[Federal Register Volume 86, Number 78 (Monday, April 26, 2021)]
[Proposed Rules]
[Pages 21972-21984]
[FR Doc No: 2021-08215]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 35

[Docket No. RM20-10-000]

Electric Transmission Incentives Policy Under Section 219 of the
Federal Power Act

AGENCY: Federal Energy Regulatory Commission.

ACTION: Supplemental notice of proposed rulemaking.

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SUMMARY: The Federal Energy Regulatory Commission has proposed in this
proceeding to revise its existing regulations that implemented section
219 of the Federal Power Act (FPA) in light of the changes in
transmission development and planning over the last few years. This
supplemental notice of proposed rulemaking proposes to modify the
incentive proposed for transmitting and electric utilities that join
Transmission Organizations in the March 20, 2020 notice of proposed
rulemaking in this proceeding. In addition, pursuant to FPA section
206, we propose to require each utility that has received an incentive
for joining and remaining in a transmission organization for three or
more years to submit a compliance filing revising its tariff to remove
the incentive from its transmission tariff.

DATES: Comments are due May 26, 2021. Reply comments are due June 10,
2021.

ADDRESSES: Comments, identified by docket number, may be filed in the
following ways. Electronic filing through http://www.ferc.gov, is
preferred.
     Electronic Filing: Documents must be filed in acceptable
native applications and print-to-PDF, but not in scanned or picture
format.
     For those unable to file electronically, comments may be
filed by USPS mail or by hand (including courier) delivery.
    [cir] Mail via U.S. Postal Service Only: Addressed to: Federal
Energy Regulatory Commission, Secretary of the Commission, 888 First
Street NE, Washington, DC 20426.
    [cir] Hand (including courier) Delivery: Deliver to: Federal Energy
Regulatory Commission, 12225 Wilkins Avenue, Rockville, MD 20852.
    The Comment Procedures Section of this document contains more
detailed filing procedures.

FOR FURTHER INFORMATION CONTACT:
David Tobenkin (Technical Information), Office of Energy Policy and
Innovation, Federal Energy Regulatory Commission, 888 First Street NE,
Washington, DC 20426,<PHONE_NUMBER><EMAIL_ADDRESS>Adam Batenhorst (Legal Information), Office of the General Counsel,
Federal Energy Regulatory Commission, 888 First Street NE, Washington,
DC 20426,<PHONE_NUMBER><EMAIL_ADDRESS>Adam Pollock (Technical Information), Office of Energy Market
Regulation, Federal Energy Regulatory Commission, 888 First Street NE,
Washington, DC 20426,<PHONE_NUMBER><EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Table of Contents

                                                               Paragraph
                                                                 Nos.

I. Introduction.............................................           2
II. Background..............................................           3
III. Discussion.............................................           5
  A. Incentive for Joining Rather Than Remaining in                    6
   Transmission Organizations...............................
  B. Transmission Organization Incentive Level..............          10
  C. Voluntariness..........................................          15
  D. Miscellaneous..........................................          18
IV. Information Collection Statement........................          19
V. Environmental Analysis...................................          23
VI. Regulatory Flexibility Act..............................          24
VII. Comment Procedures.....................................          25
VIII. Document Availability.................................          26

I. Introduction

    1. In a Notice of Proposed Rulemaking (NOPR) issued pursuant to
section 219 of the Federal Power Act (FPA) \1\ in this proceeding on
March 20, 2020 (March NOPR), the Federal Energy Regulatory Commission
(Commission) proposed reforms to revise its existing transmission
incentives policy and corresponding regulations (Transmission
Incentives Regulations) \2\ in light of changes in transmission
development and planning in the last

few years.\3\ In light of the responsive comments in this proceeding,
pursuant to our authority under FPA section 219, we issue this
Supplemental NOPR to propose and seek comment on a revised proposed
incentive for transmitting and electric utilities \4\ that join
Transmission Organizations \5\ (Transmission Organization
Incentive).\6\ In addition, pursuant to our authority under FPA section
206,\7\ we propose to require each utility that has received an
incentive for joining and remaining in a Transmission Organization for
three or more years to submit a compliance filing revising its tariff
to remove the incentive from its transmission tariff. We note that the
draft Supplemental NOPR only refines the Transmission Organization
Incentive and does not address the other proposals contained in the
March NOPR.
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    \1\ 16 U.S.C. 824s.
    \2\ 18 CFR 35.35.
    \3\ Electric Transmission Incentives Policy Under Section 219 of
the Federal Power Act, Notice of Proposed Rulemaking, 85 FR 18784,
170 FERC ] 61,204, errata notice, 171 FERC ] 61,072 (2020) (March
NOPR).
    \4\ A transmitting utility is defined as an entity that owns,
operates, or controls facilities used for the transmission of
electric energy. 16 U.S.C. 769(23). An electric utility is defined
as a person or federal or state agency that sells electric energy.
16 U.S.C. 769(22).
    \5\ A Transmission Organization is defined as a Regional
Transmission Organization (RTO), Independent System Operator (ISO),
independent transmission provider, or other organization finally
approved by the Commission for the operation of transmission
facilities. 16 U.S.C. 796(29). For consistency with FPA section 219,
in this final rule we use ``Transmission Organization,'' rather than
``RTO/ISO,'' as the Commission did in the March NOPR.
    \6\ The March NOPR defined this incentive as the ``RTO-
Participation Incentive.'' Accordingly, this Supplemental NOPR uses
``RTO-Participation Incentive'' when summarizing the March NOPR and
commenter responses to the proposal in the March NOPR.
    \7\ 16 U.S.C. 824e.
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II. Background

    2. In relevant part, section 219 of the FPA states that the
Commission shall, to the extent within its jurisdiction, provide for
incentives to each transmitting utility or electric utility that joins
a Transmission Organization.\8\ As described in more detail in the
March NOPR, Order Nos. 679 and 679-A adopted an incentive for utilities
that ``join and/or continue to be a member of an ISO, RTO, or other
Commission-approved Transmission Organization.'' \9\ While the
Commission declined to make a finding on the appropriate size or
duration of the incentive in Order No. 679, applicants have
subsequently requested a 50-basis-point level for demonstrating they
have joined an RTO or ISO, which the Commission has granted without
modification.\10\
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    \8\ 16 U.S.C. 824s(c).
    \9\ Promoting Transmission Investment through Pricing Reform,
Order No. 679, 71 FR 43293, 116 FERC ] 61,057, at P 326 (2006),
order on reh'g, Order No. 679-A, 72 FR 1152, 117 FERC ] 61,345
(2006), order on reh'g 119 FERC ] 61,062 (2007).
    \10\ March NOPR, 170 FERC ] 61,204 at P 92.
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    3. On March 21, 2019, in Docket No. PL19-3-000, the Commission
issued a Notice of Inquiry seeking comment on the scope and
implementation of its transmission incentives policy under FPA section
219.\11\ The Commission posed several questions concerning an incentive
for transmitting and electric utilities to join and remain in
Transmission Organizations. In the March NOPR, the Commission proposed
to revise its Transmission Incentives Regulations to more closely align
the policy with the statutory language of FPA section 219 and to
reflect changes in the electric industry that have taken place since
the issuances of Order Nos. 679 and 679-A.\12\ The Commission stated
that an increased return on equity (ROE) remained an effective
incentive to recognize the benefits, risks, and associated obligations
of RTO membership and meet the requirements of FPA section 219(c).\13\
The Commission proposed, among other things, to continue to permit
transmitting utilities and electric utilities that join an RTO/ISO to
recover prudently incurred costs associated with joining the RTO/ISO in
their jurisdictional rates.
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    \11\ Inquiry Regarding the Commission's Electric Transmission
Incentives Policy, 84 FR 11759, 166 FERC ] 61,208 (2019) (2019
Notice of Inquiry).
    \12\ March NOPR, 170 FERC ] 61,204 at P 2.
    \13\ Id. P 97.
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    4. Additionally, the Commission proposed to standardize the RTO-
Participation Incentive by doubling the level of the ROE adder that the
Commission has commonly awarded as an incentive for electric and
transmitting utilities that join and remain in Transmission
Organizations, specifying that the level would be 100 basis points. The
Commission also proposed to remove the existing requirement for this
incentive that recipients participate in Transmission Organizations on
a voluntary basis. The Commission proposed to apply the RTO-
Participation Incentive prospectively to new applicants and to allow
existing Transmission Organization Incentive recipients to increase the
ROE level at which they receive this incentive to 100 basis points.

III. Discussion

    5. We propose to modify the March NOPR proposal and revise proposed
Sec.  35.35(f) of the Commission's regulations to codify the
Commission's current practice of granting a standardized 50-basis-point
increase in ROE as an incentive-based rate treatment for a transmitting
utility that joins and remains in a Transmission Organization and turns
over operational control of the applicant's wholesale transmission
facilities to the Transmission Organization. Additionally, we propose
that this 50-basis-point increase in ROE be available for only the
first three years after the transmitting utility transfers operational
control of its facilities to the Transmission Organization.
Additionally, we propose to adopt the clarification in the March NOPR
that, in order to qualify for the Transmission Organization Incentive,
the transmitting utility must turn over operational control of its
transmission facilities to the Transmission Organization. Finally, we
request comment on whether the Transmission Organization Incentive
should be available only to transmitting utilities that join a
Transmission Organization voluntarily. If so, we seek further comment
on how the Commission should apply that standard and, in particular,
how the Commission should determine whether a transmitting utility's
decision to join a Transmission Organization is voluntary.

A. Incentive for Joining Rather Than Remaining in Transmission
Organizations

    6. FPA section 219(c) requires that the Commission provide
incentives to each transmitting utility or electric utility that joins
a Transmission Organization. After review of the comments received in
response to the March NOPR, we believe that it is reasonable to read
FPA section 219(c) to direct the Commission to provide an incentive for
``join[ing]'' a Transmission Organization and not for remaining in a
Transmission Organization in perpetuity.
    7. In response to the 2019 NOI and March NOPR, several commenters
suggested that the Commission limit the duration of or phase out the
incentive for membership in a Transmission Organization.\14\ For
example, Alliant states that, if the purpose of the incentive is to
incent joining a Transmission Organization, a transmission incentive in
perpetuity

does not provide benefits commensurate with the intended goal.\15\
Joint Commenters \16\ question whether continued receipt of the
incentive still serves the purpose of inducing a public utility to
join, or retain its membership in, a Transmission Organization. Joint
Commenters assert that, if the Commission retains the incentive, it
should consider phasing out the incentive after a certain number of
years of a public utility's membership in a Transmission
Organization.\17\ New Jersey Agencies state that a sunset period would
allow transmission owners to receive an incentive for joining
Transmission Organizations, while not overly burdening ratepayers.\18\
According to the Connecticut Commission, FPA section 219(c) requires
only that the Commission provide for incentives to each transmitting
utility or electric utility that joins a Transmission Organization, and
does not foreclose a time-limited inducement, or require that any such
incentive be perpetual.\19\ TAPS similarly argues that FPA section
219(c) narrowly authorizes an incentive for joining a Transmission
Organization, and that this incentive should also be limited in
duration.\20\
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    \14\ See, e.g., APPA Comments at 59-60; Connecticut Commission
Comments at 29; Consumer Organization Groups Comments at 15-16;
Delaware and District of Columbia Public Advocates Comments at 3;
East Texas Coops Comments at 4; Kansas Commission Comments at 19;
New Jersey Agencies Comments at 12; Northern Virginia Coop Comments
at 16; State Utility Consumer Advocates Comments at 20; TAPS
Comments at 110-112; Transmission Dependent Coops Comments at 6.
    \15\ Alliant, Comments, Docket No. PL19-3-000, at 41 (filed June
26, 2019).
    \16\ Joint Commenters in Docket No. PL19-3-000 include: The
Aluminum Association; ELCON; APPA; Blue Ridge; California
Municipals; California Commission; the Cities of Anaheim, Azusa,
Banning, Colton, Pasadena, and Riverside, California; Electricity
Consumers Resource Council; Industrial Energy Consumers of America;
Maryland Office of People's Counsel; Modesto Irrigation District;
State Utility Consumer Advocates; New York State Public Service
Commission; Northern California Power Agency; Office of the People's
Counsel for the District of Columbia; Public Utility Law Project of
New York; Transmission Agency of Northern California; and Virginia
Consumer Counsel.
    \17\ Joint Commenters, Comments, Docket No. PL19-3-000, at 71,
74-75 (filed June 26, 2019).
    \18\ New Jersey Agencies, Reply Comments, Docket No. PL19-3-000,
at 11 (filed Aug. 26, 2019).
    \19\ Connecticut Commission Comments at 29-30.
    \20\ TAPS Comments at 110-111.
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    8. Given that the statute only directs an incentive for entities
that ``join'' a Transmission Organization, we believe that the
Commission has latitude under the statute to tailor this incentive more
narrowly to encourage joining, rather than remaining in, a Transmission
Organization. We believe that providing the Transmission Organization
incentive indefinitely may not be necessary to incentivize a
transmitting utility to join a Transmission Organization and, given the
large impact that such an incentive has on ratepayers,\21\ may not
appropriately balance utility and ratepayer interests, particularly
given the substantial benefits of Transmission Organization membership
to participating utilities.
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    \21\ Commenters assert that the cost to ratepayers is around
$400 million per year. See TAPS Comments, Docket No. PL19-3-000, at
97 (filed June 26, 2019).
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    9. Accordingly, we propose to modify Sec.  35.35(f) of the
Commission's regulations to authorize an ROE adder for a period of
three years after a transmitting utility newly joins a Transmission
Organization. This three-year period would begin on the date the
transmitting utility turns over operational control of its transmission
facilities to the Transmission Organization. We propose that this
incentive would not be available if the transmitting utility has
previously been a member of a Transmission Organization. We further
propose that, when a transmitting utility files tariff revisions to its
formula or stated rate to implement this incentive, it must include
language terminating the incentive three years after the date the
transmitting utility turns over operational control of its transmission
facilities to the Transmission Organization.
    10. We believe that providing the Transmission Organization
Incentive to transmitting utilities for a three-year period after they
join a Transmission Organization and transfer operational control of
their facilities to that organization will appropriately balance the
different provisions of FPA section 219. In particular, we believe that
providing an additional ROE for a time-limited period will further the
purpose of section 219(c) \22\ by encouraging Transmission Organization
membership and the formation of new Transmission Organizations where
they do not currently exist, while ensuring that the resulting rates
remain just and reasonable and not unduly discriminatory and
preferential as required by section 219(d).\23\ This approach
appropriately focuses the incentive on the transmitting utility's
decision to ``join'' the Transmission Organization by providing a
substantial incentive in the years after a transmitting utility joins a
Transmission Organization, while protecting ratepayers by ensuring that
the transmitting utility does not continue to collect that incentive
long after it has joined the Transmission Organization. However, we
seek comment on whether three years or another period is the
appropriate duration for this incentive.
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    \22\ 16 U.S.C. 824s(c).
    \23\ 16 U.S.C. 824s(d).
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    11. For similar reasons, we believe that continuing to allow
transmitting utilities to retain the existing additional 50-basis-point
incentive for joining a Transmission Organization for a period of more
than three years may no longer be just and reasonable and may be unduly
discriminatory or preferential. Accordingly, pursuant to section 206 of
the FPA, we propose that each utility that has previously received an
ROE incentive for joining and remaining in a Transmission Organization
for three or more years must, within 30 days of the effective date of
the final rule, submit a compliance filing removing the incentive from
its transmission tariff or, if the transmitting utility joined an
Transmission Organization in the previous three years, adding language
to its transmission tariff to terminate its incentive three years from
the date it turned over operational control of its transmission
facilities.

B. Transmission Organization Incentive Level

    12. We propose to modify Sec.  35.35(f) of the Commission's
regulations to adopt a 50-basis-point ROE adder consistent with
Commission precedent, for the three years after the transmitting
utility has turned over operational control of its transmission
facilities to a Transmission Organization, it will be eligible for an
increase in ROE of 50 basis points.\24\ We believe that a 50-basis-
point Transmission Organization Incentive for three years provides a
material incentive to join Transmission Organizations without unduly
burdening ratepayers.
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    \24\ Applicants have consistently requested a uniform, 50 basis-
point level for demonstrating they have joined a Transmission
Organization. See, e.g., Gridliance West Transco LLC, 160 FERC ]
61,003, at P 6 (2017), order denying reh'g, 162 FERC ] 61,101 (2018)
(requesting a 50 basis-point ROE incentive); Midcontinent
Independent System Operator, Inc, 150 FERC ] 61,004, at P 1, order
on clarification, 151 FERC ] 61,269 (2015) (requesting a 50 basis-
point ROE incentive); American Electric Power Serv. Corp., 120 FERC
] 61,205, at P 34, order denying reh'g, 121 FERC ] 61,245 (2007)
(granting a 50 basis-point ROE incentive).
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    13. In the March NOPR, the Commission highlighted the additional
duties, responsibilities, and/or risks of Transmission Organization
membership as support for the Commission's proposal to increase the
incentive from 50 to 100 basis points.\25\ While some commenters
support this proposal, other commenters suggest that the additional
duties, risks, and responsibilities do not justify doubling the amount
of the

