In the NOI, Promoting Transmission Investment Through Pricing Reform, FERC is seeking comments about the effect of its incentives on promoting transmission.  If you're going to comment, you need to understand what the incentives are, and what they are intended to do.

The nexus test is the next step after the statutory threshold (rebuttable presumption) has been met.  The nexus test is supposed to ensure that the incentives granted are "rationally tailored to the risks and challenges faced by a project."  There is no actual "test."  The Commission states that the test is "not prescriptive by design."  In other words, it's completely subjective and hard to pin down.  Perhaps this is because it's impossible to make a rational decision based on subjective analysis. 

FERC believes that the "most compelling candidates for incentives are new projects that present special risks or challenges, not routine investments made in the ordinary course of expanding the system to provide safe and reliable transmission service."  Hey... wait a minute here!  Section 219 (b), which gives FERC their authority in granting these incentives says nothing about "new" projects.  In fact, Sec. 219 (b) specifically requires that FERC's incentive rule promote transmission improvements that:  Are economically efficient; that enlarge, improve, maintain and operate facilities; are related to transmission technologies; that increase the capacity and efficiency of existing transmission facilities and improve their operation; comply with mandatory reliability standards; and relate to transmission infrastructure development.  I don't see a thing in there about limiting incentives to "new projects," and in fact, it specifically calls for improving existing transmission facilities.  It also allows for "routine" projects such as those necessary to comply with mandatory reliability standards.  FERC has completely perverted the original intent here to encourage "new" transmission projects.  Is it any wonder that hugely expensive and totally unnecessary projects such as PATH have begun to proliferate while existing transmission lines like Dominion's Mt. Storm - Doubs and FirstEnergy's Mt. Storm - Pruntytown deteriorate to the point that they are in danger of falling down?  The PATH project satisfies NONE of the Sec. 219 (b) requirements.  PATH is just more of the same old technology we've been using for 100 years, just bigger, more expensive and more destructive.  There's nothing "technologically advanced" about PATH.  In fact, PATH ultimately became the rotten apple in the barrel that spoiled things for everyone else and caused FERC to re-examine their transmission incentives policies. 

But, back to the nexus test.  One of the Commission's criteria used in evaluation is whether the project is routine or non-routine.  According to the Commission, routine projects aren't eligible for incentives.  Again, this isn't in keeping with Sec. 219 (b).  However, in order to make a determination of the non-routine nature of the project being evaluated, FERC's criteria are:

• the scope of the project, including the cost, increase in transfer capability, and size
• the project's effect on reducing congestion and/or improving reliability
• the challenges or risks faced by a project, such as siting, long lead times, regulatory and political risks and financing challenges

What does the size of a project have to do with Sec. 219 (b)?  Bigger is not always better!  Project cost also doesn't correlate -- just because a project has a huge price tag on it doesn't necessarily mean it should be encouraged with incentives.  In fact, since the Commission is supposed to guarantee that rates are just and reasonable and not unduly discriminatory or preferential and Sec. 219 is supposed to reduce the cost of delivered power, this is diametrically opposed to their mission.  It's not about encouraging projects just because they are expensive!  Regarding a project reducing congestion and improving reliability, isn't that a separate test that's already been covered by the rebuttable presumption before a project actually reaches the nexus test?  And last, but certainly not least, utilizing a project's "risks" to evaluate its award of incentives is just plain wrong.  By categorizing as incentive deserving "risk" a project's siting, regulatory and political risks, FERC is encouraging and incentivizing bad behavior by project owners, which only compounds any risks of this nature.  As an example, let's look at the PATH project (oh, come on, you knew that was coming!).  PATH has engaged in a multi-million dollar propaganda, state regulatory commission lobbying and influence buying campaign that has been recovered from ratepayers.  They have defended themselves by stating that this campaign was necessary because of the siting, regulatory and political "risks" FERC recognized by granting them incentives.  And I suppose PATH also feels justified in their harassment, coercion and lying to landowners in an effort to get them to sign ROW and purchase agreements without the advice of a lawyer because of "siting risks."  This is outrageous!

