FERC proposes revision of electric transmission incentives to stimulate development
Looking for ways to stimulate the development of transmission infrastructure in the United States, the Federal Energy Regulatory Commission (FERC) last week proposed reforms for its electric transmission incentives policy.
That policy governs incentive-based rates for electric transmission — rates first implemented in 2006. Additional guidance followed in 2012, but FERC contends that the ways that transmission is planned, developed, operated, and maintained have changed significantly since then, prompting the organization to look at new rules to support an evolving mix of generation resources, technologies, and load pattern shifts.
“I’ve been saying for a while now that our transmission incentives policy should focus on consumers and the benefits they will see,” FERC Chairman Neil Chatterjee said. “This proposal would provide the Commission with a clear framework to grant incentives for the most beneficial transmission projects.”
Under proposed rules, FERC would increase the incentive for joining and remaining a member of a Regional Transmission Organization, Independent System Operator, or other Commission-approved transmission organization by 50 basis points and make the incentive available to all. A further 50 basis points would be issued to transmission projects that meet a pre-construction benefit-to-cost ratio in the top 25 percent of projects examined over a given period, with yet another 50 given to projects that rate in the top 10 percent. Up to 50 basis points would be given to projects that show reliability benefits through quantitative analysis and qualitative analysis. A sizable 100 basis point incentive would also be offered for transmission technologies that enhance reliability, efficiency, and capacity while improving operations.
A 250 basis point cap on total return on equity incentives would be established as well.
Applicants would no longer be required to show a connection between requested incentives and the risks and challenges associated with projects. FERC says this switch would more closely align its policy with its obligation to provide consumer-benefiting incentives and ensure reliability and cost reduction.
