Transmission Investors Ask FERC To Revisit ROE Policies

On June 26, 2013, a non-profit association of investors (WIRES) petitioned FERC to initiate a generic proceeding to clarify and reform policies regarding regulated rates of return on equity (or ROE) for existing and future investments in high voltage electric transmission infrastructure.  According to WIRES, evolving and unpredictable application of FERC’s discounted cash flow (DCF) methodology for determining allowed ROEs may have unintended consequences by chilling investment in needed transmission facilities, disrupting infrastructure planning and growth, and delaying projects.

WIRES recommends a new policy that (1) standardizes selection of proxy groups; (2) denies complainants a hearing on ROEs for existing facilities unless it is shown that existing returns are at the extremes of the zone of reasonableness; (3) allows consideration of competing infrastructure investments of other industries; (4) permits use of ROE methodologies other than DCF; and (5) supports use of more forward-looking data and modeling.

Regulated ROEs for new and existing transmission infrastructure have been declining in recent years, and FERC has been less inclined to grant ROE adders.  Single issue rate cases challenging allowed ROEs have undermined regulatory certainty needed to support infrastructure investment and created uncertainty in capital markets.

A copy of the petition is available here.

Topics:  Electricity, Energy Policy, FERC, Infrastructure, Investors

Published In: General Business Updates, Energy & Utilities Updates, Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Akin Gump Strauss Hauer & Feld LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »