ENE, NCLC file complaint against transmission cost hikes in New England

ENVIRONMENT NORTHEAST and the National Consumer Law Center have filed a complaint with the Federal Energy Regulatory Commission to lower transmission rates in New England from 11.14 percent to 8.7 percent.
Posted 1/4/13

(Updated, 4:41 p.m.)

BOSTON – Environment Northeast and the National Consumer Law Center have filed a complaint to the Federal Energy Regulatory Commission over the “skyrocketing” costs of transmission in the New England region.

Specifically, the complaint suggests that the Federal Energy Regulatory Commission - the federal agency that regulates electric transmission investment and rates of return - reduce transmission owners’ regulated returns on their investments to save New England ratepayers “hundreds of millions of dollars.”

“Transmission line owners receive inflated returns that no longer reflect economic reality,” Michael Henry, director of the ENE Sustainable Transmission Project, said in prepared remarks. “The days of high guaranteed earnings for transmission investment need to end. Those earnings not only represent hundreds of millions in excessive charges for New England ratepayers, but they also discourage the use of cleaner, cheaper options like energy efficiency.”

According to the complaint, the current 11.14 percent Base Return on Equity used in calculating formula rates for transmission service should be reduced to 8.7 percent.

The 11.14 percent return is derived from financial information last updated in August 2006,” said an ENE release. “Due to changes in the capital markets since then, including the recession, the 11.14 percent rate is no longer ‘just and reasonable,’ the legal standard for measuring the return.”

Joining ENE in the complaint are a coalition of environmental, consumer, industrial and commercial groups including: the National Consumer Law Center, the Greater Boston Real Estate Board and the NEPOOL Industrial Consumer Coalition.

“The excessive ‘rate of return on equity’ [or profit margin] drives utilities to make unnecessary investments in transmission lines in order to boost shareholder profits, at the expense of ratepayers – many of who are still struggling from the recession,” NCLC’s managing attorney for energy issues Charles Harak said in a statement.

ENE’s complaint was filed subsequent to a similar complaint issued in the fall of 2011 by the Massachusetts Attorney General and other state interests from around New England.

If the FERC agrees, the combined effect of these two complaints would represent an annual savings of at least $113 million per year to New England rate payers, according to ENE.

The regulatory commission has established a deadline of Jan. 16 for answers to the complaint. After that, FERC may then either respond to the substance of the complaint or set the issues raised for hearing before an administrative law judge.

The full complaint and summary version can be found on ENE’s Regional Energy Reform webpage.

Jackie Barry, a spokesperson for National Grid said that the company believes its “existing return is reasonable. We are reviewing the complaint and will respond at the appropriate time.”

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