Another of FERC's nexus test evaluations involves whether the project is individual or a group of projects.  FERC allows applicants to group projects so that one set of incentives covers them all.  This is bad practice considering FERC's decision in the partial abandonment of the TrAIL project.  When a distinctly separate portion of the TrAIL project (Prexy) was abandoned due to its failure to be granted approval in Pennsylvania, FERC determined that its abandonment was merely "an engineering and siting change" and instructed TrAILCo to recover all Prexy's costs, plus a 12.7% ROE, along with the rest of the project costs.  Prexy was never needed, as evidenced by it's willful abandonment by TrAILCo when denied a permit, but it was originally added in by TrAILCo to sweeten their profit margin.  If FERC will not allow abandonment of distinct project segments but only abandonment of entire projects, then projects should never be grouped and should be broken down into even smaller segments so that partial abandonment does not end up costing ratepayers additional unnecessary expense.

Now that you've been so patient reading along while I ejected a huge blast of steam, go look at FERC's questions about the nexus test beginning on page 16 of the NOI and formulate your comments/suggestions for FERC.  I'm sure you creative consumer "stakeholders" can make suggestions that the industry won't even ponder.  The industry will be letting FERC know how they can and should sweeten the pot even further for them.  It's up to you to provide balance with a little real world sanity.

If you found this helpful in crafting your comments, you are encouraged to browse the entire FERC Transmission NOI category at StopPATHwv.com for other useful material.  You don't have to comment on all aspects of the NOI if that's too burdensome.  In fact, if you want to concentrate in detail on just one aspect that interests you and about which you have strong feelings, that's a perfectly acceptable approach to producing effective comments.

In the NOI, Promoting Transmission Investment Through Pricing Reform, FERC is seeking comments about the effect of its incentives on promoting transmission.  If you're going to comment, you need to understand what the incentives are, and what they are intended to do.

Let's back up a bit here and take a look at the beginning of the NOI.  Beginning on page 10, A. Section 219 (a) Statutory Threshold, explains the first step that makes a transmission project eligible for incentives.  FERC has established rebuttable presumptions in order to make this determination.

A project is eligible for the incentives if one of two requirements has been met:

1. The project has been approved by a RTO through their planning process.
2. The project has been approved by necessary state public service commission(s).

If either of these requirements has not been met, the applicant has the option of making an independent showing to FERC that the project either satisfies a need for reliability or reduces transmission congestion in order to lower costs to consumers.

If a project cannot jump this initial hurdle, they are not eligible for transmission incentives and it's all over.

But, what happens when a project initially meets the rebuttable presumption, however the basis for their rebuttable presumption subsequently evaporates?

That's exactly what has happened with the PATH project.  PATH was removed from the RTEP.  It has not been approved by any state commission.  PATH has not made an independent showing to FERC that their project ensures reliability or reduces congestion (they couldn't anyhow -- PJM's removal from the RTEP prevents this argument).  However, PATH (and FERC by sitting around doing nothing about it) are ignoring this fact.  PATH continues to collect all the benefits of incentives for which they no longer qualify.  Why is this being allowed to happen?  It's costing the consumers money!

FERC asks several questions about this requirement beginning on page 11.  Q14 sort of addresses this issue -- it's the closest FERC gets, so it will suffice as a starting point for your suggestions and ideas regarding how to prevent another PATH from happening and robbing the consumers blind.

If you found this helpful in crafting your comments, you are encouraged to browse the entire FERC Transmission NOI category at StopPATHwv.com for other useful material.  You don't have to comment on all aspects of the NOI if that's too burdensome.  In fact, if you want to concentrate in detail on just one aspect that interests you and about which you have strong feelings, that's a perfectly acceptable approach to producing effective comments.

Lots more stuff to come... keep checking back.

