[Federal Register Volume 76, Number 103 (Friday, May 27, 2011)]
[Proposed Rules]
[Pages 30869-30878]
[FR Doc No: 2011-13150]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Chapter I

[Docket No. RM11-26-000]

Promoting Transmission Investment Through Pricing Reform

May 19, 2011.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Notice of inquiry.

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SUMMARY: In this Notice of Inquiry, the Federal Energy Regulatory
Commission (Commission) seeks comment on the scope and implementation
of its transmission incentives regulations and policies under Order No.
679. It has been nearly five years since the Commission promulgated
rules to implement the directives of section 1241 of the Energy Policy
Act of 2005 (EPAct 2005), which added a new section 219 to the Federal
Power Act (FPA). In the past five years, the Commission has received
over 75 applications for transmission incentives. The requested
incentives have been varied, and the demonstrations supporting the
incentives applications have likewise been varied.
    During this time, the electric industry has continued to evolve,
and the Commission has issued corresponding regulations, policy
statements, and case-by-case determinations. Given the changes in the
electric industry, the Commission's experience to date applying Order
No. 679, and the ongoing need to ensure that our incentives regulations
and policies are encouraging the development of transmission
infrastructure in a manner consistent with FPA sections 219 and 205 and
206, the Commission now issues this Notice of Inquiry.

DATES: Comments are due July 26, 2011.

ADDRESSES: You may submit comments, identified by docket number and in
accordance with the requirements posted on the Commission's Web site
http://www.ferc.gov. Comments may be submitted by any of the following
methods:
     Agency Web Site: Documents created electronically using
word processing software should be filed in native applications or
print-to-PDF format, and not in a scanned format, at http://www.ferc.gov/docs-filing/efiling.asp.
     Mail/Hand Delivery: Commenters unable to file comments
electronically must mail or hand deliver an original of their comments
to: Federal Energy Regulatory Commission, Secretary of the Commission,
888 First Street, NE., Washington, DC 20426. These requirements can be
found on the Commission's Web site, see, e.g., the ``Quick Reference
Guide for Paper Submissions,'' available at http://www.ferc.gov/docs-filing/efiling.asp, or via phone from FERC Online Support at 202-502-
6652 or toll-free at 1-866-208-3676.

FOR FURTHER INFORMATION CONTACT:

David Borden (Technical Information), Office of Energy Policy and
Innovations, Federal Energy Regulatory Commission, 888 First Street,
NE., Washington, DC 20426,<PHONE_NUMBER><EMAIL_ADDRESS>Andrew Weinstein (Legal Information), Office of General Counsel--Energy
Markets, Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426,<PHONE_NUMBER><EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Notice of Inquiry

    1. In this Notice of Inquiry, the Federal Energy Regulatory
Commission (Commission) seeks comment on the scope and implementation
of its transmission incentives regulations and policies under Order No.
679.\1\ It has been nearly five years since the Commission promulgated
rules to implement the directives of section 1241 of the Energy Policy
Act of 2005 (EPAct 2005),\2\ which added a new section 219 to the
Federal Power Act (FPA).\3\ In the past five years, the Commission has
received over 75 applications for transmission incentives.
Collectively, the applicants in those cases sought incentives for
investment in over $50 billion in proposed transmission infrastructure
to ensure reliability or to reduce the cost of delivered power to
customers by reducing transmission congestion.\4\ The requested
incentives have been varied, and the demonstrations supporting the
incentives applications have likewise been varied.
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    \1\ Promoting Transmission Investment through Pricing Reform,
Order No. 679, 71 FR 43294 (Jul. 31, 2006), FERC Stats. & Regs. ]
31,222 (2006), order on reh'g, Order No. 679-A, 72 FR 1152 (Jan. 10,
2007), FERC Stats. & Regs. ] 31,236, order on reh'g, 119 FERC ]
61,062 (2007).
    \2\ Energy Policy Act of 2005, Public Law 109-58, Sec. Sec.
1261 et seq., 119 Stat. 594 (2005).
    \3\ 16 U.S.C. 824s.
    \4\ This figure is the sum of the proposed investment amounts
included in transmission incentive applications submitted to the
Commission pursuant to Order No. 679, as of April 2011. However, the
approval of transmission rate incentives for many of those proposed
projects does not mean that all of those proposed projects have gone
into service or ultimately will be completed.
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    2. During this time, the electric industry has continued to evolve,
and the Commission has issued corresponding regulations, policy
statements, and case-by-case determinations.\5\ Given the changes in
the electric industry, the Commission's experience to date applying
Order No. 679, and the ongoing need to ensure that our incentives
regulations and policies are encouraging the development of
transmission infrastructure in a manner consistent with FPA sections
219 and 205 and 206,\6\ the Commission now issues this Notice of
Inquiry.
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    \5\ In the past five years, the electric industry has
experienced significant changes. Among others, such changes include
the implementation of Order No. 890 transmission planning processes;
adoption of mandatory and enforceable reliability standards;
increasing diversity of the generation fleet; and increasing
investment in the development of smart grid technologies.
    \6\ 16 U.S.C. 824(d) and 824(e) (2006).
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I. Brief History/Background

