Today, Consumer Advocates of New England (CANE) – a coalition of statutorily designated ratepayer advocates from New England – applauded a recent decision from the Federal Energy Regulatory Commission (FERC) reducing the allowed return on equity (ROE) earned on transmission projects.
In a decision issued on March 19th, FERC concluded that the New England transmission owners (NETOs) had been collecting a return on equity (ROE) that was “unjust and unreasonable.” Before FERC’s decision, NETOs were allowed to earn up to 11.14% in ROE. Based on a revised methodology and related financial modeling for setting ROEs, FERC cut that ROE to 9.57% and made its decision retroactive to 2014.
The decision follows more than a decade long proceeding before FERC led by the Massachusetts Attorney’s General’s Office (AGO), along with a coalition that included each of the CANE offices, New England state attorneys general, and several state utility commissions. The case began in 2011 when the AGO-led coalition filed a complaint challenging NETOs’ ROE, arguing that NETOs’ costs, which are passed onto ratepayers, were excessive.
“This important decision reducing the profit rate utilities earn for building transmission lines is a victory for New England’s ratepayers. FERC’s action—stemming from years of litigation and collective consumer advocacy—will help reduce annual energy costs for ratepayers in Connecticut and across the region,” said Claire Coleman, Connecticut’s Consumer Counsel.
“We commend FERC for recognizing that the profits granted to New England transmission owners over the last 15 years have been far too high and for taking definitive action to make electric rates more affordable,” said Heather Sanborn, Maine’s Public Advocate. “We will press for refunds to be returned swiftly to provide real rate relief for folks who are struggling to pay high utility bills.”
“As Massachusetts’ ratepayer advocate, my role is to ensure that utility rates are just and reasonable and that consumers are not paying more than they should,” said Attorney General Andrea Joy Campbell. “This decision reflects years of work to challenge excessive transmission profits and deliver meaningful relief. My office will continue to hold utility companies accountable and push for greater oversight to protect residents from unjustified and unreasonable costs.”
“Granite Staters are grateful to our current group of FERC commissioners for doing something their predecessors either couldn’t or wouldn’t – finally addressing this longstanding case and taking a welcome step toward curbing excessive return on equity for transmission owners,” said New Hampshire Consumer Advocate Donald Kreis. “I commend FERC for coming to the aid of our region’s struggling electric ratepayers.”
“In all respects, this FERC decision is welcome and timely. As with our New England regional counterparts, Rhode Islanders face an affordability crisis that requires targeted, unwavering advocacy. The DPUC has been at the table since the inception of this case, and we will continue to stand up for ratepayers until these transmission refunds are returned to them. But we cannot tackle skyrocketing utility costs alone – FERC plays a critical role,” said Linda George, Administrator of the Rhode Island Division of Public Utilities & Carriers, the consumer advocate for Rhode Island. “I remain laser focused on removing inequitable, excessive charges on Rhode Islanders’ bills and will continue to advocate for ratepayers at the state and federal forums.”
Additional Background
FERC’s decision concluded that the combination of methodologies which the NETOs relied upon to set their ROE (i.e., the amount of profit transmission owners can collect from ratepayers for using the transmission owners’ physical assets), was resulting in a rate outside of the zone of reasonableness. In its decision last week, FERC ordered the NETOs to pay refunds plus interest to ratepayers based on an effective ROE of 9.57% for the period between October 2011 and December 2012 as well as the period between October of 2014 through March 2026 (and beyond).
If the FERC ordered refund is upheld, at the lower ROE, New England ratepayers could see about $900 million in refunds based on preliminary analysis. The decrease to NETOs’ ROE will also result in more than $100 million in estimated savings per year going forward.
ISO-NE serves a total of 7.2 million retail electricity customers across the region, who will share the credits and reductions resulting from this decision.
FERC will need to determine the timeline and mechanics for the refund, and CANE is ready to work with federal regulators, utility companies, and other stakeholders to advocate that refunds are delivered as quickly as possible.
A press release issued by the Commonwealth of Massachusetts on this FERC decision can be found here.
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Media Contact: Brooke Parker
brooke.parker@ct.gov | 203-540-7154