incentive.\26\ Other commenters submit that the incentive should be
eliminated altogether.\27\ We agree with commenters who advise that the
benefits of Transmission Organization membership support leaving the
incentive offered for joining a Transmission Organization at 50 basis
points rather than increasing it.
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    \25\ See March NOPR, 170 FERC ] 61,204 at P 94; see, e.g., AEP
Comments at 9; Avangrid Comments at 15-16; California Utilities
Comments at 11; EEI Comments at 15-17; Eversource Comments at 15-16;
Exelon Comments at 12-19; ITC Comments at 8-9; WIRES Attachment at
12.
    \26\ See, e.g., Alliant Comments at 13-14; APPA Comments at 54-
56; California State Water Project Comments at 10; Connecticut
Commission Comments at 27-28; Eastern Massachusetts Municipals
Comments at 33-34; Public Interest Organizations Comments at 23;
TAPS Comments at 107-108.
    \27\ See, e.g., Joint State Entities Comments at 16; Ohio
Commission Energy Advocate Comments at 14; State Utility Consumer
Advocates Comments at 20.
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    14. We note that there are many benefits of Transmission
Organization membership, and that many of these benefits accrue to
transmitting utilities.\28\ These benefits include optimization of the
transmission system, and regional transmission planning as well as
access to numerous types of markets. With respect to the magnitude of
the incentive for new members, we propose to find that, although
ratepayer benefits and utility risks and responsibilities from
Transmission Organization participation have increased since the
issuance of Order No. 679, benefits to transmission owners, including
access to more developed organized markets, have increased as well,
such that 50 basis points, and not 100 basis points, as proposed in the
March NOPR, continues to appropriately correspond to the benefits of
utilities joining Transmission Organizations.\29\ Additionally, as
commenters point out, the actual amount of this incentive has
increased, as the rate base for most transmitting utilities have risen
considerably during this period.\30\ Correspondingly, the value of the
incentive for potential new members has and will continue to increase.
Given the transmission investments made since Order No. 679,\31\ we
believe that the dollar impact of the Transmission Organization
Incentive will continue to increase correspondingly, as will the other
benefits accruing to transmission owners joining Transmission
Organizations that we describe above. Thus, upon reconsideration, we do
not believe it is necessary to increase the Transmission Organization
Incentive to 100 basis points.
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    \28\ See March NOPR, 170 FERC ] 61,204 at P 94.
    \29\ For example, MISO and SPP each estimate that membership
brings multifactor benefits to members and ratepayers. MISO
estimates that it provides $3.5 billion in total benefits annually
to its members. MISO, 2020 Value Proposition, at 5 (Feb. 5, 2021),
https://cdn.misoenergy.org/2020%20MISO%/20Value%20Proposition%20Calculation/%20Details521882.pdf. SPP
estimates that its transmission planning, market administration,
reliability coordination, and other services provide a net benefit
to its members in excess of $2.2 billion annually. SPP, Value and
Affordability Task Force Meeting, at 2 (June 20. 2019), https://www.spp.org/documents//60090/vatf%20materials_posting%2020190620.pdf.
    \30\ For example, between September 2006 and July 2020, MISO
North transmission owners' (excluding in the Cinergy zone, whose
transmission owners subsequently left MISO) gross transmission-
allocated rate base increased from $11.2 billion to $38.1 billion
(excluding transmission in the MidAmerican and Entergy zones and
Central Minnesota Municipal Power Authority and Prairie Power
because they joined MISO and Cinergy because it left MISO subsequent
to Order No. 679). See MISO, Transmission and Settlement and
Pricing, Attach. O Data, https://www.misoenergy.org//markets-and-operations//settlements/ts-pricing//#nt=%2Ftspricingtype%/3AAttachment%20O/%20Data&t=10&p=0&s=Updated&sd=desc).
    \31\ Transmission investment by investor-owned electric
companies and stand-alone transmission companies has steadily grown
from $8.6 billion in 2006 to $23.4 billion in 2019, with $26.1
billion projected in 2020 and $27.1 billion projected in 2021. See
EEI Business Analytics Group, Historical and Projected Transmission
Investment, at 1 (Nov. 2020), https://www.eei.org/resourcesandmedia//Documents/Historical%20and%20Projected/%20Transmission%20Investment.pdf; EEI, Transmission Investment:
Adequate Returns and Regulatory Certainty Are Key, at 6 (June 2013),
https://www.transmissionhub.com//wp-content/uploads/2018//12/EEI-White-Paper-on-Transmission-Investment.pdf.
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    15. In Order No. 679, the Commission declined to make a finding on
the appropriate size or duration of the incentive for joining a
Transmission Organization. Nevertheless, entities seeking to join a
Transmission Organization have subsequently requested a uniform, 50-
basis-point level ROE adder for demonstrating they have joined a
Transmission Organization, which the Commission has granted without
modification.\32\ We have found in practice no reason to vary the size
of this incentive and believe that there is no compelling reason to
potentially vary on a case-by-case basis the level of the Transmission
Organization Incentive. Codifying that 50-basis-point level ROE adder
for the Transmission Organization Incentive will provide financial
certainty for developers and potential third-party sources of capital
funding for transmission projects, increase transparency regarding the
size and duration of this incentive, and reduce the administrative
burden of the application process for applicants and commenters. We
believe that this proposed incentive level appropriately balances
encouraging transmission owners to join Transmission Organizations with
ratepayer considerations. We seek comment on whether 50 basis points is
the appropriate level for this incentive.
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    \32\ See PPL Elec. Utilities Corp. and Pub. Serv. Elec. & Gas
Co., 123 FERC ] 61,068, at P 35 (2008) (finding that the ``50-basis-
point adder is appropriate. The consumer benefits, including
reliable grid operation, provided by such organizations are well
documented and consistent with the purpose of section 219. The best
way to ensure these benefits is to provide member utilities of an
RTO with incentives for joining and remaining a member.''); Republic
Transmission, LLC, 161 FERC ] 61,036, at P 32 (2017) (approving 50-
basis-point incentive based on Republic's commitment to become a
member of MISO and transfer operational control of the project to
MISO once the project has been placed in service); Pac. Gas & Elec.
Co., 148 FERC ] 61,195, at P 16 (2014) (granting request for a 50-
basis-point incentive ``based on PG&E's commitment to remain a
member of CAISO, and its commitment to transfer functional control
of the Project to CAISO once the Project enters service'').
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    16. Finally, FPA section 219(c) does not specify the form of the
incentive for utilities that join a Transmission Organization. As such,
we request comment as to whether there are alternative, non-ROE
incentives that are more appropriate for the Transmission Organization
Incentive.

C. Voluntariness

    17. The Commission proposed in the March NOPR that transmitting or
electric utilities that join and remain enrolled in a Transmission
Organization are eligible for the Transmission Organization Incentive
regardless of the voluntariness of their participation in the
Transmission Organization. As stated in the March NOPR, FPA section
219(c) obligates the Commission to provide for incentives to each
transmitting utility or electric utility that joins a Transmission
Organization and is silent about the obligation to do so. Furthermore,
the Commission noted that the issue of whether Transmission
Organization membership is voluntary for certain transmitting utilities
within Transmission Organizations has become subject to challenges at
the Commission and litigation in federal courts.\33\
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    \33\ March NOPR, 170 FERC ] 61,204 at P 98 (citing Cal. Pub.
Util. Comm'n v. FERC, 879 F.3d 966, 980 (9th Cir. 2018) (CPUC v.
FERC) (remanding to the Commission the issue of whether PG&E was
eligible for a 50-basis-point RTO-Participation Incentive for its
continued participation in CAISO in light of protestors' arguments
that PG&E's participation in CAISO is mandated by California state
law); N.Y. State Dept. of Pub. Serv., Protest, Docket No. ER20-715-
000, at 5 (filed Jan. 21, 2020) (protesting that Central Hudson Gas
& Electric Corp. should not receive an RTO-Participation Incentive
because it is already a member of NYISO)).
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    18. We note that multiple commenters suggest that the Commission
offer an incentive only for utilities that join a Transmission
Organization voluntarily and not for ones that are required to join or
remain in an Transmission Organization by state law or other
obligations.\34\ Commenters argue that

state laws, or other obligations, advance the Commission's goals of
Transmission Organization membership and the purpose of FPA section
219(c).\35\ Commenters also argue that awarding incentives for
voluntary conduct is consistent with the Commission's policy of not
rewarding past behavior.\36\ Moreover, certain commenters state that
courts favor or require that incentives be voluntary, and assert that
the Commission should therefore not adopt a policy to grant the
incentive for conduct that is already required.\37\ Furthermore, many
commenters state that the RTO-Participation Incentive proposal in the
March NOPR directly contravenes CPUC v. FERC, which stated ``[a]n
incentive cannot `induce' behavior that is already legally mandated.''
\38\
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    \34\ See, e.g., American Manufactures Comments at 24; APPA
Comments at 57-58; California Commission Comments at 29-31;
California Municipals Comments at 3; California State Water Project
Comments at 7-9; Connecticut Commission Comments at 27-28; East
Texas Coops Comments at 4; NESCOE Comments at 29-30; New England
Public Systems Comments at 13-14 (arguing that the incentive should
be eliminated for any entity required to be in an RTO/ISO); New
Jersey Agencies Comments at 18-20; New York Coalition Comments at
13-16; Northern Virginia Coop Comments at 14-15; NRECA Comments at
49; Steel Manufacturers Comments at 11; 10 State Entities Comments
at 13; Virginia Consumer Counsel Comments at 27-30.
    \35\ See APPA Comments at 58; California Commission Comments at
30.
    \36\ See California State Water Project Comments at 8.
    \37\ See, e.g., Connecticut Commission Comments at 27; TAPS
Comments at 109-110 (citing Me. Pub. Utils. Comm'n v. FERC, 454 F.3d
278, 289 (D.C. Cir. 2006); 10 State Entities Comments at 13 (citing
CPUC v. FERC, 879 F.3d at 970 (granting petition for review and
remanding for a determination on whether the purportedly
incentivized conduct was mandated or voluntary)); Virginia Consumer
Counsel Comments at 29-30 (citing CPUC v. FERC, 879 F.3d at 879).
    \38\ CPUC v. FERC, 879 F.3d at 974; see California Commission
Comments at 30; California Municipals Comments at 2-3; California
State Water Project Comments at 8; Connecticut Commission Comments
at 28, n.50; NESCOE Comments at 30; New Jersey Agencies Comments at
11 and 18-19; New York Coalition Comments at 15, n.3; 10 State
Entities Comments at 13.
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    19. Removing the voluntariness requirement, as proposed in the
March NOPR, is not the only way that the Commission could reduce
uncertainty regarding the application of a voluntariness requirement to
individual transmitting or electric utilities. Rather, the Commission
could retain Order No. 679's voluntariness requirement, add it to the
Transmission Incentives Regulations, and clarify this requirement by
providing guidance on the circumstances that would make participation
voluntary. Accordingly, we request comment on whether the Transmission
Organization Incentive should be available only to transmitting
utilities that join a Transmission Organization voluntarily. If so, we
seek further comment on how the Commission should apply that standard
and, in particular, how the Commission should determine whether a
transmitting utility's decision to join a Transmission Organization is
voluntary. We also seek comment on whether the Transmission
Organization Incentive should include an exception or exceptions to a
voluntariness requirement and the demonstration necessary to qualify
for the exception by an applicant. For example, should the Commission
allow an applicant to seek the Transmission Organization Incentive
where states and/or other relevant electric retail regulatory
authorities support receipt of such an incentive by the transmitting
utility even though participation in the Transmission Organization is
mandated by the state and/or other relevant electric retail regulatory
authority? If the Commission adopts an exception or exceptions to a
voluntariness requirement, how would an applicant show that it meets
the exception or exceptions?

D. Miscellaneous

    20. We propose to revise Sec.  35.35(f) of our regulations to
provide that the transmitting utility is only eligible for the
Transmission Organization Incentive if it has not previously been a
member of a Transmission Organization. We intend for the Transmission
Organization Incentive to encourage transmitting and electric utilities
to join Transmission Organizations, not to incent such utilities to
change membership between Transmission Organizations or to alter their
ownership structures. Allowing a utility that changes Transmission
Organizations to extend the Transmission Organization Incentive or
receive a new Transmission Organization Incentive would impose costs to
ratepayers from integration and exit costs of leaving and joining
Transmission Organizations without providing material benefits.
    21. Further, to implement the proposed three year period for the
Transmission Organization Incentive in Sec.  35.35(f) of the
Commission's regulations, we also propose that a transmitting or
electric utility may not receive a Transmission Organization Incentive
for transmission plant if the asset was already under the operational
control of a Transmission Organization, whether as part of an affiliate
or a separate owner. Allowing a transmitting or electric utility to
receive an incentive for such assets would unduly extend the duration
of the incentive and would encourage sales or corporate restructuring
of transmission assets for the sake of the incentive, which would not
benefit ratepayers. Accordingly, we seek comment on whether, and, if
so, what restrictions the Commission should impose on incentive
eligibility based on sales/affiliate corporate restructurings or for
transmission plant constructed by new affiliates. In particular, we
request comment on whether new utility affiliates that build
transmission, either within or outside of the service territory of
existing operating companies, should be eligible for the Transmission
Organization Incentive.

