On March 21, 2019, the same day FERC issued an inquiry into Return on Equity (“ROE”) policies (see here), FERC also published another Notice of Inquiry (“NOI”) seeking comments on the scope and implementation of its electric transmission incentives policy and regulations. The NOI covers a broad range of topics from using incentives to encourage new technology integration to unlocking location constrained resources and addressing resiliency concerns. Initial comments are due 90 days after the NOI is published in the Federal Register, with reply comments due 30 days thereafter.

The impetus for this NOI is Section 1241 of the Energy Policy Act of 2005 (“EPAct 2005”), codified as section 219 of the Federal Power Act (“FPA”). EPAct 2005 directed FERC to use transmission incentives to help ensure reliability and reduce the cost of delivered power through reducing transmission congestion. In 2006, FERC first implemented this directive through Order Nos. 679 and 679-A, which established FERC’s basic approach to transmission incentives and enumerated several potential incentives that FERC would consider. FERC issued an incentives policy statement in 2012, which raised the bar for receiving a ROE incentive rate.

Since FERC’s Order Nos. 679 and 679-A, however, there have been myriad developments in transmission planning, operation, development, and maintenance. In 2011, for example, FERC issued Order No. 1000, which instituted certain transmission planning and cost allocation reforms for public utility transmission providers. Accordingly, FERC issued the current NOI to obtain information to assist it in evaluating its transmission incentives policy and to ensure the policy continues to satisfy its obligations under FPA section 219.

FERC specifically asked 105 questions in five major categories. First, FERC seeks comments on: (1) whether and how to continue pursuing its traditional “risks and challenges” incentive approach; (2) whether incentives could be provided for projects that are likely to contribute to reliability and congestion management (also known as the “Project Benefits” approach); and (3) whether a project has unique characteristics, such as relieving constraints or integrating advanced technology (also known as the “Project Characteristic” approach). Second, FERC raises questions regarding the overall objectives to be pursued with an incentive scheme, including what benefits or project characteristics warrant incentives (e.g., reliability benefits, economic efficiency benefits, persistent geographic needs, flexible transmission system operations, security, resilience, improving existing transmission facilities, and interregional transmission projects). Third, FERC requests comments on whether existing incentives are still relevant and appropriate (e.g., ROE-Adder Incentives and Non-ROE transmission incentives); and if not, what other changes should be undertaken. Fourth, understanding that permanent incentives may not be appropriate in all cases, FERC has requested comments on the duration of incentives, bounds on ROE incentives, a case-by-case vs. automatic approach in reviewing incentive applications, and how the incentives should interact with each other. Finally, FERC seeks input on the metrics for evaluating the incentives’ effectiveness, such as whether existing mandatory forms are sufficient or whether recipients should otherwise provide more details about the implementation and usefulness of an incentive.

As demonstrated by the NOI’s broad scope and question sets, FERC appears open to moving beyond its traditional “risks and challenges” incentive framework in favor of a broader approach that considers system and economic benefits, security and resiliency needs, as well as advance technology deployment.

FERC encourages commenters to respond to the provided questions in detail and, where appropriate, provide specific examples supporting each comment and recommendation. Commenters are not required to answer each question.

Click here to read the NOI. Initial comments are due 90 days after the NOI is published in the Federal Register, with reply comments due 30 days thereafter.