In the NOI, Promoting Transmission Investment Through Pricing Reform, FERC is seeking comments about the effect of its incentives in promoting transmission.  If you're going to comment, you need to understand what the incentives are, and what they are intended to do.

Accelerated depreciation is an incentive that allows the utility to recover its equity capital over a shorter period of time than normal.  Normally, the costs are recovered over a period of time roughly representing the life of the facility.  With this incentive, FERC gives an example of a quicker recovery period of 15 years or less.  That would be really, really, really expensive!  As anyone knows, the longer you have to pay for something, the cheaper the monthly payments are (although you will pay more in interest over the long run).  Fortunately, this incentive is rarely requested.  Of course not... the sheer cost of it alone would spur tons of unwanted opposition to the project!  FERC wants your comments on this incentive.  They ask no specific questions, therefore an appropriate answer could be... why doesn't FERC just do away with this incentive altogether?

The advanced technology incentive is where you should focus more effort.  The use of advanced technology in a project can be considered for two different treatments.  One is as part of the nexus test (we'll cover that in upcoming posts) and the second is with additional ROE adders (previously discussed).

Use of advanced technology is what Congress was envisioning when enacting the EPAct 2005, a section of which required FERC to "encourage, as appropriate, the deployment of advanced transmission technologies."  This is where we should be heading!  Advanced technologies wouldn't necessarily only apply to "new" transmission, but also to improving our existing, aging infrastructure.  We need to make transmission more efficient, not just more of the same old dinosaur "technology" that's been in use for a hundred years.  This is probably the only incentive that stands a chance of actually generating some benefit for the consumers, if it is applied correctly.  One of the problems here though is that the 2005 legislation actually listed specific technologies as "advanced."  I'm sure I don't have to tell any of you how fast technology moves!  Perhaps some new ground rules are needed to ensure that this incentive actually serves its intended purpose.

In the NOI, beginning on page 36, FERC discusses the accelerated depreciation and advanced technology incentives and asks several specific questions regarding the advanced technology incentive.  Now that you know what they are... go look at the questions and formulate your comments/suggestions for FERC.  I'm sure you creative consumer "stakeholders" can make suggestions that the industry won't even ponder.  The industry will be letting FERC know how they can and should sweeten the pot even further for them.  It's up to you to provide balance with a little real world sanity.

Next we'll move onto the real fun stuff - such as the rebuttable presumption (PATH's has run away from home and they've been putting up signs all over town that say, "Lost - Rebuttable Presumption - Last Seen Feb. 28 at PJM.  It's very small and weak, and it needs medication!  Call PATH at 1-800-UT-OHHH if found".)  We'll also cover the nexus test, as well as some other FERC mumbo jumbo (as Bill calls it.)  Check in again for more updates on this topic.

If you found this helpful in crafting your comments, you are encouraged to browse the entire FERC Transmission NOI category at StopPATHwv.com for other useful material.  You don't have to comment on all aspects of the NOI if that's too burdensome.  In fact, if you want to concentrate in detail on just one aspect that interests you and about which you have strong feelings, that's a perfectly acceptable approach to producing effective comments.

In the NOI, Promoting Transmission Investment Through Pricing Reform, FERC is seeking comments about the effect of its incentives in promoting transmission.  If you're going to comment, you need to understand what the incentives are, and what they are intended to do.

Pre-commercial costs are preliminary project costs incurred before being granted any approvals or incentives, such as surveys, plans and feasibility studies.  In certain instances, it can also include legal fees and company formation and start-up costs.  Without this incentive, these costs would be recovered as capitalized costs over the life of the project once it goes into service.  With this incentive, these costs are expensed over a hypothetical 5 year construction period and earn a return on equity.  Once again, FERC thinks this improves cash flows and financial metrics.  (How do you know when someone's reaching?  When they start using stupid buzzwords, but I digress.)  It also removes any uncertainty about recovery of these costs... in case the project is abandoned and never built, or perhaps loses it's rebuttable presumption when the wheels come off the farce-wagon, isn't that right, PATH? 