IV. Information Collection Statement

    22. The information collection requirements contained in this
Supplemental NOPR are subject to review by the Office of Management and
Budget (OMB) under section 3507(d) of the Paperwork Reduction Act of
1995.\39\ OMB's regulations require approval of certain information
collection requirements imposed by agency rules (including reporting,
record keeping, and public disclosure requirements).\40\ Upon approval
of a collection of information, OMB will assign an OMB control number
and expiration date. Respondents subject to the filing requirements of
this rule will not be penalized for failing to respond to the
collection of information unless the collection of information displays
a valid OMB control number. The following discussion describes and
analyzes the collection of information proposed to be modified by this
Supplemental NOPR.
---------------------------------------------------------------------------

    \39\ 44 U.S.C. 3507(d).
    \40\ 5 CFR 1320.
---------------------------------------------------------------------------

    23. The Commission solicits comments on the Commission's need for
the proposed information collection in this Supplemental NOPR which
would revise the Commission's regulations and policy with respect to
the mechanics and implementation of the Commission's transmission
incentives policy; and with respect to the metrics for evaluating the
effectiveness of incentives. All burden estimates for the proposed
information collection is discussed in this Supplemental NOPR. These
provisions would affect the following information: FERC-516, Electric
Rate Schedules and Tariff Filings (OMB Control No. 1902-0096).
    24. Interested persons may obtain information on the reporting
requirements by contacting Ellen Brown, Office of the Executive
Director, Federal Energy Regulatory Commission, 888 First Street NE,
Washington, DC

20426 (via email<EMAIL_ADDRESS>or telephone<PHONE_NUMBER>).
    25. The Commission solicits comments on the Commission's need for
this information, whether the information will have practical utility,
the accuracy of the burden estimates, ways to enhance the quality,
utility, and clarity of the information to be collected or retained,
and any suggested methods for minimizing respondents' burden, including
the use of automated information techniques.
    26. Send written comments on FERC-516 to the Office of Management
and Budget (OMB) through www.reginfo.gov/public/do/PRAMain, Attention:
Federal Energy Regulatory Commission Desk Officer. Please identify the
OMB control number (1902-0096) in the subject line. Your comments
should be sent within 30 days of publication of this notice in the
Federal Register. OMB submissions must be formatted and filed in
accordance with submission guidelines at www.reginfo.gov/public/do/PRAMain; Using the search function under the ``Currently Under Review
field,'' select Federal Energy Regulatory Commission; click ``submit''
and select ``comment'' to the right of the subject collection.
    27. Title: FERC-516, Electric Rate Schedules and Tariff Filings.
    28. Action: Proposed revision of collection of information in
accordance with RM20-10-000.
    29. OMB Control No.: 1902-0096 (FERC-516).
    30. Respondents for this Rulemaking: Transmitting utilities for
which the Commission has granted incentive-based rate treatment for
joining Transmission Organizations.
    31. Frequency of Information Collection: One time for transmitting
utilities for which the Commission has granted incentive-based rate
treatment for joining Transmission Organizations.
    32. Necessity of Information: Required to determine whether the
transmitting utilities who have received the Transmission Organization
Incentive for three years have updated their rates to remove the
benefit, as described in this NOPR.
    33. Internal Review: The Commission has reviewed the changes and
has determined that such changes are necessary. These requirements
conform to the Commission's need for efficient information collection,
communication, and management within the energy industry. The
Commission has specific, objective support for the burden estimates
associated with the information collection requirements.
    34. The Commission estimates that no more than 190 transmitting
utilities currently receive a 50-basis-point ROE incentive for
membership in a Transmission Organization.\41\ The Commission estimates
that the NOPR would affect the burden \42\ and cost \43\ of FERC-516 as
follows:

                  Estimated Average One-Time Change to FERC-516, Due to Proposed Changes in Supplemental NOPR in Docket No. RM20-10-000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Annual estimated
                                                           Annual estimated      number of                                      Total estimated burden
           Area of modification               Number of        number of         responses      Average burden hours & cost    hours & total estimated
                                             respondents     responses per      (Column B x            per response           cost (Column D x Column E)
                                                              respondent         Column C)
A.                                                     B.                C.                D.  E...........................  F.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Filings regarding updated rates                       190                 1               190  80 hours; $6,640............  15,200 hours; $1,261,600.
 reflecting the termination of the
 Transmission Organization Incentive.
                                          --------------------------------------------------------------------------------------------------------------
    Total Proposed Changes for FERC-516    ..............  ................  ................  80 hours; $6,640............  15,200 hours; $1,261,600.
     in Supplemental NOPR in RM20-10-000.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    35. We seek comments on the estimated burden and the number of
transmission owners affected by the proposed changes.
---------------------------------------------------------------------------

    \41\ The sum of the ``transmission owners'' according to the
websites of the six RTOs/ISOs is 190. The Commission uses this
conservative estimate, while noting that not every transmitting
utility has sought an incentive for membership in a Transmission
Organization, and also that a parent company may seek the incentive
on behalf of numerous affiliate companies.
    \42\ ``Burden'' is the total time, effort, or financial
resources expended by persons to generate, maintain, retain, or
disclose or provide information to or for a Federal agency. For
further explanation of what is included in the information
collection burden, refer to 5 CFR 1320.3.
    \43\ Commission staff estimates that respondents' hourly wages
(including benefits) are comparable to those of FERC employees.
Therefore, the hourly cost used in this analysis is $83.00 ($172,329
per year).
---------------------------------------------------------------------------

V. Environmental Analysis

    36. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\44\ We
conclude that neither an Environmental Assessment nor an Environmental
Impact Statement is required for this Supplemental NOPR under Sec.
380.4(a)(15) of the Commission's regulations, which provides a
categorical exemption for approval of actions under sections 205 and
206 of the FPA relating to the filing of schedules containing all rates
and charges for the transmission or sale of electric energy subject to
the Commission's jurisdiction, plus the classification, practices,
contracts, and regulations that affect rates, charges, classification,
and services.\45\
---------------------------------------------------------------------------

    \44\ Regulations Implementing the National Environmental Policy
Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs.
] 30,783 (1987) (cross-referenced at 41 FERC ] 61,284).
    \45\ 18 CFR 380.4(a)(15).
---------------------------------------------------------------------------

VI. Regulatory Flexibility Act

    37. The Regulatory Flexibility Act of 1980 \46\ generally requires
a description and analysis of proposed and final rules that will have
significant economic impact on a substantial number of small entities.
The RFA mandates consideration of regulatory alternatives that
accomplish the stated objectives of a proposed rule and minimize any
significant economic impact on a substantial number of small
entities.\47\ The Small Business Administration (SBA) sets the
threshold for what constitutes a small business. Under SBA's size
standards,\48\ transmission owners fall under the category of Electric
Bulk Power Transmission and Control (NAICS code 221121),\49\ with a

size threshold of 500 employees (including the entity and its
associates).\50\
---------------------------------------------------------------------------

    \46\ 5 U.S.C. 601-612.
    \47\ Id. 603(c).
    \48\ 13 CFR 121.201.
    \49\ The North American Industry Classification System (NAICS)
is an industry classification system that Federal statistical
agencies use to categorize businesses for the purpose of collecting,
analyzing, and publishing statistical data related to the U.S.
economy. United States Census Bureau, North American Industry
Classification System, https://www.census.gov/eos/www/naics/.
    \50\ The threshold for the number of employees indicates the
maximum allowed for a concern and its affiliates to be considered
small.
---------------------------------------------------------------------------

    38. We estimate that 190 transmitting utilities are affected by the
NOPR. We estimate that approximately 87.5% (or approximately 166
transmitting utilities) of those 190 entities are small entities,
according to information collected from the websites of the six RTOs/
ISOs. We estimate additional one-time costs associated with the NOPR
(as shown in the table in paragraph 34) of: $6,640 each for the 190
filers (transmitting utilities in RTOs/ISOs) of FERC-516. According to
SBA guidance, the determination of significance of impact ``should be
seen as relative to the size of the business, the size of the
competitor's business, and the impact the regulation has on larger
competitors.'' \51\ We do not consider the estimated cost to be a
significant economic impact. As a result, pursuant to section 605(b) of
the RFA, the Commission certifies that the proposals in this
Supplemental NOPR will not have a significant economic impact on a
substantial number of small entities.
---------------------------------------------------------------------------

    \51\ U.S. Small Business Administration, A Guide for Government
Agencies How to Comply with the Regulatory Flexibility Act, at 18
(May 2012), https://www.sba.gov/sites/default/files/advocacy/rfaguide_0512_0.pdf.
---------------------------------------------------------------------------

VII. Comment Procedures

    39. The Commission invites interested persons to submit comments on
the matters and issues proposed in this notice to be adopted, including
any related matters or alternative proposals that commenters may wish
to discuss. Comments are due May 26, 2021. Reply comments are due June
10, 2021. Comments must refer to Docket No. RM20-10-000, and must
include the commenter's name, the organization it represents, if
applicable, and its address in its comments. All comments will be
placed in the Commission's public files and may be viewed, printed, or
downloaded remotely as described in the Document Availability section
below. Commenters on this proposal are not required to serve copies of
their comments on other commenters.
    40. The Commission encourages comments to be filed electronically
via the eFiling link on the Commission's website at http://www.ferc.gov. The Commission accepts most standard word processing
formats. Documents created electronically using word processing
software should be filed in native applications or print-to-PDF format
and not in a scanned format. Commenters filing electronically do not
need to make a paper filing.
    41. Commenters that are not able to file comments electronically
must send an original of their comments to: Federal Energy Regulatory
Commission, Secretary of the Commission, 888 First Street NE,
Washington, DC 20426. Submission of filings other than by USPS should
be delivered to: Federal Energy Regulatory Commission, 12225 Wilkins
Avenue, Rockville, MD 20852.