    3. Section 1241 of EPAct 2005 added a new section 219 to the FPA.
Section 219(a) of the FPA requires the Commission to establish by rule
incentive-based, including performance-based, rate treatments for the
transmission of electric energy in interstate commerce by public
utilities for the purpose of benefiting consumers by ensuring
reliability and reducing the cost of delivered power by reducing
transmission congestion. Section 219(b) requires that the Rule:
     Promote reliable and economically efficient transmission
and generation of electricity by promoting capital investment in the
enlargement, improvement, maintenance, and operation of all facilities
for the transmission of electric energy in interstate commerce,
regardless of the ownership of the facilities;
     Provide a return on equity that attracts new investment in
transmission facilities, including related transmission technologies;
     Encourage deployment of transmission technologies and
other measures to increase the capacity and efficiency of existing
transmission facilities and improve the operation of the facilities;
and
     Allow the recovery of all prudently incurred costs
necessary to comply with mandatory reliability standards issued
pursuant to section 215 of the FPA, and all prudently incurred costs
related to transmission infrastructure

development pursuant to section 216 of the FPA.\7\
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    \7\ Section 216 addresses designation of and siting of
transmission facilities within National Interest Electric
Transmission Corridors. 16 U.S.C. 824p (2006).
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    4. Section 219(c) requires that the Rule provide for incentives to
each transmitting utility or electric utility that joins a Transmission
Organization and ensure that any recoverable costs associated with
joining such Transmission Organization may be recovered through
transmission rates charged by the utility or through the transmission
rates charged by the Transmission Organization that provides
transmission service to the utility. Finally, section 219(d) provides
that all rates approved under the Rule are subject to the requirements
of sections 205 and 206 of the FPA, which require that rates, charges,
terms and conditions of service be just and reasonable and not unduly
discriminatory or preferential.
    5. On July 20, 2006, the Commission issued Order No. 679, Promoting
Transmission Investment through Pricing Reform, which was further
refined in Order No. 679-A, and a subsequent order on rehearing, issued
in December 2006, and April 2007, respectively. In this series of
orders, the Commission stated that Section 219 reflects Congress'
determination that the Commission's traditional ratemaking policies may
not be sufficient to encourage new transmission infrastructure.\8\
Thus, the Commission identified instances where its policies may no
longer have struck the appropriate balance in encouraging new
investments and set forth several broad categories of incentive rate
treatments. The Commission declined to adopt specific criteria or
conditions that applicants would be required to meet in order for their
projects to be considered eligible for incentive rate treatments. The
Commission stated that it would not establish such criteria ``at this
time,'' on the grounds that to do so ``now would limit the flexibility
of the Rule.'' \9\ Instead, as discussed more fully below, the
Commission required that each applicant satisfy the statutory threshold
set forth in section 219(a), by demonstrating that the facilities for
which it seeks incentives either ensure reliability or reduce the cost
of delivered power by reducing transmission congestion. Once that
threshold is met, the applicant must demonstrate that there is a nexus
between the incentive sought and the investment being made.
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    \8\ Order No. 679, FERC Stats. & Regs. ] 31,222 at P 5.
    \9\ Id. P 43.
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    6. With respect to the statutory threshold, the Commission
established rebuttable presumptions to assist in determining whether
proposed facilities either ensure reliability or reduce the cost of
delivered power by reducing transmission congestion, consistent with
section 219(a) of the FPA. The rebuttable presumptions apply to a
transmission project that (i) results from a fair and open regional