PATH has been expensing its pre-commercial costs since 2008.  We're now in year 4 of the "5 year construction period."  These costs have almost been completely recovered but PATH doesn't have active state applications and has been dropped from PJM's RTEP.  They've regressed so far there's no chance that anything will be constructed during the "5 year construction period."  And we continue to pay.

In the NOI, beginning on page 34, FERC discusses the pre-commercial cost recovery incentive and asks several specific questions.  Now that you know what pre-commercial cost recovery is... go look at the questions and formulate your comments/suggestions for FERC.  I'm sure you creative consumer "stakeholders" can make suggestions that the industry won't even ponder.  The industry will be letting FERC know how they can and should sweeten the pot even further for them.  It's up to you to provide balance with a little real world sanity.

We're pretty much done with the incentives now.  There's one more that hasn't been used much, and another for which PATH doesn't even come close to qualifying.  We'll cover them quickly and then move on to other aspects of the NOI.  Isn't this fun?  If someone had told me five years ago that I'd be doing this now, I would have laughed at them.  Where's the escape hatch?

If you found this helpful in crafting your comments, you are encouraged to browse the entire FERC Transmission NOI category at StopPATHwv.com for other useful material.  You don't have to comment on all aspects of the NOI if that's too burdensome.  In fact, if you want to concentrate in detail on just one aspect that interests you and about which you have strong feelings, that's a perfectly acceptable approach to producing effective comments.

FERC partly granted the extension requested by the state Commissions today.

FERC has added another 30 days to the comment deadline.  New deadline is August 25, 2011.

Be sure to get your comments in before the deadline!

If you found this helpful in crafting your comments, you are encouraged to browse the entire FERC Transmission NOI category at StopPATHwv.com for other useful material.  You don't have to comment on all aspects of the NOI if that's too burdensome.  In fact, if you want to concentrate in detail on just one aspect that interests you and about which you have strong feelings, that's a perfectly acceptable approach to producing effective comments.

In the NOI, Promoting Transmission Investment Through Pricing Reform, FERC is seeking comments about the effect of its incentives in promoting transmission.  If you're going to comment, you need to understand what the incentives are, and what they are intended to do.

A hypothetical capital structure pre-determines how much of the project capital will be equity (capital provided by the company, or in PATH's case, the parent companies) and how much will be debt (financed/borrowed capital).  In order to earn a yearly return (or interest) on project capital, capital costs must be split between equity (which in PATH's case we know earns a 14.3% return) and debt (which earns at a much lower rate - in PATH's case 6.64%).  Every year, PATH's return (earnings) is calculated upon the amount of capital in the rate base. What FERC's incentive does is provide a hypothetical split of equity/debt to make it possible to calculate the return.  Let's say that PATH's rate base is $106,594,443 in 2010 and the hypothetical capital structure granted to them by FERC is 50%-50%.  Half of the rate base would earn 14.3% and the other half would earn 6.64%.  This would score PATH a return (profit) for 2010 in the amount of $11,193,509.  As you can probably tell, I'm not being "hypothetical" -- it actually happened.  (Now you know why I'm livid that PATH thinks they can sit back while "suspended" for eternity and continue to earn a yearly return.)

The hypothetical capital structure incentive is generally geared toward a higher percentage of equity than will actually happen in practice.  FERC's reasoning is that equity has a higher cost and the larger return earned with a hypothetical capital structure will enhance cash flows, lower financing costs and improve credit ratings.  It might, if companies like PATH didn't toss a bunch of it away every year on lobbying and "donations" and other income deductions intended to influence state approvals for their project, by means either fair or foul.

FERC says it has placed limitations on this incentive by requiring the actual capital structure to match the hypothetical structure at some point in time.  Let's hope we all live that long, because FERC hypothesizes that hypothetical and actual will come in sync when a project commences operations.  Ut-oh!  PATH is now looking like it's going to be completed right around the 12th of Never.

