On March 21, 2019, the Federal Energy Regulatory Commission (FERC) issued a Notice of Inquiry (NOI) seeking comment on possibly broad reforms to the scope and implementation of its electric transmission incentives regulations and policy under Section 1241 of the Energy Policy Act of 2005 (EPAct 2005), codified as Section 219 of the Federal Power Act (FPA), 16 U.S.C. § 824s.
Section 219 directed FERC to use transmission incentives to help ensure grid reliability and diminish the cost of delivered electric power by reducing transmission congestion. It also required FERC to use its incentives policy to promote capital investment in transmission facilities, provide a rate of return on equity (ROE) that attracts new investment in such facilities, encourage deployment of improved technologies at the facilities, incentivize utilities to join regional transmission organizations (RTO) and independent system operators (ISO), and allow utilities to recover certain prudently incurred costs associated with transmission projects.
In 2006, FERC implemented this provision by issuing Orders 679 and 697-A, which set the Commission's basic approach to transmission incentives by requiring that applicants establish a "nexus" between the incentive sought and the investment being made by the applicant, on a case-by-case basis. The Commission also identified a series of incentives that would be available, including:
FERC later refined this approach in a 2012 policy statement, in which it provided additional guidance regarding Order 679 and its evaluation of transmission incentives applications.
With this most recent NOI, FERC is asking for commentary from stakeholders on required updates to its transmission incentives policy in light of significant developments in the electricity transmission arena and in various incentives proceedings before the Commission since it issued Orders 679/679-A and its 2012 policy statement.
FERC shapes the NOI as a series of questions, grouped into subject matter sections, seeking comment on the following areas:
FERC is evidently considering material changes to its incentives policies, which could have significant consequences for affected utilities and market participants who are involved in, or are considering involvement, in electric transmission projects. Public comments will be due 90 days after the NOI's publication in the Federal Register, and reply comments 120 days after publication.
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