Review of Transmission Incentive Policies May Prompt Narrower Scope and Fewer Benefits

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In a May 19, 2011 Notice of Inquiry (NOI), the Federal Energy Regulatory Commission (FERC) signaled that it may be ready to modify its transmission investment pricing policies. The NOI requests industry comments on whether the rate incentives provided under FERC’s transmission investment pricing policies effectively encourage the development of transmission infrastructure. The NOI appears to respond to recent concerns expressed by some Commissioners regarding the broad application of the incentives program, and could lead to a more formal rulemaking aimed at reducing the scope and availability of incentives while increasing the burden placed on applicants that seek those incentives.

The NOI (Docket No. RM11-26) addresses several general topics and poses a number of specific questions related to FERC’s rate incentives program. A list of the questions is available here. Areas proposed for comment include:

- The overall effectiveness of the rate incentives program since its inception almost five years ago, including whether the rate incentives appropriately promote investment in transmission and adequately address barriers to construction of new transmission.

- The impact rate incentives have had on consumer rates and transmission investment patterns.

- The criteria used by FERC in evaluating applications; whether FERC should adopt specific eligibility criteria or conditions for each incentive sought by an applicant; and the effectiveness, impact and appropriateness of the specific incentives FERC has historically granted as part of its rate incentives program.

- Suggested changes to the program to more effectively encourage transmission development.

- Whether FERC should focus its efforts on additional goals, such as economic efficiency and improved operations.

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