planning process that considers and evaluates projects for reliability
and/or congestion and is found to be acceptable to the Commission; or
(ii) has received construction approval from an appropriate state
commission or state siting authority.\10\ If a proposed project does
not qualify for the rebuttable presumption, an applicant bears the
burden of otherwise demonstrating that its project satisfies the
statutory criteria and therefore is eligible for incentives.
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    \10\ Id. P 58.
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    7. As mentioned above, after satisfying the statutory threshold of
section 219(a), applicants for incentives must then show that there is
a nexus between the incentive sought and the investment being made,
i.e., that the incentives being requested are ``rationally tailored to
the risks and challenges faced by a project.'' \11\ In Order No. 679-A,
the Commission stated that ``[i]n evaluating whether an applicant has
satisfied this nexus test, the Commission will examine the total
package of incentives being sought, the inter-relationship between any
incentives, and how any requested incentives address the risks and
challenges faced by a project.'' \12\
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    \11\ Id. P 26.
    \12\ Order No. 679-A, FERC Stats. & Regs. ] 31,236 at P 21.
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    8. The Commission stated that the rebuttable presumptions and the
nexus test are not prescriptive by design, and are intended to be
applied on a case-by-case basis.\13\ The Commission also stated that
the ``most compelling'' candidates for incentives are ``new projects
that present special risks or challenges, not routine investments made
in the ordinary course of expanding the system to provide safe and
reliable transmission service.'' \14\
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    \13\ Order No. 679, FERC Stats. & Regs. ] 31,222 at P 22, 24.
    \14\ Id. P 23, 60.
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    9. The Commission also discussed the potential benefits of specific
incentives for which applications could be filed under Order No. 679.
These incentives included incentive adders to a base return on equity
(ROE), recovery of 100 percent of prudently incurred costs of
transmission facilities that are cancelled or abandoned due to factors
that are beyond the control of the public utility, inclusion of 100
percent of construction work in progress (CWIP) in rate base,
hypothetical capital structures, accelerated depreciation for rate
recovery, and recovery of prudently incurred pre-commercial operations
costs.

II. Subject of the Notice of Inquiry

    10. In Order No. 679, the Commission established a policy for rate
incentives to achieve the goals of section 219 to promote
``transmission infrastructure investment that will help ensure the
reliability of the bulk power transmission system in the United States
and reduce the cost of delivered power to customers by reducing
transmission congestion.''\15\ The Commission believes that there
remains a need for additional transmission investment to ensure the
reliable operation of the grid and reduce the cost of delivered power
by reducing transmission congestion.
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    \15\ Id. P 1.
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    11. By issuing this Notice of Inquiry, the Commission is not
departing from the Congressional mandate set forth in section 219.
    12. Similarly, by issuing this Notice of Inquiry, the Commission is
not departing from its longstanding recognition of the need to balance
consumer and investor interests. For example, in Order No. 679, the
Commission stated:

    The incentives adopted by this Final Rule are properly
understood only in the context of the traditional regulatory
principles they seek to further. The longstanding rule is that
utility rate regulation must adequately balance both consumer and
investor interests. It is not enough to ensure investors are
properly compensated, and it is not enough to ensure that consumers
are protected against excessive rates. Our policies must ensure both
outcomes and, in doing so, strike the appropriate balance between
these twin objectives.\16\
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    \16\ Id. P 21.

