Following the paper hearing, FERC in Opinion No. 531-A found that the long-term GDP growth rate is the appropriate long-term growth rate to use in the two-step DCF methodology and that 4.39 percent is the appropriate GDP growth rate to use to calculate the NETOs’ base ROE. The parties did not contest either of these matters. Applying the two-step DCF methodology with a 4.39 percent long-term GDP growth rate, FERC determined that the NETOs’ existing 11.14 percent base ROE is unjust and unreasonable, that a just and reasonable base ROE for the NETOs is 10.57 percent, and that the NETOs’ maximum ROE, including incentives, cannot exceed 11.74 percent, the top of the zone of reasonableness of 7.03 to 11.74 percent. Accordingly, FERC directed the NETOs to make refunds, with interest, for the 15-month refund period from October 1, 2011, to December 31, 2012.
Importantly, FERC in Opinion No. 531-A did not address arguments regarding whether the projected long-term GDP growth rate of 4.39 percent used for the NETOs should represent an upper or lower limit on the long-term growth component of the two-step DCF methodology, and, accordingly, it could reach a different result in other ROE cases.