Eversource, Avangrid and other New England transmission owners on Thursday asked the Federal Energy Regulatory Commission to increase their base return on equity to 11.39% from the 9.57% level the agency set about six weeks ago.
The transmission owners — mainly electric utilities — asked that the new ROE for their transmission investments take effect on June 30.
In mid-March, FERC retroactively cut the base ROE it gives to transmission owners in New England to 9.57% from 10.57% following 15 years of litigation. The agency has ordered New England’s transmission owners to refund to ratepayers an estimated $1.5 billion by May 20, 2027. Eversource and Avangrid are seeking to overturn FERC’s ROE decision in court.
FERC’s decision to lower the base ROE is based on outdated financial conditions from October 2012 through March 2013, the transmission owners said in their Thursday filing.
The proposed ROE was derived using the same methodology FERC used in its mid-March decision, according to the transmission owners. However, it uses updated financial metrics and reflects current risk conditions, such as the war with Iran and supply chain constraints, the companies said.
“Growing demand, evolving generation patterns, and heightened reliability and resilience requirements underscore the essential public interest served by sustained transmission investment,” Eversource and Avangrid executives said in joint testimony supporting the ROE request. “The ability to undertake this level of investment depends directly on access to capital on reasonable terms, which in turn depends on a regulatory framework that provides for an allowed ROE that adequately reflects current risks and capital market conditions.”
The ROE can affect a utility’s earnings, depending on the size of its transmission system. Eversource, for example, said in a Feb. 17 U.S. Securities and Exchange Commission filing that a 0.1 percentage point change to its base ROE would impact its after-tax earnings by about $7 million a year.
The transmission owners contend the proposed ROE meets FERC’s “just and reasonable” standard and therefore should be approved.
Also, because the proposed ROE is based on FERC’s just-used methodology, there is no basis for the agency to hold hearings or launch settlement procedures to consider the proposal, the transmission owners said.
However, the ROE proposal failed to gain support at an ISO New England meeting in April, the transmission owners noted. Only 20% of the New England Power Pool’s Transmission Committee supported the proposed ROE and 25% of its Participants Committee backed it.
And it already faces opposition from the Maine Office of Public Advocate, which represents ratepayers.
“We are extremely disappointed by the decision of the New England Transmission Owners to seek this increase so quickly after FERC’s decisive ruling on the issue of ROE,” Andrew Landry, deputy public advocate, said in an email.
The transmission owners say economic conditions have changed, but their proposal reflects the same flawed analysis FERC rejected in its recent order, Landry said.
“Our office will be vigorously opposing the request,” he said.