VIII. Document Availability

    42. In addition to publishing the full text of this document in the
Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
internet through the Commission's Home Page (http://www.ferc.gov). At
this time, the Commission has suspended access to the Commission's
Public Reference Room due to the President's March 13, 2020
proclamation declaring a National Emergency concerning the Novel
Coronavirus Disease (COVID-19).
    43. From the Commission's Home Page on the internet, this
information is available on eLibrary. The full text of this document is
available on eLibrary in PDF and Microsoft Word format for viewing,
printing, and/or downloading. To access this document in eLibrary, type
the docket number excluding the last three digits of this document in
the docket number field.
    44. User assistance is available for eLibrary and the Commission's
website during normal business hours from the Commission's Online
Support at<PHONE_NUMBER> (toll free at 1-866-208-3676) or email at
<EMAIL_ADDRESS>or the Public Reference Room at (202) 502-
8371, TTY<PHONE_NUMBER>. Email the Public Reference Room at
<EMAIL_ADDRESS>
List of Subjects in 18 CFR Part 35

    Electric power rates, Electric utilities, Reporting and
recordkeeping requirements.

By direction of the Commission. Commissioner Chatterjee is dissenting
with a separate statement attached.
    Commissioner Danly is dissenting with a separate statement
attached.
    Commissioner Christie is concurring with a separate statement
attached.

    Issued: April 15, 2021.
Nathaniel J. Davis, Sr.,
Deputy Secretary.

    In consideration of the foregoing, the Commission proposes to amend
part 35, chapter I, title 18, Code of Federal Regulations, as follows.

Subpart G--Transmission Infrastructure Investment Provisions

0
1. The authority citation for subpart G continues to read as follows:

    Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 41
U.S.C. 7101-7352.

0
2. In Sec.  35.35(f) is revised to read:

Sec.  35.35   Transmission infrastructure investment.

    (f) Incentives for joining a Transmission Organization. For
purposes of this incentive, Transmission Organization means a Regional
Transmission Organization, Independent System Operator, independent
transmission provider, or other transmission organization finally
approved by the Commission for the operation of transmission
facilities. The Commission will permit transmitting utilities and
electric utilities that join a Transmission Organization the ability to
recover prudently incurred costs associated with joining the
Transmission Organization in their jurisdictional rates. Additionally,
for a transmitting utility that joins a Transmission Organization and
turns over operational control of the applicant's wholesale
transmission facilities to the Transmission Organization, the
Commission will authorize a 50-basis-point increase in return on equity
for three years, commencing from the date the transmitting utility
turns over operational control of the facilities, if the transmitting
utility has not previously been a member of a Transmission
Organization.

Appendix A--Abbreviated Names of Commenters

    The following table contains the abbreviated names of all
commenters in this docket.

------------------------------------------------------------------------
              Abbreviation                    Commenter (full name)
------------------------------------------------------------------------
ACORE..................................  American Council on Renewable
                                          Energy.
Advanced Energy Buyers.................  Advanced Energy Buyers Group.
Advanced Energy Management.............  Advanced Energy Management
                                          Alliance.
AEP....................................  American Electric Power
                                          Company.
Alliant................................  Alliant Energy Corporate
                                          Services, Inc./DTE Electric
                                          Company.
Ameren.................................  Ameren Services Company.
Americans for a Clean Energy Grid......  Americans for a Clean Energy
                                          Grid.
American Manufacturers.................  American Manufacturers.
APPA...................................  American Public Power
                                          Association.
Avangrid...............................  Avangrid Networks, Inc.
AWEA...................................  American Wind Energy
                                          Association.
Blue Ridge.............................  Blue Ridge Power Agency.
CAISO..................................  California ISO.
California Commission..................  California Public Utility
                                          Commission.
California Municipals..................  California Municipal Utilities
                                          Association.
California State Water Project.........  California Department of Water
                                          Resources.
California Utilities...................  Pacific Gas and Electric/San
                                          Diego Gas and Electric.
Connecticut Commission.................  Connecticut Public Utilities
                                          Regulatory Authority.
Consumer Organization Groups...........  Consumer Organization Groups.
CTC Global.............................  CTC Global Corporation.
Delaware and District of Columbia        Delaware Division of the Public
 Public Advocates.                        Advocate.
East Texas Coops.......................  East Texas and Northeast Texas
                                          Electric Cooperatives.
Eastern Massachusetts Municipals.......  Eastern Massachusetts Consumer
                                          Owned Systems.
EDF Renewables.........................  EDF Renewables, Inc.
EEI....................................  Edison Electric Institute.
ELCON..................................  Electricity Consumers Resource
                                          Council, American Chemistry
                                          Council, and American Forest &
                                          Paper Association.
Energy Storage Association.............  Energy Storage Association.
Eversource.............................  Eversource Energy Service
                                          Company.
Exelon.................................  Exelon Corporation.
GridLiance.............................  GridLiance Holdco, LP.
GridPolicy.............................  GridPolicy, Inc.
Hiorns.................................  Hiorns Smart Energy Networks.
Individual Consumers...................  Individual Consumers.
Institute for Policy Integrity.........  Institute for Policy Integrity
                                          at the New York University
                                          School of Law.
ITC....................................  ITC Holdings Corporation.
Joint State Committees.................  Organization of MISO States.
Kansas Commission......................  Kansas Corporation Commission.
Louisiana Energy Users.................  Louisiana Energy Users Group.
LS Power...............................  LSP Transmission Holdings II,
                                          LLC.
Maryland Commission....................  Maryland Public Service
                                          Commission.
MISO...................................  Midcontinent Independent System
                                          Operator, Inc.
MISO Transmission Owners...............  MISO Transmission Owners.
National Grid..........................  National Grid USA.
Navopache..............................  Navopache Electric Cooperative,
                                          Inc.
NESCOE.................................  New England States Committee on
                                          Electricity.
New England Public Systems.............  Massachusetts Municipal
                                          Wholesale Electric Company and
                                          New Hampshire Electric
                                          Cooperative Inc.
New Jersey Agencies....................  New Jersey Board of Public
                                          Utilities and the New Jersey
                                          Division of Rate Counsel.
New York Coalition.....................  New York State Public Service
                                          Commission, the City of New
                                          York, Multiple Intervenors,
                                          and Consumer Power Advocates.
New York Transmission Owners...........  Indicated New York Transmission
                                          Operators.
New York Transco.......................  New York Transco, LLC.
NextEra................................  NextEra Energy Transmission,
                                          LLC.
Northern California Power Agency.......  Northern California Power
                                          Agency.
Northern Virginia Coop.................  Northern Virginia Electric
                                          Cooperative, Inc.
NRECA..................................  National Rural Electric
                                          Cooperative Association.
Ohio Commission Energy Advocate........  Public Utility Commission of
                                          Ohio Office of the Federal
                                          Energy Advocate.
PJM....................................  PJM Interconnection, L.L.C.
PJM Market Monitor.....................  Independent Market Monitor for
                                          PJM Interconnection.
PJM States.............................  Organization of PJM States.
PJM Transmission Owners................  PJM Transmission Owners.
Potomac Economics......................  Potomac Economics, LTD.
Protect Our Power......................  Protect Our Power.
Prysmian...............................  Prysmian Group.
Public Interest Organizations..........  Public Interest Organizations.
R Street Institute.....................  R Street Institute.
Railroad Electrification Council.......  Railroad Electrification
                                          Council.
Resale Power Group of Iowa.............  Resale Power Group of Iowa.
Schulte Associates.....................  Schulte Associates LLC.
Smart Wires............................  Smart Wires.

SMUD...................................  Sacramento Municipal Utility
                                          District.
SPP....................................  Southwest Power Pool.
SPP Transmission Owners................  Indicated Southwest Power Pool,
                                          Inc. Transmission Owners.
State Utility Consumer Advocates.......  National Association of State
                                          Utility Consumer Advocates.
Steel Manufacturers....................  Steel Manufacturers
                                          Association.
TAPS...................................  Transmission Access Policy
                                          Study Group.
Ten State Entities.....................  Southern New England State
                                          Agencies.
Transmission Dependent Coops...........  Transmission Dependent
                                          Utilities Systems.
Union of Concerned Scientists..........  Union of Concerned Scientists.
Virginia Consumer Counsel..............  Virginia Office of Attorney
                                          General, Division of Consumer
                                          Counsel.
WATT Coalition.........................  Working for Advanced
                                          Transmission Technologies
                                          Coalition and Advanced Energy
                                          Economy.
WIRES..................................  WIRES.
XBRL US................................  XBRL US.
------------------------------------------------------------------------

Department of Energy

Federal Energy Regulatory Commission

Electric Transmission Incentives Policy Under Section 219 of the
Federal Power Act

    CHATTERJEE, Commissioner, dissenting:
    1. I strongly oppose today's supplemental NOPR. It mischaracterizes
the plain language of the Federal Power Act (FPA) in order to strip
utilities of the Transmission Organization Incentive, even though the
utility RTO/ISO membership has led to substantial consumer benefits and
is vital to the energy transition and the development of much-needed
transmission in the RTO/ISO regions.