    13. This Notice of Inquiry does not seek to overturn the need for
balance between consumer and investor interests. In Order No. 679, the
Commission stated that the purpose of the incentives policy ``is to
benefit customers by providing real incentives to encourage new
infrastructure, not simply increasing rates in a manner that has no
correlation to encouraging new investment.'' \17\ We will continue to
balance the interests of consumers and investors and ensure that our
implementation of section 219 provides

incentives to encourage new infrastructure as we evaluate future
requests for incentives for investment in transmission
infrastructure.\18\
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    \17\ Id. P 6.
    \18\ During the pendency of this proceeding, the Commission will
continue to evaluate incentive requests under Order No. 679 on a
case-by-case basis.
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    14. The Commission has discretion in implementing transmission
incentives policies to achieve the broad goals of section 219. Through
this Notice of Inquiry, the Commission is seeking input from
stakeholders on the scope and implementation of its transmission
incentives policies, and on what steps the Commission could take
evaluating future requests for incentives for investment in
transmission infrastructure to ensure that its incentives policies
appropriately encourage the development of transmission infrastructure
in a manner consistent with our statutory responsibilities.
    15. Immediately below, the Commission poses a number of overarching
questions about our incentives policies under Order No. 679. The
ensuing sections of this Notice of Inquiry pose more specific questions
with respect to various aspects of the Commission's implementation of
its transmission incentive policies.
    (Q1) What have been the effects of the incentives policies adopted
in Order No. 679 with respect to the goals set forth in section 219?
    (Q2) Are the Commission's incentives policies appropriately
promoting investment in transmission infrastructure in accordance with
section 219?
    (Q3) Some barriers to construction of new transmission facilities
fall outside of the Commission's jurisdiction. How do the Commission's
incentives policies affect such barriers?
    (Q4) How can the Commission's rate incentives policies balance the
need for regulatory certainty with the changing investment climate over
time? Are there metrics the Commission should monitor to achieve this
balance, and if so, what are they? Are there other factors that change
over time that the Commission should consider in evaluating incentives
applications? Should the Commission consider these changes over time on
a generic or case-by-case basis?
    (Q5) Should specific rate incentives be tailored to address
specific goals set forth by Congress in section 219?
    (Q6) Are there other factors or considerations which the Commission
should consider as part of its transmission incentives policies, in
order to be consistent with the goals of section 219?
    (Q7) Have the incentives granted to transmission projects had an
impact on consumer rates and service, including impacts related to
reliability and the reduction of congestion?
    (Q8) Have the incentives granted to transmission projects had an
impact on investment patterns in the electricity industry? Do the
incentives impact the allocation of investment capital among
transmission, generation, and distribution facilities?
    (Q9) How should the Commission best balance the promotion of
transmission investment with the assurance of just and reasonable
rates?

A. Section 219(a) Statutory Threshold

    16. In Order No. 679, the Commission required that each applicant
seeking transmission incentives in accordance with section 219 of the
FPA, first satisfy the statutory threshold set forth in section 219(a)
by demonstrating that a proposed project for which it seeks incentives
either ensures reliability or reduces the cost of delivered power by
reducing transmission congestion. The Commission has established
rebuttable presumptions that a proposed transmission project satisfies
the section 219(a) statutory threshold if such project: (i) Results
from a fair and open regional planning process that considers and
evaluates a project for reliability and/or congestion, and is found to
be acceptable to the Commission; or (ii) has received construction
approval from an appropriate state commission or state siting
authority. In the alternative, if a proposed project does not qualify
for the rebuttable presumption, an applicant can nevertheless make an
independent showing that its project either ensures reliability or
reduces transmission congestion and therefore is eligible for
incentives.
    17. The Commission seeks comment regarding the following issues:
    (Q10) Do the rebuttable presumptions established in Order No. 679
serve as appropriate bases for satisfying the statutory threshold for
section 219(a)?
    (Q11) Are there other criteria that the Commission should adopt as
additional rebuttable presumptions for satisfying the statutory
threshold for section 219(a)?
    (Q12) What types of information, data, or studies should the
Commission consider in evaluating whether an applicant has made an
independent showing that satisfies section 219(a)?
    (Q13) Would it assist applicants if the Commission established a
procedure that applicants may follow to make such an independent
showing? If so, what should be the characteristics of that procedure?
    (Q14) In some cases, when an applicant has sought incentives, the
Commission has conditionally approved the request subject to the
project receiving approval in a regional transmission planning process
or state siting process.\19\ Intervenors in various rate proceedings
have raised concerns that a project scope may change in the planning
and siting process. In light of this, how should the Commission balance
the value of and need for the requested incentives in promoting project
development and financing with the potential uncertainty surrounding
project scope?
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    \19\ As discussed above, these processes are related to
satisfying the rebuttable presumptions set forth in Order No. 679.
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B. Additional Goals in Section 219

