As to the local transmission upgrades determination, by order dated August 19, 2022, attached, FERC accepted a Cost Sharing and Recovery Agreement, rate schedule, tariff revisions and certificates of concurrence intended to implement a statewide cost allocation on a volumetric load-ratio basis for local transmission upgrades selected by the NYPSC to satisfy New York State statutory climate change and renewable energy goals. Consolidated Edison Co. of New York, Inc. et al., 180 FERC ¶ 61,106 (2022). The transmission facilities at issue will create “on-ramps” and “off-ramps” for moving renewable energy on to and off the bulk electric system. The underlying agreement is a voluntary participant funding agreement among the eight New York transmission owners and the NYPSC that is consistent with an earlier FERC policy statement encouraging state and utility collaboration to incent transmission investment. State Voluntary Agreements to Plan & Pay for Transmission Facilities, 175 FERC ¶ 61,225 (2021)(“State Agreement Policy Statement”). Specifically, FERC’s State Agreement Policy Statement encouraged state collaboration to develop transmission facilities through voluntary arrangements regarding planning for and paying for transmission facilities. The transmission owners’ revenue requirements for transmission assets approved through the New York program will be determined pursuant to a FERC formula rate with an ROE input that will change over time and consist of the lower of the NYSPC-approved ROE (the utility’s distribution ROE) or the FERC ROE.
Significantly, FERC concluded that the New York proposal was consistent with its Order No. 1000 regional transmission planning and cost allocation process and emphasized that Order No. 1000 does not preclude participant funding arrangements where market participants negotiated voluntary alternative cost sharing arrangements separate from Order No. 1000’s regional cost allocation methods. FERC also concluded that the proposal to allocate costs for the upgrades on a load-ratio share basis across the state is roughly commensurate with the benefits and consistent with its precedent.
The delay issues before the Fifth Circuit that resulted in the second decision this short report will cover are similar to the FERC delays experienced by the parties to the New England Transmission Owner and MISO Transmission Owner ROE complaint proceedings that have been pending before FERC for many years. As noted above, FERC’s ROE methodology applicable to electric transmission has been uncertain since 2011. Regulatory uncertainty discourages investment and the need for significant transmission capital expenditures to achieve clean energy goals underscores the importance of FERC moving through its electric transmission and power rate cases to provide clear guidance. The Fifth Circuit Order this report will discuss responded to a Louisiana Public Service Commission (“LPSC”) petition for writ of mandamus compelling FERC to resolve several LPSC complaints against System Energy Resources, Inc. (“SERI”) related to SERI’s rates as the operator of the Grand Gulf Nuclear Station. The complainants sought a mandamus from the court requiring FERC to proceed more quickly. The Fifth Circuit Order took the petition very seriously and required FERC to provide “a meaningful explanation for the length of time the Commission takes for final action in Section 206 complaint proceedings, including those at issue here.”
The Order is expected to influence FERC to move forward more quickly with respect to other cases involving its ROE methodology. The Fifth Circuit threatened judicial intervention if FERC could not justify the delays and focused on consumer interests and the need for consumers to have FERC cases resolved in a reasonable amount of time:
“In its petition, the LPSC argues that mandamus is appropriate because Congress intended for FERC to work through Section 206 complaints more quickly, FERC has violated a statutory command by failing to do so, and FERC inaction is causing irreparable injury to consumers. FERC responds that mandamus is an extraordinary remedy; these complaints represent just a subset of the thirteen different proceedings addressing the Entergy system; there is no deadline—express or implied—for FERC action; and a recent D.C. Circuit opinion [the MISO ROE decision] overturned the agency’s methodology for complaints like these, rendering the delay reasonable. We conclude that although Congress did not impose a hard and fast deadline for FERC to resolve complaints, it certainly anticipated greater alacrity than this.” (slip op. at p. 4, footnote omitted).
As background, the LPSC and other retail regulators submitted several Section 206 complaints with FERC challenging SERI’s filed rates. Those complaints seek various remedies, including adjustment of SERI’s ROE, and allege that SERI violated FERC’s ratemaking and accounting requirements. Some of these complaints have been pending at FERC for at least four years and one case has been before FERC for nearly six years. LPSC argued that FERC violated a statutory directive by not working through Federal Power Act Section 206 complaints more quickly, thereby causing irreparable harm to consumers. FERC countered that there is no express or implied deadline for action on these complaints and asserted that the delays were reasonable a recent D.C. Circuit opinion that overturned FERC’s current ROE methodology.
The Fifth Circuit expressed concerns about FERC’s delays. The court reasoned that when Congress passed the Regulatory Fairness Act (“RFA”) in 1980, Section 206 complaints were taking an average of a year to complete. Now they are taking significantly longer. The Fifth Circuit also expressed frustration that FERC appears to regularly ignore the RFA’s requirement to provide an explanation when it has “failed to” conclude any Section 206 proceeding within 180 days. Taken together, the court found that “the lack of an explicit deadline does not preclude a finding that FERC has delayed unreasonably in this case.”
The court also rejected FERC’s argument that granting this writ of mandamus might unfairly allow the LPSC to skip to the front of FERC’s queue of pending rate cases. The Order explained that LPSC is complaining about the age of their wait rather than their place in line. Further, the Fifth Circuit considered FERC’s argument as an admission that it was also allowing other rate complaint proceedings to stretch beyond a reasonable time, underscoring the negative impacts to consumers that FERC’s delays are causing. Lastly, the Fifth Circuit did not find FERC’s reliance on other recent judicial opinions rejecting its ROE methodology for calculating utilities’ ROE convincing, reasoning that “these speedbumps—five years apart —do not explain proceedings lasting four-to-six years.”
The court ultimately concludes, “FERC has yet to provide this court with a meaningful explanation for its inability to expeditiously conclude Section 206 proceedings,” and orders the Commission to provide proper explanation within 21 days.
“FERC is correct that ratemaking is challenging work, and we are fully aware of the difficulties attending the substitution of nuclear for other power sources, with its attendant difficulties of allocating huge installation costs among electrical suppliers now looking to a new power source. Yet Congress has duly charged FERC with this important duty, and FERC has yet to provide this court with a meaningful explanation for its inability to expeditiously conclude Section 206 proceedings. FERC must convince this court that it has acted ‘within a reasonable time . . . to conclude [the] matter presented to it.’ In failing to do so, FERC risks judicial intervention to protect the rights of the parties before it and the interests of consumers.” (slip op. at p.7, footnotes omitted).
After considering FERC’s response – also attached, the Fifth Circuit denied the LPSC petition. However, as noted above, the Order may influence FERC to refocus its efforts on moving through pending complaint cases, including those involving its transmission ROE methodology, more quickly.
