AG Leads Coalition To Curb Incentives For Transmission Developers

Press release from the AG's Office:

June 28, 2021

Attorney General William Tong this week led a coalition of attorneys general, the Connecticut Department of Energy and Environmental Protection, the Office of Consumer Counsel, and state ratepayer advocates reiterating a call to the Federal Energy Regulatory Commission to reject unnecessary and unjust incentive payments to transmission developers.

On April 15, 2021 FERC issued a draft rulemaking revisiting a proposal issued during the Trump Administration that provides a series of generous new transmission incentives, including extra payments to transmission developers to join regional transmission organizations; something developers generally have to do anyway. In its new April 2021 rulemaking, FERC invited comments on the incentive to join regional transmission organizations. The multistate coalition comments oppose overgenerous incentives for participation by transmission utilities in Regional Transmission Organizations (“RTOs”) and Independent System Operators (“ISOs”), particularly if such participation is mandatory. The comments support reforms designed to limit any such incentives to the minimum amount necessary to encourage the desired goal of least cost to ratepayers. The comments reiterate a previous call to FERC made under the previous Administration.

The coalition agrees with FERC Chairman Richard Glick, who stated in his dissent to the current rule: “Incentives must actually incentivize something. A payment that does not incentivize anything is a handout, not an incentive. Handing out customers’ money to transmission owners without a strong belief that that money will induce beneficial conduct is unjust and unreasonable and inconsistent with the Congress.”

“Connecticut consumers already pay far too much for their energy. The last thing we need is to send more ratepayer dollars to transmission developers for lucrative work they were already required to do. If we are going to consider any form of incentive, it should be to encourage the necessary transition away from fossil fuels, and towards carbon-zero renewables,” said Attorney General Tong.

“The Department strongly urges the Commission not to provide unjust and unnecessary incentives to transmission companies for projects they would build anyway,” DEEP Commissioner Katie Dykes said. “Grid planners and operators should be required to engage in strategic transmission planning in order to integrate the amount of renewable energy we need to decarbonize our electricity supply. The Department strongly supports this effort to ensure that FERC evaluates transmission projects based on metrics that protect ratepayers and accommodate state public policies.”

“Under FERC’s proposed rulemaking, Connecticut ratepayer dollars would be given away to transmission developers with no customer benefit in return,” said Acting Consumer Counsel Richard E. Sobolewski. “Ratepayer funds should be prudently spent on improving the safety and reliability of the transmission system—not further enriching developers that stood to profit regardless. Connecticut ratepayers already face high electric rates—they rightfully expect to receive tangible outcomes from rates paid rather than watching those rates climb higher for no demonstrable purpose.”

Transmission costs have increased substantially over the last decade. Nationwide, investments in electric transmission facilities grew from approximately $2 billion per year during the late 1990s to approximately $20 billion per year during the five years ending in 2019.

In New England, these transmission costs account for almost 20 percent of ratepayer bills. Approximately $1.3 billion in transmission upgrades are planned for New England over the next several years. The base rate of return on equity for transmission developers on those projects is currently over 10 percent—a lucrative business hardly in need of additional incentives.

The savings to ratepayers from ending this incentive will be substantial. The evidence submitted to FERC shows that this incentive costs consumers up to $400 each year nationally. For Connecticut, it is estimated that ratepayers will save as much as $24 million every year.

Attorney General Tong led this comment letter that was joined by the Connecticut Department of Energy and Environmental Protection, the Office of Consumer Counsel, the Maine Ratepayer Advocate, Maryland Office of People's Counsel, the Rhode Island Division of Public Utilities and Carriers, the People’s Counsel for the District of Columbia, and the attorneys general of California, Illinois, Maryland, Michigan, New Jersey, Pennsylvania, Rhode Island, Vermont, and the District of Columbia.

Click here to view the letter.

Assistant Attorney General Robert Snook and Section Chief Matt Levine, Head of the Environment Section, assisted the Attorney General in this matter.

This press release was produced by the AG's Office. The views expressed here are the author's own.