    18. The Commission in Order No. 679 interpreted section 219 as
intended to promote capital investment in a wide range of
infrastructure that ensures reliability or reduces the cost of
delivered power by reducing transmission congestion. This
interpretation is primarily based on the language of section 219(a). In
addition, section 219(b)(1) states that ``the Commission shall promote
reliable and economically efficient transmission and generation of
electricity by promoting capital investment in the enlargement,
improvement, maintenance, and operation of all facilities for the
transmission of electric energy in interstate commerce * * *''
Similarly, section 219(b)(3) encourages the ``deployment of
transmission technologies and other measures to increase the capacity
and efficiency of existing transmission facilities and improve the
operation of the facilities.'' The Commission stated that the
``reliability benefits of operation and maintenance capital spending
are obvious, and we expect applicants incurring this type of capital
spending will be able to demonstrate reliability benefits and thereby
be eligible for incentive treatment.'' \20\
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    \20\ Id. P 56.
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    19. To date, the vast majority of applications for transmission
incentives filed with the Commission have focused on the enlargement of
facilities, including construction of new transmission facilities. Few
applications have focused on the improvement, maintenance, and
operations of transmission facilities or on increasing their capacity
or efficiency.\21\
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    \21\ For example, this could include software improvements that
enhance scheduling and dispatch or investment in tools to enhance
self-healing grid capabilities or improved situational awareness.

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    20. The Commission requests comment on whether there is a need for
the Commission to promote the other goals set forth in the statute,
such as greater efficiency, including economic efficiency, and improved
operations in transmission assets through specifically tailored
incentives. The use of advanced transmission technologies to bring
about efficiencies and/or improved operations is discussed further and
separately below. Specifically, the Commission poses the following
questions.
    (Q15) Pursuant to section 219(b)(1), what steps could the
Commission take to ``promote reliable and economically efficient
transmission and generation of electricity by promoting capital
investment in the enlargement, improvement, maintenance, and operation
of all facilities for the transmission of electric energy in interstate
commerce''?
    (Q16) How would these steps affect other aspects of the
Commission's rate-making policy?
    (Q17) Pursuant to section 219(b)(3), what steps could the
Commission take to ``increase the capacity and efficiency of existing
transmission facilities and improve the operation of the facilities''?
    (Q18) As indicated above, applicants must show that their project
meets the threshold under section 219(a). What showing should the
Commission require to support a request for incentives under section
219(b)(1) and (b)(3)?