The Supplemental NOPR Proposal Fails To Reasonably Implement the
Statute

    2. FPA section 219(c) requires that the Commission ``provide for
incentives to each transmitting utility or electric utility that joins
a Transmission Organization.'' \1\ Nowhere in the statute is the
Commission directed to provide incentives only to each utility that
newly joined a Transmission Organization, or to those that voluntarily
joined a Transmission Organization. Indeed, by advancing these
arbitrary restrictions,\2\ the supplemental NOPR proposal will
eviscerate the Transmission Organization Incentive and is therefore
inconsistent with the statute.\3\
---------------------------------------------------------------------------

    \1\ 16 U.S.C. 824s(c).
    \2\ For example, the supplemental NOPR does not explain how the
majority arrived at a three-year incentive or even attempt to
justify why three years is the appropriate duration for utilities to
receive the incentive.
    \3\ Because so few utilities have joined a Transmission
Organization in the last three years, today's proposal would
eliminate the Transmission Organization Incentive for the vast
majority of existing RTO members.
---------------------------------------------------------------------------

    3. In Order No. 679, the Commission correctly explained that the
``basis for the [Transmission Organization Incentive] is a recognition
of the benefits that flow from membership in such organizations.'' \4\
The Commission reasoned that it would be unduly discriminatory for the
Commission to consider the benefits of membership in determining the
appropriate ROE for new members but not for similarly situated entities
that are already members.\5\ In Order No. 679-A, the Commission found
that the best way to ensure benefits to as many consumers as possible
``is to provide an incentive that is widely available to member
utilities of Transmission Organizations.'' \6\ The Commission
determined that the Transmission Organization Incentive is ``entirely
consistent'' with FPA section 219's purpose, which is to establish
incentives ``that benefit consumers by ensuring reliability and
reducing the cost of delivered power.'' \7\ Finally, the Commission
explained that ``limit[ing] the incentive to only utilities yet to join
Transmission Organizations offers no inducement to stay in these
organizations for members with the option to withdraw, and hence risks
reducing Transmission Organization membership and its attendant
benefits to consumers.'' \8\
---------------------------------------------------------------------------

    \4\ Promoting Transmission Investment through Pricing Reform,
Order No. 679, 71 FR 43293, 116 FERC ] 61,057, at P 331 (2006),
order on reh'g, Order No. 679-A, 72 FR 1152, 117 FERC ] 61,345
(2006), order on reh'g 119 FERC ] 61,062 (2007).
    \5\ Id.
    \6\ Order No. 679-A, 117 FERC ] 61,345 at P 86.
    \7\ Id.
    \8\ Id. By design, the Supplemental NOPR proposal attempts to
limit the incentive to utilities yet to join Transmission
Organizations. See supra note 3.
---------------------------------------------------------------------------

    4. The supplemental NOPR does not even attempt to grapple with any
of the Commission's well-reasoned prior holdings. Rather, the majority
merely offers a conclusory statement that a new interpretation is
reasonable.\9\ The majority provides no basis for its subtle but
meaningful contortion of the statue, which, as noted above, requires
that the Commission ``provide for incentives to each . . . utility that
joins a Transmission Organization'' and does not--as the majority would
have you believe--require the Commission ``to provide an incentive for
joining rather than remaining in a Transmission Organization.'' \10\
---------------------------------------------------------------------------

    \9\ Supplemental NOPR at P 8 (offering nothing more than a
blanket suggestion that the existing Transmission Organization
Incentive ``may not balance utility and ratepayer interests''). In
addition to ignoring the increasing burdens placed on member
utilities and the fact that the billions of dollars of benefits the
RTOs/ISOs provide through utility membership accrue to consumers--
not to the utilities, as the majority would have you believe--the
majority completely disregards WIRES' clear warning that, with a
proposal like today's, ``there is a very real risk that RTO/ISO
membership could remain static (at best) or shrink (at worst).''
WIRES Comments at 14.
    \10\ See Supplemental NOPR at P 6.
---------------------------------------------------------------------------

The Supplemental NOPR Will Slow the Energy Transition and Stymie Needed
Investments

    5. I could understand the majority's proposal to eviscerate the
Transmission Organization Incentive if doing so accomplished an
important or even articulable policy objective. But the proposal is--
bafflingly--contrary to the current Administration's federal clean
energy goals.\11\ To meet such aggressive goals, we will need both
robust organized markets and an enormous

amount of investment in transmission,\12\ and we will need to put
Americans to work building the grid of the future.\13\ If this
Commission hopes to run fast toward these energy transition goals, it
must not shoot itself in the foot by eliminating the Transmission
Organization Incentive.
---------------------------------------------------------------------------

    \11\ See, e.g., Executive Order 14008, 86 FR 7619 (Jan. 27,
2021), available at https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/27/executive-order-on-tackling-the-climate-crisis-at-home-and-abroad (setting forth the goal of
``put[ting] the United States on a path to achieve net-zero
emissions, economy-wide, by no later than 2050''); see also, e.g.,
Ronald Brownstein, Infrastructure plan: How Biden's zero-carbon
revolution would broaden the energy map, CNN (Apr. 6, 2021), https:/
www.msn.com/en-us/news/us/infrastructure-plan-how-biden-s/-zero-carbon-revolution-would-broaden/-the-energy-map/ar-BB1fkZ5q
(explaining that President Biden's American Jobs Plan includes ``a
provision that would require every state to generate all of its
electricity by 2035 from fuels that do not produce any of the carbon
emissions linked to global climate change'').
    \12\ See, e.g., Eric Wolff, Down to the wire: Biden's green
goals face a power grid reckoning, Politico (Apr. 8, 2021), https:/
www.politico.com/news//2021/04/08/biden-green-/goals-power-grid-480446 (``President Joe Biden's dream of a climate-friendly electric
grid hangs on a slender wire: his administration's ability to speed
the construction of thousands of miles of power lines.'').
    \13\ See Fact Sheet, The American Jobs Plan, https:/
www.whitehouse.gov//briefing-room/statements-releases//2021/03/31/fact-sheet-the-american-/jobs-plan/ (setting forth the goal to ``put
hundreds of thousands of people to work'' on projects to include
``laying thousands of miles of transmission lines'').
---------------------------------------------------------------------------

    6. RTOs and ISOs, while imperfect, have been enormously successful
in generating billions of dollars of annual benefits to consumers. MISO
estimates that it produces between $3.1 and $3.9 billion of annual net
economic benefits in the form of ``improved reliability, compliance,
more efficient use of existing assets and reduced need for additional
assets.'' \14\ PJM estimates its annual savings at between $3.2 and
$4.0 billion in the form of more efficient regional transmission
planning, lower aggregate generation reserve requirements, encouraging
replacement of less-efficient generators, and reducing electricity
production costs.\15\ SPP estimates that savings from its markets and
transmission planning services provide more than $2.2 billion of annual
benefits.\16\ According to National Grid, ISO-NE is expected to produce
savings of more than $600 million per year.\17\ Based on these four
estimates, one could reasonably conclude that these RTOs/ISOs alone
produce more than $10 billion of annual benefits for consumers.\18\
Though the estimated $400 million annual cost of the Transmission
Organization Incentive may appear large without any context,\19\ it is
quite literally pennies on the dollar when compared to the more than
$10 billion of annual benefits to ratepayers generated from RTO/ISO
membership. The majority has lost sight of the forest for the trees. I
share the concern expressed by WIRES that any course-reversal ``on
maintaining the availability of the RTO/ISO Participation Incentive . .
. would undermine the Commission's decades-long policy of supporting
the development and expansion of RTOs/ISOs and the corresponding
benefits to consumers they provide.'' \20\
---------------------------------------------------------------------------

    \14\ See MISO, 2020 MISO Value Proposition, (Feb. 2021), https://cdn.misoenergy.org//2020%20Value%20Propostion/%20Exec%20Summary521884.pdf.
    \15\ See PJM, PJM Value Proposition, (Jul. 2019), https://www.pjm.com/-/media/about-pjm/pjm-value-proposition.ashx.
    \16\ See SPP, 14-to-1 The Value of Trust, at 3 (May 2019),
https://spp.org/documents//58916/14-to-1%20value%20of%20trust%2020190524%20web.pdf.
    \17\ National Grid Comments at 8 (citing Supplemental Answering
Testimony of Kenneth B. Bowes on Behalf of the NETOs, Docket No.
EL16-64, Exh. No. NET-02600 at 9 and accompanying Exhibit No. NET-
02601 (July 31, 2017)).
    \18\ This estimate is likely understated because it does not
include the benefits to consumers from CAISO or NYISO. In addition,
according to Renewable Energy Buyers Alliance (REBA), which
advocates for ``instituting organized wholesale markets in all
regions of the country,'' the creation of an RTO in the Southeast
would generate an estimated $19.2 billion in annual savings. REBA,
Organized Wholesale Markets, https://rebuyers.org/programs/market-policy-innovations/organized-markets/.
    \19\ Supplemental NOPR at P 9 & n.21.
    \20\ WIRES Reply Comments at 5.
---------------------------------------------------------------------------

    7. Moreover, as we move towards a clean energy future, the
importance of RTOs/ISOs will only continue to grow.\21\ As just one
example, large energy consumer Google, which recently articulated a
goal of running on carbon-free energy everywhere by 2030,\22\ put it
this way:
---------------------------------------------------------------------------

    \21\ See, e.g., REBA, Organized Wholesale Markets, https://rebuyers.org/programs/market-policy-innovations/organized-markets/
(``[O]rganized wholesale markets produce billions in customer
savings annually, they are critical to efficient decarbonization and
clean energy integration, and increase customers' ability to drive
the clean energy transition.'').
    \22\ See Sundar Pichai, Our Third Decade of Climate Action:
Realizing a Carbon-free Future (Sept. 14, 2020), https://blog.google/outreach-initiatives/sustainability/our-third-decade-climate-action-realizing-carbon-free-future.