In the NOI, beginning on page 33, FERC discusses the hypothetical capital structure incentive and asks several specific questions.  Now that you know what a hypothetical capital structure is... go look at the questions and formulate your comments/suggestions for FERC.  I'm sure you creative consumer "stakeholders" can make suggestions that the industry won't even ponder.  The industry will be letting FERC know how they can and should sweeten the pot even further for them.  It's up to you to provide balance with a little real world sanity.

Keep checking back... there's lots more incentives to come!

If you found this helpful in crafting your comments, you are encouraged to browse the entire FERC Transmission NOI category at StopPATHwv.com for other useful material.  You don't have to comment on all aspects of the NOI if that's too burdensome.  In fact, if you want to concentrate in detail on just one aspect that interests you and about which you have strong feelings, that's a perfectly acceptable approach to producing effective comments.

The state public service commissions of Arkansas, Nebraska, Oklahoma and Missouri have joined together in a motion to FERC to extend the deadline for filing comments on FERC's Promoting Transmission Investment Through Pricing Reform Notice of Inquiry.  The commissions have asked to have the deadline extended by 45 days, with a new deadline of September 9, 2011.

What a marvelous idea!  This would give everyone more time to research and compose their comments.  Check back soon to see if FERC grants the motion.  If not, comment deadline is currently July 26.

If you found this helpful in crafting your comments, you are encouraged to browse the entire FERC Transmission NOI category at StopPATHwv.com for other useful material.  You don't have to comment on all aspects of the NOI if that's too burdensome.  In fact, if you want to concentrate in detail on just one aspect that interests you and about which you have strong feelings, that's a perfectly acceptable approach to producing effective comments.

In the NOI, Promoting Transmission Investment Through Pricing Reform, FERC is seeking comments about the effect of its incentives on promoting transmission.  If you're going to comment, you need to understand what the incentives are, and what they are intended to do.

Let's look at CWIP in rate base.  This is an incentive that costs you money every year for projects that are stalled or may never ever be built.

CWIP (pronounced quip) stands for Construction Work in Progress.  CWIP represents the capitalized project costs such as land, fixtures, regulatory expense, engineering, surveys, the federal EIS process, land agents, and other items that will become a part of the rate base, which is recovered over the useful life of the project (with return).

Without this great incentive, transmission developers would have to accrue these costs and begin recovering them (with carrying charges - a form of interest) when the project is completed and goes into service.

With this incentive, transmission developers begin earning a return on their capital investment in the project during the construction period.  FERC's reasoning for this incentive is that it reduces the amount of capital needed and therefore reduces the cost of borrowing needed capital.  The idea is that the yearly return will be invested back into the project as capital (unless the transmission owner fritters it away on "donations" and lobbying as PATH has done).  As an example, let's look at our favorite poster child, the PATH project.  When PATH's incentives and formula rate (formula rate is the mechanism for recovering project costs and return in your electric rates) were granted in February, 2008, ratepayers began paying for the PATH project immediately.  All ratepayers in the PJM region have been paying a return on PATH's rate base (including CWIP) since 2008, although no state permits have been granted and nothing has been built.  PATH has been spending money on CWIP (millions) and we have been paying them a return on it every year, in addition to the yearly taxes, depreciation on plant in service and Operations & Maintenance costs.  The ratepayers have nothing to show for their investment.  PATH has not been built and has not delivered any electricity anywhere, and may never do so.  PATH is "suspended" for an unknown period of time, however, they will still collect a return this year on accumulated CWIP in rate base, and also every year thereafter, as long as this project drags on.  There's no impetus to ever get this project built.  PATH will continue to collect millions of dollars in return every year and will be required to do absolutely nothing for it.

In the NOI, beginning on page 30, FERC discusses the CWIP in rate base incentive and asks several specific questions. 