C. Order No. 679 Nexus Test

    21. Once a proposed project satisfies the section 219(a) statutory
threshold, the applicant must demonstrate that there is a nexus between
the incentive sought and the investment being made--i.e., that the
incentives being requested are ``rationally tailored to the risks and
challenges faced'' by a project.\22\ In evaluating whether an applicant
for incentives has satisfied the nexus test, the Commission stated that
it will examine the total package of incentives being sought, the
inter-relationship between any incentives, and how any requested
incentives address the risks and challenges faced by a project.\23\ The
nexus test is not prescriptive by design and the Commission did not
specify criteria for measuring the nexus. The Commission did emphasize
that the ``most compelling'' candidates for incentives are ``new
projects that present special risks or challenges, not routine
investments made in the ordinary course of expanding the system to
provide safe and reliable transmission service.'' \24\
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    \22\ Id. P 26.
    \23\ Order No. 679-A, FERC Stats. & Regs. ] 31,236 at P 21.
    \24\ Id. P 23, 60.
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    22. As the Commission has reached case-by-case determinations on
incentive applications, and faced new facts and circumstances in each
case, the Commission's application of the nexus test has evolved.
    23. One development with respect to the nexus test is the
Commission's finding that the question of whether a project is routine
or non-routine is particularly probative in evaluating whether there is
a nexus between a project and the incentives sought.\25\ The Commission
has offered guidance on the factors that will be considered in
evaluating whether a project is routine or non-routine, including: (1)
The scope of a project, e.g., investment dollars, increase in transfer
capability, and size of a project; 2) the effect of a project, e.g.,
improving reliability or reducing congestion costs; and 3) the
challenges or risks faced by a project, e.g., siting, long lead times,
regulatory and political risks, and financing challenges.\26\
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    \25\ Baltimore Gas and Electric Company, 120 FERC ] 61,084
(2007).
    \26\ Id. P 43.
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    24. Another development with respect to the nexus test involves
whether that test applies to each individual project for which an
applicant requests incentives, or instead applies to groups of
projects. The Commission has stated that an applicant may demonstrate
that several individual projects are appropriately considered as a
single overall project based on their characteristics or combined
purpose, and seek incentives for that single overall project.\27\ The
Commission has also stated that if the applicant is unable to satisfy
that criterion, then the applicant may still file a single application
for incentives, but the Commission will consider each individual
project separately in applying the nexus test and determining whether
each project is routine or non-routine.\28\
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    \27\ See PJM Interconnection, L.L.C., 133 FERC ] 61,273 at 45
(2010) (citing PacifiCorp, 125 FERC ] 61,076 (2008)).
    \28\ Id.
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    25. Thus, the nexus test has been fundamental to the Commission's
implementation of Order No. 679, and the required demonstration for
satisfying the nexus test has evolved over time on a case-by-case
basis. The Commission is interested in comments on the following:
    (Q19) Does the focus of the nexus test on the risks and challenges
of a given transmission project remain appropriate for the purpose of
justifying incentives? Is that focus more appropriate for some
incentives than others? What other factors should the Commission
consider?
    (Q20) Would focusing on project characteristics or effects be a
more effective means than focusing on a project's risks and challenges
as the basis for granting incentives? What characteristics or effects
would be appropriate for the Commission to consider for that purpose,
consistent with section 219? \29\
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    \29\ For example, this could include transmission projects that
are multi-state or high voltage in nature.
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    (Q21) What risks and challenges are transmission developers facing
today? Have such risks and challenges evolved since the issuance of
Order No. 679, and if so how?
    (Q22) Is the distinction between a routine and non-routine project
in analyzing ``risks and challenges'' useful in providing guidance to
the industry on how to apply the nexus test? Does this distinction
appropriately differentiate between the level of difficulty in
constructing various transmission projects?
    (Q23) What types of criteria should the Commission consider when
evaluating the ``scope of a project'' or the ``effect of a project,''
in determining whether a project is routine or non-routine? Should the
Commission establish bright line criteria, such that a project meeting
those criteria is non-routine regardless of the applicant, or should
this evaluation depend on the circumstances of the applicant, e.g. the
estimated cost of the project relative to the applicant's transmission
rate base?
    (Q24) Are there aspects of the Commission's accounting and
ratemaking policies, including the use of formula rates, that reduce or
increase the risks and challenges of a transmission project? If so, how
should the Commission take into account the effect of its accounting
and ratemaking policies in evaluating incentive applications?
    (Q25) In Order No. 679-A, the Commission stated that ``[i]n
general, we do not consider that contractual commitments or mandatory
projects, such as section 215 reliability projects, disqualify a
request for incentive-based rate treatment. Provided applicants are
able to demonstrate they meet the requirements of section 219,
including establishing the required nexus between the requested
incentive and the investment, they may qualify for incentive-based rate
treatments. A prior

contractual commitment or statute may have a bearing on our nexus
evaluation of individual applications.'' \30\ Is the existence of a
contractual commitment to build a relevant factor in considering
applications for rate incentives?
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    \30\ Order No. 679-A, FERC Stats. & Regs. ] 31,236 at P 122.
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    (Q26) The Commission has encouraged the joint ownership of
transmission facilities but declined in Order No. 679 to make it a
requirement for receiving incentives.\31\ Does this approach adequately
account for the benefits of joint ownership? Are there other approaches
to providing incentives that encourage joint ownership of transmission
facilities?
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    \31\ Order No. 679, FERC Stats. & Regs. ] 31,222 at P 356, 357;
Order No. 679-A, FERC Stats. & Regs. ] 31,236 at 102.
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D. Interrelationship of Incentives

