New York Association of Public Power Files Complaint to Reduce Niagara Mohawk Power Corporation’s ROE

by Akin Gump Strauss Hauer & Feld LLP

On February 6, 2014, the New York Association of Public Power (NYAPP) filed a second complaint (Second Complaint) against Niagara Mohawk Power Corporation d/b/a National Grid (NMPC) asking the Federal Energy Regulatory Commission (FERC or the Commission) to reduce the Return on Equity (ROE) used to calculate NMPC’s transmission rates under the New York Independent System Operator’s Open Access Transmission Tariff (OATT).1  Please click here to read complaint. NYAPP filed a similar compliant on September 11, 2012 (First Complaint), recommending a base of ROE of 9.49 percent for NMPC, based on market conditions at that time.2 Please click here to read complaint. The Second Complaint, using updated information, recommends an ROE of 9.36 percent. NMPC’s current base ROE is 11.5 percent.

NYAPP’s Second Complaint is essentially a renewal of the First Complaint. The Federal Power Act (FPA) limits refunds to a fifteen month period, starting no earlier than the filing of a complaint. Assuming that FERC choses to set the refund effective date for the First Complaint as of the date of that filing, the refund period would have run out in December 2013. NYAPP therefore filed the Second Complaint to “prevent a gap in refunds,”3 and provide an updated analysis of NMPC’s ROE. The Municipal Electric Utilities Association of New York State (MEUA) filed its own complaint on November 2, 2012 (MEUA Complaint) asking for a reduction in NMPC’s ROE.4 Please click here to read complaint.

FERC has not acted on the First Complaint or the MEUA Complaint. Although the FPA directs FERC to act “speedily” on complaints, the statutory time limit for action does not come into play until the proceeding is set for hearing.5 Because the Commission has chosen not to take any action on the ROE complaints, they have remained in administrative limbo. Meanwhile, the Commission’s recent issuances on the related issue of incentive ROEs, which involve awarding a higher ROE to compensate a developer for undertaking risky transmission investments, have indicated a move towards lower ROEs.6

In addition to the NYAPP and MEUA complaints, there are numerous other pending complaints regarding transmission ROEs in Florida, New England, Colorado, and the Midwest.  In particular, two complaint proceedings relating to transmission rates under the ISO New England, Inc. (ISO-NE) OATT have been very closely watched by the industry. In August, the administrative law judge (ALJ) in one of the ISO-NE proceedings recommended that the base ROE for New England transmission owners be reduced from 11.14 percent to 9.7 percent.7 Please click here to read decision. FERC has not yet ruled on the ALJ’s initial decision.

The various complainants are not the only parties anxious for resolution.  In June 2013, the Working group for Investment in Reliable and Economic electric Systems (WIRES) petitioned FERC to issue a statement of policy on transmission ROEs that would provide “greater stability and predictability regarding regulated rates of return on equity.”8 WIRES’s petition drew a swarm of commenters, both supporting and opposing changes in FERC’s ROE policy. On December 5, 2013, FERC Commissioner John Norris expressed his own frustrations with the delay, stating that “[t]hese cases have lingered at FERC long enough and I think it's OK to start asking publicly, 'Where is our decision?”9

1 New York Association of Public Power, Compliant of the New York Association of Public Power Challenging Base Return on Equity, filed Feb. 6, 2014, Docket No. EL14-29-000.

2 New York Association of Public Power, Compliant of the New York Association of Public Power Challenging Base Return on Equity, filed Sept. 11, 2012, EL12-101-000.

3 Second Complaint at 16.

4 Municipal Electric Utilities Association of New York State, Complaint of the Municipal Electric Utilities Association of New York and Request for Fast Track Processing, filed Nov. 2, 2012, Docket No. EL13-16-000.

5 16 U.S.C. § 824e(b).

6 See e.g., Promoting Transmission Investment Through Pricing Reform, 141 FERC ¶ 61,129 (2012); Pepco Holdings, Inc., 139 FERC ¶ 61,444 at PP 12-13 (2012).

7 See Coakley v. Bangor Hydro-Electric Co., 144 FERC ¶ 63,012 (2013).

8 Statement of Policy on Electric Transmission Rates of Return on Equity, Petition for Statement of Policy at 1, filed June 26, 2013, Docket No. RM13-18-000.

9 Ester Whieldon, Norris Pushes for FERC Action on Contentious Utility Transmission ROE Complaints, SNL Electric Transmission Week, Dec. 16, 2013, at 2.


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.

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