    The key to managing [renewable] intermittency at low cost has
been the ability to use large, interconnected, highly integrated
electricity grids and associated liquid wholesale markets. As
renewable penetrations grow, it will be critical to shift from
balkanized, isolated electricity markets to regional, interconnected
grids and markets. This will create larger balancing areas to better
manage intermittency, increase price efficiency through greater
liquidity and market transparency, and allow renewables to be
delivered from distant but resource-rich geographies to the load
centers where they are needed.\23\
---------------------------------------------------------------------------

    \23\ Google, Achieving Our 100% Renewable Energy Purchasing Goal
and Going Beyond (Dec. 2016), https://www.gstatic.com/gumdrop/sustainability/achieving-100-renewable-energy-purchasing-goal.pdf.
See also Advanced Energy Buyers Group, Organized Wholesale Markets
and Advanced Energy Procurement (Jan. 2021), https://info.aee.net/hubfs/AEE_AEBG%20-%20WholesaleMkts_1.19.21.pdf (``[E]xpanding and
improving [organized wholesale] markets would open new opportunities
for large customers to meet their own emission reduction and
renewable energy goals while also accelerating the broader energy
transition.'').

    8. Real world experience bears this out. We already have seen SPP
successfully manage record levels of wind generation, which would not
be possible if its footprint were broken into dozens of balancing
areas.\24\ SPP's CEO Barbara Sugg identified four factors behind SPP's
successful integration of renewable energy: (1) SPP's large
consolidated balancing authority takes advantage of its scale to match
the many sellers of renewable power with a broad footprint of buyers;
(2) SPP sits at the crossroads of the nation's highest wind and solar
resources; (3) SPP has a robust transmission infrastructure that allows
renewable energy to be sent long distances; and (4) SPP enjoys a robust
day-ahead and real-time energy market.\25\ SPP's impressive integration
of wind paints a clear picture: RTOs provide a platform for a
successful energy transition. That platform can only remain viable if
existing utility members remain in RTOs.
---------------------------------------------------------------------------

    \24\ On March 29, 2021, SPP broke four renewable records, with
wind penetration surpassing 80% for the first time in SPP history
and reaching a renewable penetration record of 84.2%. Kassia Micek,
SPP breaks four renewable, wind records causing power prices to dip
negative, S&P Global (Mar. 30, 2021) https://www.spglobal.com/platts/en/market-insights/latest-news/electric-power/033021-spp-breaks-four-renewable-wind-records-causing-power-prices-to-dip-negative.
    \25\ American Council for Renewable Energy, How Southwest Power
Pool Sets Renewable Records Daily (Apr. 8, 2021), https://acore.org/how-southwest-power-pool-sets-renewable-records-daily/ daily/.
---------------------------------------------------------------------------

    9. I whole-heartedly agree with the current chorus of calls for
more effective regional and interregional transmission planning,
including more expansive competitive bidding processes and
interregional planning.\26\ But we cannot ignore that the RTO/ISO
regions are the leaders and catalysts on these fronts. The Commission
staff's 2020 State of the Markets Report noted that ``four transmission
planning regions . . . awarded to developers or requested proposals for
new transmission projects as part of a competitive bidding process.''
\27\ All four of these transmission planning regions are RTO/ISO
regions--PJM, NYISO, SPP, and ISO-NE.\28\ Commission staff also

identified two promising developments pertaining to inter-regional
transmission planning: (1) MISO's board approved an interregional
project previously approved by PJM; and (2) MISO and SPP announced a
joint project to find comprehensive, cost-effective projects along the
MISO-SPP seam. Again, these developments are driven by RTO/ISOs. Now is
not the time to undercut them.
---------------------------------------------------------------------------

    \26\ See, e.g., Americans for a Clean Energy Grid, Planning for
the Future, FERC's Opportunity to Spur More Cost-effective
Transmission Infrastructure, at 8 (Jan. 2021), (``As we look to the
future, much more regional and inter-regional power exchange will be
needed for national energy security, reliability, resilience, cost-
effectiveness, and economic competitiveness.'').
    \27\ Commission Staff, State of the Markets 2020, (Mar. 2021),
https://www.ferc.gov/sites/default/files/2021-03/State-of-the-Markets-2020-Report.pdf.
    \28\ Id. MISO is engaging with stakeholders to develop its Long-
Range Transmission Planning initiative to holistically assess the
region's future transmission needs in light of expected resource
evolution and electrification. See MISO, Long-Range Transmission
Plan Roadmap, (Mar. 2021), https://cdn.misoenergy.org/20210317%20PAC%20Item%2003a%20Long%20Range%20Transmission%20Plan%20Initial%20Roadmap531009.pdf. I am not aware of any similar holistic
region-wide initiative in the non-RTO/ISO planning regions.
---------------------------------------------------------------------------

    10. Finally, the existing Transmission Organization Incentive
modestly increases the overall ROE awarded to utilities in RTO/ISO
regions. Preserving or increasing the incentive would better position
such utilities to compete for capital, thereby enhancing large-scale
transmission investment.\29\ Stable incentives create much-needed
``regulatory certainty for investors, planners, and transmission owners
to inform decisions regarding long-term planning and the deployment of
capital.'' \30\ Lowering overall ROEs, as the majority proposes to do
here, may push investment away from transmission projects and towards
other sectors of the economy or to lower risk projects.
---------------------------------------------------------------------------

    \29\ See London Economic, Economic Considerations in the Matter
of Transmission Incentives, (July 2020), https://wiresgroup.com/wp-content/uploads/2020/07/LEI-Expert-Paper-on-FERC-NOPR_Electric-Transmission-Incentives-July-1-2020.pdf.
    \30\ WIRES Reply Comments at 4-5.
---------------------------------------------------------------------------

    11. If the Commission is truly committed to advancing policies to
build out our transmission system to deliver clean, reliable, and
affordable energy services, it should not support today's proposal. A
far better approach would be to move forward with a comprehensive suite
of reforms to provide incentives for the transmission projects that
provide the most benefits to consumers.\31\ Unfortunately, with today's
order, the Commission has taken its eye off the ball.
---------------------------------------------------------------------------

    \31\ March NOPR, 170 FERC ] 61,204, at PP 3-11. I support moving
forward with a final rule that adopts the March NOPR proposal,
albeit with some narrow adjustments. For example, rather than
providing Economic Benefits Incentives to transmission projects
based on their benefit-to-cost ratios, I would instead provide such
incentives based on net benefits in an effort to ensure that the
incentives flow to the most beneficial--likely regional and inter-
regional--transmission projects.
---------------------------------------------------------------------------

    For these reasons, I respectfully dissent.

-----------------------------------------------------------------------

Neil Chatterjee,

Commissioner.

Department of Energy

Federal Energy Regulatory Commission

Electric Transmission Incentives Policy Under Section 219 of the
Federal Power Act

    DANLY, Commissioner, dissenting:
    1. That ``that'' is a word that the English language overtasks and
that leads to confusion cannot be disputed. But ``that'' does not mean
``to,'' and that is what the majority freights ``that'' with in this
order. That is why I dissent.
    2. Section 219(c) of the Federal Power Act provides that ``the
Commission shall . . . provide for incentives to each transmitting
utility or electric utility that joins a Transmission Organization.''
\1\ And this is what the Commission has done since this text was added
to the Federal Power Act in 2005,\2\ providing a 50-basis-point adder
to the return on equity of transmission utilities in Regional
Transmission Organizations (RTO).\3\ These incentives do not expire
unless the transmission utility leaves the RTO.\4\
---------------------------------------------------------------------------

    \1\ 16 U.S.C. 824s(c) (emphasis added).
    \2\ See Promoting Transmission Investment through Pricing
Reform, Order No. 679, 116 FERC ] 61,057, at P 326 (2006), order on
reh'g, Order No. 679-A, 117 FERC ] 61,345 (2006), order on reh'g,
119 FERC ] 61,062 (2007).
    \3\ See Electric Transmission Incentives Policy Under Section
219 of the Federal Power Act, 175 FERC ] 61,035, at P 2 (2021).
    \4\ There is but one reasonable reading of this provision.
``That'' in this sentence is a relative pronoun. Its function is to
introduce a restrictive relative clause. It does no more than
identify the universe of entities eligible for the incentive. Its
antecedent is ``transmitting utility or electric utility.'' The same
essential meaning would be conveyed were we to substitute another
relative pronoun by treating the utilities as people. In that case,
we could re-state the provision as: ``the Commission shall . . .
provide for incentives to each transmitting utility or electric
utility who joins a transmission organization.'' This language
admits for no limitation. It establishes a category of eligible
entities (they must be transmission or electric utilities). It then
restricts the category by requiring the satisfaction of a further
condition (they must join an RTO). There is also no limitation in
the verb. ``Joins'' is the 3rd person singular present active
indicative form of the verb ``to join.'' ``Joins'' is a simple
aspect verb; it is neither completed nor continuous. Accordingly, a
(somewhat) stilted Latinate expression of the Congressional mandate
might read: ``the utility joins; the Commission provides.''
---------------------------------------------------------------------------

    3. The majority, however, states that it now ``believe[s] that it
is reasonable to read FPA section 219(c) to direct the Commission to
provide an incentive for `join[ing]' a Transmission Organization and
not for remaining in a Transmission Organization in perpetuity.'' \5\
The incentive, therefore, would be limited to ``each transmitting
utility or electric utility to join[ ] a Transmission Organization''
and the incentive would expire after three years. I disagree because
that is not what the statute says.
---------------------------------------------------------------------------

    \5\ Electric Transmission Incentives Policy Under Section 219 of
the Federal Power Act, 175 FERC ] 61,035 at P 6.
---------------------------------------------------------------------------

    4. First, the Commission's new belief contradicts fourteen years of
precedent interpreting unchanged statutory text.
    5. Second, the Commission's consistent interpretation of the
statute since its inception is correct. The Commission is to provide
incentives to a utility ``that joins'' an RTO. The statute does not
limit the incentive solely to encourage utilities ``to join'' an RTO;
it does not address the issue of whether they ``remain'' in the RTO. If
Congress intended the RTO adder to only apply as an incentive ``to
join'' an RTO, it would have said so. It did not. The statute requires
incentives to an entity ``that joins'' an RTO, full stop, no
limitation.
    6. It is not our role to second guess Congress. It is irrelevant
whether the majority ``believes'' the RTO adder is no longer necessary
as an incentive for a utility ``that joins'' an RTO to stay in the RTO.
If the majority or anyone else has a problem with the statute, their
sole recourse is through Congress.
    7. Just as the statutory text is not limited to an incentive for a
utility ``to join'' an RTO, it also is not limited to a utility that
``voluntarily'' joins a Transmission Organization. That word does not
appear in the statute. I oppose inserting this further limitation into
the statutory text.\6\
---------------------------------------------------------------------------

