Dive Brief:
- Maryland agencies last week asked the Federal Energy Regulatory Commission to strip Exelon and FirstEnergy utility subsidiaries, as well as a NextEra Energy unit, of the extra 0.5% return on equity they earn for being voluntary members of the PJM Interconnection.
- The complaint was filed on July 2, about seven weeks after Maryland Gov. Wes Moore, D, signed the Utility RELIEF Act into law, which took effect on July 1 and includes a provision requiring the state’s transmission owners to be PJM members.
- Removing the ROE “adder” that transmission owners earn for participating in the PJM would save Maryland ratepayers more than $20 million a year, according to the complaint. The complaint will likely be successful given precedent that was set in California and Ohio, Jefferies equity analysts said in a client note Monday.
Dive Insight:
Maryland is the latest state asking FERC to remove an extra 0.5% transmission owners earn in their transmission rates for being a voluntary member of a regional transmission organization. The so-called RTO adder is part of a range of incentives FERC offers to boost transmission development.
In an effort to keep electricity as affordable as possible, states and regulators have targeted the RTO adder for elimination by requiring transmission owners to participate in their region’s grid operator. Other states requiring RTO participation include California, Connecticut and Ohio.
“We appreciate the Moore administration and General Assembly's efforts to address rising transmission rates,” Maryland People’s Counsel David Lapp said in a press release.
Transmission costs are driving up electricity bills, and now account for about 15% of a residential customer's bill, he said.
The complaint was filed by the Maryland Energy Administration, Maryland Office of People’s Counsel and Maryland Public Service Commission.
Federal courts have confirmed that the RTO adder is only for transmission owners that voluntarily join a regional transmission organization, according to the Maryland complaint.
“When incentives cannot induce behavior because the behavior is mandated, the Commission has a longstanding policy that incentives may not be awarded,” the state agencies said. “The RTO adder significantly increases costs for consumers while providing no commensurate benefit — given Maryland law, respondents are required to remain in or join an RTO.”
The companies affected by the complaint are Exelon’s Baltimore Gas and Electric, Delmarva Power and Light and Potomac Electric Power Co.; FirstEnergy’s Potomac Edison Co.; NextEra Energy Transmission MidAtlantic; Transource Maryland; and Valley Link Transmission Maryland.
Exelon is reviewing the complaint, according to a spokesperson for the Chicago-based utility company. “We remain committed to providing energy through sound, long-term investments that strengthen reliability, resilience, and safety for the customers and communities we serve," they said.
Connecticut utilities sue over RTO adder law
A similar complaint is pending at FERC involving Connecticut agencies and Eversource Energy and Avangrid utilities.
Eversource’s Connecticut Light and Power and Avangrid’s The United Illuminating Co. on July 1 asked FERC to put the complaint on hold while a federal court considers their lawsuit over the law requiring the utilities to be members of ISO New England. They asked FERC to make a decision on their request by July 17.
In the lawsuit filed June 29 in the U.S. District Court for the District of Connecticut, the utilities contend the state law violates the U.S. Constitution’s takings and contracts clauses, among other things.
Meanwhile, the New England States Committee on Electricity on July 1 told FERC it supports the complaint seeking to bar utilities in the state from collecting the RTO adder. In addition, the organization, which represents the region’s governors, called on FERC to abolish its RTO participation adder or adopt a previous FERC proposal of limiting it to three years after a transmission owner joins an RTO.
The Edison Electric Institute, a trade group for investor-owned utilities, said granting the complaint could create regulatory uncertainty, potentially chilling transmission development when it is needed to handle growing electricity demand.
If FERC eliminates the RTO adder, it must make sure that the Connecticut utilities’ overall rate of return remains just and reasonable, EEI said.
“The commission must be prepared to account for the continued existence of RTO‑related risks and responsibilities in establishing or adjusting base ROE,” the trade group said.
In 2024, the RTO adder increased CL&P and UI rates by $17 million across New England, with Connecticut ratepayers paying nearly $4.5 million of the total, according to the complaint.