    26. In determining whether an applicant has satisfied the nexus
test, the Commission evaluates the interrelationship between the
requested incentives.\32\ However, the Commission has stated that
receiving a particular incentive does not preclude receiving other
incentives.\33\ The Commission seeks comment regarding whether and/or
how the Commission should consider the effects of granting certain
incentives in evaluating whether to grant other incentives, and at what
level. The Commission seeks comment on the following:
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    \32\ Order No. 679-A, FERC Stats. & Regs. ] 31,236 at P 21.
    \33\ Id.
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    (Q27) Are there specific criteria the Commission should use in
evaluating whether and how to adjust certain incentives to account for
the impacts of other incentives?
    (Q28) Do certain incentives sufficiently mitigate the risks and
challenges of a transmission project so as to obviate the need for
granting other incentives, or warrant adjustment in the level of those
incentives? For example, should granting 100 percent CWIP and recovery
of the costs of abandoned plant affect the evaluation of a request for
an incentive ROE adder based on a project's risks and challenges?

E. The Role of Cost Estimates

    27. The Commission has generally denied proposals to limit
incentives to budgeted amounts.\34\ Intervenors in various transmission
incentive proceedings have asserted that the Commission's incentive
policies may have the unintended effect of discouraging cost
containment. However, others have responded that changes in cost
estimates are not due to any failure of the applicant to contain costs
but are due to changes imposed on the applicant in the state siting
process or other factors beyond the applicant's control that cause
costs to change.
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    \34\ Order No. 679, FERC Stats. & Regs. ] 31,222 at P 121, n.
81; P 166. See also Virginia Electric and Power Co., 124 FERC ]
61,207 at P 53 (2008).
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    28. As noted above, the Commission created a rebuttable presumption
that a project is eligible under FPA section 219 for incentive rate
treatments if that project results from a fair and open regional
planning process that evaluates projects for reliability and/or
congestion. The submission of an estimate of project costs is part of
some regional planning processes. These estimates may be used to select
certain projects for development. Because the estimated and actual
costs of a project may change significantly through the development and
construction process, and there can be significant unknowns at the time
a project is selected for development in a regional transmission
planning process, the Commission seeks comment on the following:
    (Q29) Should the Commission limit the application of incentives to
the cost estimate utilized for including or retaining the project in
the plan submitted through the regional planning process? If so, which
incentives should be applied to the cost estimate, and which should be
applied to all prudently incurred costs?
    (Q30) How could such an approach be implemented? Would this
approach work in all regions of the country? What processes for
developing, evaluating, and updating cost estimates must be in place
within regional transmission planning processes to facilitate such an
approach?
    (Q31) If a change in cost estimate is not due to the failure to
contain costs but instead reflects the real cost in building the
proposed transmission line, should the Commission take that
consideration into account, and if so, how?
    (Q32) Should new reporting requirements be in place to allow the
Commission to audit compliance with a requirement to limit incentives
to some project cost estimate?