I know this particular question will be of interest to all of you PATH opponents.  In fact, it looks like it was crafted to relate particularly to the PATH project in response to all your recent comments to FERC.  This is one you should definitely answer in your comments to FERC (can we get a resounding chorus of "Oh! Hell, yes!"?).

Q60)  Should the CWIP incentive not apply or be suspended in circumstances where an incentives project has been suspended for an indefinite period of time and there is no additional construction activity on the project?

FERC wants to know if PATH should be allowed to continue to collect a return on it's "suspended" project indefinitely; or, if FERC took this incentive away from them, would PATH be jolted into action to either fold or get on with things?

Now that you know what CWIP in rate base is... go look at the rest of the questions and formulate your comments/suggestions for FERC.  I'm sure you creative consumer "stakeholders" can make suggestions that the industry won't even ponder.  The industry will be letting FERC know how they can and should sweeten the pot even further for them.  It's up to you to provide balance with a little real world sanity.

Keep checking back... there's lots more incentives to come!

If you found this helpful in crafting your comments, you are encouraged to browse the entire FERC Transmission NOI category at StopPATHwv.com for other useful material.  You don't have to comment on all aspects of the NOI if that's too burdensome.  In fact, if you want to concentrate in detail on just one aspect that interests you and about which you have strong feelings, that's a perfectly acceptable approach to producing effective comments.

In the NOI, Promoting Transmission Investment Through Pricing Reform, FERC is seeking comments about the effect of its incentives in promoting transmission.  If you're going to comment, you need to understand what the incentives are, and what they are intended to do.

One of FERC's incentives is the entitlement to seek recovery of 100% of the prudently incurred costs of transmission projects that are abandoned for reasons beyond the control of the transmission owner and are never built or put in service.  In order to collect on this incentive once granted, the transmission owner must make a separate Section 205 filing to FERC showing that abandonment was beyond their control and that all costs proposed to be recovered are prudent.  Other parties may intervene and challenge the filing.  Granting of this incentive is not a guarantee of a favorable ruling, but use your own judgment on how you think FERC would rule when their incentive is tested.

Historically, FERC precedent was that the risk of abandoned projects would be shared equally between consumers and shareholders, with 50% being recovered over what would have been the life of the project, if it had gone in service, and 50% being written off as a loss by the transmission owner.  However, in a 2005 case, FERC granted 100% recovery of abandoned plant in a California case because the transmission developer would not be controlling or profiting from the generation source and would be shouldering additional risk that the new generation would not be built.  In 2006, FERC used this case as reasoning for offering the 100% recovery to incentivize new transmission.

Guaranteed ability to recover prudently incurred costs if a transmission project fails for reasons beyond their control removes all investment risk from the transmission owner and stockholders and places it all squarely on the shoulders of the consumers.  The failure of a transmission project is even more beyond the control of the consumer than it is beyond the control of the owner!

If recovery of abandoned plant removes all risks, are other incentives necessary?  FERC has granted multiple incentive package deals to many transmission projects, making them win-win for their developers and lose-lose for the consumers, who always wind up holding the bag.  This is not "just and reasonable" and has created a proliferation of white elephant projects being proposed in PJM, such as PATH, MAPP and Susquehanna-Roseland, that are stalled or "suspended" due to lack of need.  When there is no risk to the developer of a project and only further rewards to be gained by proposing new projects, whether they ever actually get built or not, how many unneeded projects will be proposed as transmission owners crowd the incentive buffet, intent on scoring their own piece of free pie?

As well, transmission projects now receiving abandonment incentives are directly benefiting from the proposed facilities by sourcing them from their own generation facilities, such as AEP's PATH project that would increase generation and market share for their John Amos coal-fired plant.  PATH would provide free transportation to higher-priced markets for increased production at Amos, something that would benefit AEP shareholders by increased profit from both generation and transmission.

