint filed by various state commissions, ratepayer advocates and end-users against the New England transmission owners (NE TOs), which is currently pending at FERC in Docket No. EL11-66.  As we reported earlier, on August 13, 2013, the Presiding Administrative Law Judge in the New England proceeding issued an initial decision finding that the NE TOs’ current 11.14 percent base ROE is unjust and unreasonable and that the just and reasonable prospective base ROE should be no more than 9.7 percent.  We anticipate that the outcome of the New England proceeding will likely provide a clear signal as to how the MISO proceeding will eventually be resolved.

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