    \6\ I recognize that the Ninth Circuit has ruled that under the
Commission's Order No. 679 implementing the relevant statutory text
``the voluntariness of a utility's membership in a transmission
organization is logically relevant to whether it is eligible for an
adder.'' Cal. Pub. Utils. Comm'n v. FERC, 879 F.3d 966, 975 (9th
Cir. 2018); see Promoting Transmission Investment Through Pricing
Reform, Order No. 679, 116 FERC ] 61,057, order on reh'g, Order No.
679-A, 117 FERC ] 61,345 (2006), order on reh'g, Order No. 679-B,
119 FERC ] 61,062 (2007). The Court did not address the meaning of
the statutory text itself.
---------------------------------------------------------------------------

    8. The majority also fails to consider the effects of its proposed
change on utilities that have not yet joined an RTO. There are large
portions of the country that have no RTO. Recent events suggest that
utilities in these regions are contemplating joining an existing RTO or
forming a new one. The Commission should be taking actions to encourage
such decisions. Instead, we are proposing to reduce the benefits to
utilities that join RTOs based on a strained, erroneous interpretation
of the statute. Utilities considering RTO participation are sure to
take note not only of the reduction in benefits attendant to RTO
participation that the Commission proposes today, but also of the
Commission's willingness to take extraordinary steps to reduce those
benefits. This is not the signal we

should be sending to utilities that, to date, have resisted RTO
participation.
    9. For similar reasons, I support a 100-basis point adder to a
utility ``that joins'' an RTO. RTOs provide enormous cost benefits to
consumers. We should continue to provide strong incentives to utilities
to join and to remain in RTOs so that consumers can reap the cost
benefits of power markets. That is what the statute requires, and I
would strengthen these incentives for any utility ``that joins'' an
RTO.
    For these reasons, I respectfully dissent.

-----------------------------------------------------------------------

James P. Danly,

Commissioner.

Department of Energy

Federal Energy Regulatory Commission

Electric Transmission Incentives Policy Under Section 219 of the
Federal Power Act

    CHRISTIE, Commissioner, concurring:
    1. I concur with today's supplemental Notice of Proposed Rulemaking
(NOPR) because it moves in the right direction.\1\ I write separately,
however, to explain my reasons.
---------------------------------------------------------------------------

    \1\ See Supplemental NOPR at PP 9-11.
---------------------------------------------------------------------------

    2. The Commission has previously enumerated the benefits of RTO/ISO
participation to both public utilities and consumers, so the costs and
benefits of such membership are not at issue here. At a time, however,
when transmission costs are already a significant and rising part of
consumers' retail bills,\2\ ROE adders needlessly burden consumers with
substantial additional costs without demonstrable evidence that they
actually incentivize the particular action they are aimed at
incentivizing.
---------------------------------------------------------------------------

    \2\ See, e.g., California Municipal Utilities Association July
1, 2020 Comments at 3 (explaining that ``[s]ince 2001, the CAISO's
TAC has risen by a whopping 700%,'' and ``[s]ince 2010, spending on
transmission has increased by almost 400%.''); see also Transmission
Access Policy Study Group July 1, 2020 Comments at 7 (``The impact
of the current 50 basis point [RTO] adder on businesses and
consumers is enormous--roughly $400 million per year and
growing.''); Monitoring Analytics, LLC, Independent Market Monitor
for PJM, State of the Market Report for PJM for 2020 at 17 (March
11, 2021), https://www.monitoringanalytics.com/reports/PJM_State_of_the_Market/2020/2020-som-pjm-vol1.pdf (``In 2020, for
the first time since the start of the PJM RPM Capacity Market in
2007, the cost of transmission in the total price per MWh of
wholesale power was greater than the cost of capacity.'').
---------------------------------------------------------------------------

    3. Given the state of play today, I agree with certain commenters
that the RTO adder ``provides an unnecessary windfall [with] no nexus
to public utilities' decisions to join or remain in an RTO.'' \3\ It
may also be the case that such adders are duplicative of other
Commission incentives already granted to public utilities by virtue of
their participation in an RTO/ISO.\4\
---------------------------------------------------------------------------

    \3\ Kansas Corporation Commission July 1, 2020 Notice of
Intervention and Comments at 18; see also Massachusetts Municipal
Wholesale Electric Company, New Hampshire Electric Cooperative,
Inc., and Connecticut Municipal Electric Energy Cooperative July 1,
2020 Comments at 12; New York State Public Service Commission, the
City of New York, Multiple Intervenors, and Consumer Power Advocates
July 1, 2020 Joint Comments at 16; State Entities July 1, 2020
Comments at 13; California Public Utilities Commission July 1, 2020
Comments at 40.
    \4\ National Association of State Utility Consumer Advocates
July 1, 2020 Motion to Intervene and Comments at 20.
---------------------------------------------------------------------------

    4. It bears repeating that while section 219 of the Federal Power
Act (FPA) requires the Commission to provide certain incentives--such
as an incentive for joining an RTO/ISO--it also requires that resulting
rates continue to be just and reasonable.\5\ As noted by the Delaware
Division of Public Advocate and the Office of the People's Counsel for
of the District of Columbia, ``Congress did not intend for [FPA section
219], or the rules promulgated pursuant to it, to unjustly enrich
utilities and RTO members at the customers' expense.'' \6\ I agree.
---------------------------------------------------------------------------

    \5\ 16 U.S.C. 824s(c).
    \6\ Delaware Division of the Public Advocate and the Office of
the People's Counsel for the District of Columbia July 1, 2020
Comments at 2.
---------------------------------------------------------------------------

    5. I also agree with the supplemental NOPR's conclusion that
section 219 of the FPA does not require an incentive for RTO/ISO
participation to take the form of an ROE adder \7\ and with its request
for commenters to propose alternative, non-ROE incentives that would
qualify under section 219.\8\ Since the FPA does not require the award
of ROE adders in this instance, I believe their use should be the
subject of reassessment. I also share the concern previously expressed
by Chairman Glick regarding ``gratuitous handouts at customers'
expense. . . .'' \9\
---------------------------------------------------------------------------

    \7\ See Supplemental NOPR at P 16.
    \8\ Id.
    \9\ Electric Transmission Incentives Policy Under Section 219 of
the Federal Power Act, 170 FERC ] 61,204 (2020) (Glick, Comm'r,
dissenting in part at P 25).
---------------------------------------------------------------------------

    6. In addition to the obvious impact on consumer costs, the broader
reason for this need for reassessment goes to the very purpose of
utility regulation. Utility regulation developed for one primary
purpose: To protect captive customers of utility monopolies from the
exercise of market power which monopolies, by definition, have and will
exercise. Market power is, of course, the ability of a seller to charge
and sustain a price above the price it could charge in a competitive
market, resulting in an unfair and uneconomic transfer of wealth from
captive customers to the monopoly (or near-monopoly).
    7. So, utility regulation developed the cost-of-service model,
which tries to duplicate the results of a competitive market where
there is none. This is a challenge that one of my law students once
described as trying to paint a rainbow. The painting will never be a
rainbow, but you want to come as close as possible.
    8. One of the most important costs that utilities are allowed to
recover in cost-of-service regulation is the cost of capital, which
consists of the cost of debt and the cost of equity. The cost of equity
is ROE. The Supreme Court of the United States set forth the
constitutional standard for determining ROE in its workhorse case of
Bluefield Water Works v. Public Service Commission of West
Virginia.\10\ The Court said, in a standard still in use today, that
investors in a utility company had a right to a return that is:
---------------------------------------------------------------------------

    \10\ 262 U.S. 679 (1923).

equal to that generally being made at the same time and in the same
region of the country on investments in other business undertakings
which are attended by corresponding risks and uncertainties, but [a
public utility] has no constitutional right to profits such as are
realized or anticipated in highly profitable enterprises or
speculative ventures.\11\
---------------------------------------------------------------------------

    \11\ Id. at 692-93 (emphasis added).

    9. Utility regulators, in setting an ROE, attempt to set the ROE
based on the actual market for equity capital, taking into account,
under the Bluefield standard, the level of risk faced by investors in a
company that has a monopoly on a vital public service versus the level
of risk undertaken by investors in a company in a fiercely competitive
market. In the latter case, investors have no guarantee of receiving a
single dollar of profit on their invested capital. Further, for riskier
ventures in the energy sector, such as certificated facilities that
face significant costs during the development phase, those risks can be
factored into the determination of the actual cost of equity capital.
Not all utilities face the same risks in each case.
    10. That is all to say, setting the ROE is a fact-intensive inquiry
that requires the regulator's best effort at determining the actual
market cost of equity capital for investments of similar risk. Once
it's set, however, adding basis points to the ROE makes the regulator
not the guardian against market power, but the facilitator of it. For
by definition, an ROE adder raises the cost of capital above the market
cost, inflicting on consumers exactly the harm that utility

regulation is supposed to prevent. In sum, an ROE adder is a subsidy.
    11. As a result, absent a clear declaration from Congress that a
FERC-authorized incentive must take the form of an ROE adder--which it
did not require for RTO participation incentives--awarding an ROE adder
for any length of time as a ``reward'' for joining an RTO/ISO may be
inconsistent with FPA section 219's concurrent mandate that rates must
be just and reasonable and not unduly discriminatory or preferential.
    12. Because this supplemental NOPR proposes to limit the use of ROE
adders for RTO/ISO membership to three years after joining--a welcome
first move--I respectfully concur. I look forward, however, to
commenters' responses regarding non-ROE incentives.
    For these reasons, I respectfully concur.

-----------------------------------------------------------------------

Mark C. Christie,

Commissioner.

[FR Doc. 2021-08215 Filed 4-23-21; 8:45 am]
BILLING CODE 6717-01-P