In the NOI, beginning on page 27, FERC discusses the abandonment incentive and asks several specific questions.  Now that you know what abandonment is... go look at the questions and formulate your comments/suggestions for FERC.  I'm sure you creative consumer "stakeholders" can make suggestions that the industry won't even ponder.  The industry will be letting FERC know how they can and should sweeten the pot even further for them.  It's up to you to provide balance with a little real world sanity.

Keep checking back... there's lots more incentives to come!

If you found this helpful in crafting your comments, you are encouraged to browse the entire FERC Transmission NOI category at StopPATHwv.com for other useful material.  You don't have to comment on all aspects of the NOI if that's too burdensome.  In fact, if you want to concentrate in detail on just one aspect that interests you and about which you have strong feelings, that's a perfectly acceptable approach to producing effective comments.

In the NOI, Promoting Transmission Investment Through Pricing Reform, FERC is seeking comments about the effect of its incentives in promoting transmission.  If you're going to comment, you need to understand what the incentives are, and what they are intended to do.

Let's start with incentive ROE adders.  When a company makes an investment in something like a new transmission project, they will be tying up their capital (and/or borrowing) to finance the capital assets of the project.  They are not reimbursed dollar for dollar as the money is spent for the entire cost of the project.  We wouldn't be able to afford it if we were charged for something like the PATH project's $2.1B cost over the 5 year construction period. 

There are two different sets of costs going on -- expense and capital assets.  Expense includes the operation & maintenance costs of the project and are reimbursed dollar for dollar as they occur.  The capital asset costs (in the case of a transmission project, mainly the fixtures and land) are reimbursed over time during the useful life of the project as they depreciate.  So, in exchange for tying up their capital and/or borrowing money to finance these assets, the company is entitled to a return on their investment.  It wouldn't be fair to equate this with an investment return you'd earn on your own money.  If returns on these projects aren't lucrative, the company could find a better place to invest their money and nothing would ever get built.

Utility returns are usually somewhere in the neighborhood of 9 - 11%.  However, in order to incentivize transmission, FERC felt it necessary to sweeten the pot with incentive ROE adders.  The return is calculated through something called the DCF analysis and then incentive adders boost the return to what FERC calls "the zone of reasonableness" arrived at through an anaysis of a selected proxy group of similar utility returns.  An "adder" is a certain number of points added to the DCF base rate of return.  100 points equals an additional 1%.

In the case of our poster child, PATH, the company's DCF analysis produced a 12.3% base rate and they requested an additional 50 points for being a member of an RTO, and an additional 150 points for their project's above average risks.  These abnormal risks, according to PATH, were the large amount of investment needed ($2.1 billion price tag); the coordination needed between two different companies; regulatory risk (the uncertainty of approvals); the need to attract needed investment (so PATH could borrow money to finance the project); siting and approvals needed in 2 different states (which ended up being 3 after re-routing); and PJM's aggressive construction timetable (originally "needed" in 2012).  The requested incentive ROE adders, which were conditionally approved and set for re-hearing (currently in process), added 200 points, or 2%, to PATH's return on equity, for a total of 14.3%, which was in the high end of the "zone of reasonableness," although not at the top of the zone.

Sounds pretty sweet, doesn't it?  But the incentives didn't stop there!  There were more!  But, that's discussion for another time.

In the NOI, beginning on page 23, FERC discusses the incentive ROE adder and asks several specific questions.  Now that you know what a ROE adder is... go look at the questions and formulate your comments/suggestions for FERC.  I'm sure you creative consumer "stakeholders" can make suggestions that the industry won't even ponder.  The industry will be letting FERC know how they can and should sweeten the pot even further for them.  It's up to you to provide balance with a little real world sanity.

Keep checking back... there's lots more incentives to come!

If you found this helpful in crafting your comments, you are encouraged to browse the entire FERC Transmission NOI category at StopPATHwv.com for other useful material.  You don't have to comment on all aspects of the NOI if that's too burdensome.  In fact, if you want to concentrate in detail on just one aspect that interests you and about which you have strong feelings, that's a perfectly acceptable approach to producing effective comments.