F. Individual Incentives

    29. Order No. 679 identified specific incentives that the
Commission may grant to qualifying applicants, including: Incentive ROE
adders, opportunity to recover 100 percent of prudently incurred costs
of transmission facilities that are cancelled or abandoned for reasons
beyond the control of the public utility, inclusion of 100 percent of
prudently incurred CWIP in rate base, recovery of pre-commercial
operations costs, hypothetical capital structures, accelerated
depreciation, and deferred cost recovery. Below the Commission briefly
explains each incentive and seeks comment on a number of questions. The
Commission also poses questions immediately below on two more general
matters:
    (Q33) The Commission has general ratemaking policies with respect
to CWIP and recovery of abandoned plant costs, as discussed below.
Pursuant to Order No. 679, incentives above and beyond those general
ratemaking policies may be requested on a case-by-case basis. Would it
be appropriate to remove these issues from the case-by-case analysis of
incentive requests, in favor of exploring changes to the Commission's
general ratemaking policies? What would be the impact on ratepayers of
revising these ratemaking policies, rather than authorizing higher
levels of CWIP or recovery of costs of abandoned plant on a case-by-
case basis?
    (Q34) The Commission stated in Order No. 679 that it had not
established specific eligibility criteria or conditions for incentives
because it would limit the Commission's flexibility with respect to its
application of the Rule. The Commission is interested in receiving
comments regarding whether the establishment of criteria for
eligibility for particular incentives would enhance regulatory
certainty and predictability and serve to further encourage appropriate
investment in transmission infrastructure. Should the Commission
establish specific criteria or conditions that applicants must meet in
order to be eligible for these individual incentives?
i. Incentive ROE Adder for Project Risks and Challenges
    30. Under Order No. 679, the Commission allows for an incentive ROE
based on a project's risks and challenges that was intended to make
transmission investment more attractive where the ``risks of a
particular project exceed the normal risks undertaken by a utility (and
hence are not reflected in a traditional discounted cash flow (DCF)
analysis).'' \35\ An applicant's overall ROE, inclusive of any
incentive ROE adder, is capped at the top end of the zone of
reasonableness for the applicable proxy group under the Commission's
traditional DCF analysis.
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    \35\ Order No. 679, FERC Stats. & Regs. ] 31,222 at P 27.
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    31. The Commission seeks comment on the application of this
incentive, and whether the Commission considers the appropriate factors
in evaluating

whether a project is entitled to an incentive ROE adder based on a
project's risks and challenges. Specifically:
    (Q35) What risks and challenges are appropriately addressed by the
incentive ROE adder? Is it appropriate for the Commission to evaluate
these risks and challenges on a project-by-project basis or on an
aggregate basis for the applicant?
    (Q36) Are there other considerations that the Commission should
focus on when awarding an incentive ROE adder?
    (Q37) Does the base ROE adequately compensate investors for the
financial risk of the company, including risks associated with the
particular transmission project for which incentives are sought?
    (Q38) In determining the incentive ROE adder, and the requisite
risks and challenges that support such an adder, should the Commission
identify with specificity the types of risks and challenges that most
warrant an incentive ROE adder?
    (Q39) In determining the incentive ROE adder, should the Commission
make a distinction between financial barriers to transmission
development such as the ability to attract capital, and regulatory
barriers, such as siting or environmental challenges? If so, how?
    (Q40) In determining the incentive ROE adder, how should the
Commission balance the impact of other risk-reducing incentives (such
as CWIP and abandoned plant recovery)?
    (Q41) Does regulatory assurance of cost recovery, either at the
state or regional levels, mitigate the risks and challenges facing a
transmission project? If so, how should the Commission give
consideration to this mitigation in evaluating a request for incentive
ROE adder based on a project's risks and challenges?
ii. Other Incentive ROE Adders
    32. In Order No. 679, the Commission offered incentive ROE adders
for the creation of a Transco or participation in a regional
transmission organization (RTO) or independent system operator (ISO).
Those incentive ROE adders are discussed below.
(1) Transcos
    33. In Order No. 679, the Commission addressed incentives to
encourage the development of transmission only companies (i.e.,
Transcos),\36\ and in particular, found it appropriate to ``provide to
Transcos a ROE that both encourages Transco formation and is sufficient
to attract investment after the Transco is formed.'' \37\ The
Commission seeks comment regarding the following questions:
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    \36\ Order No. 679 defines a Transco broadly. Order No. 679,
FERC Stats. & Regs. ] 31,222 at P 201.
    \37\ See Id. P 221.
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    (Q42) Is it appropriate to promote voluntary formation of Transcos,
as defined in Order No. 679, through an ROE adder? Would other
incentives promote Transco formation more effectively?
    (Q43) Order No. 679 does not distinguish between Transcos that are
independent of generation-owning market participants and Transcos that
are affiliated with such market participants. Would such a distinction
be appropriate in terms of eligibility for, or the amount of, a Transco
adder?
    (Q44) Further, Order No. 679 did not distinguish between Transcos
that result from divestiture of a vertically-integrated utility's
existing transmission system and Transcos that are created for the
purpose of developing a particular new transmission facility. Would
such a distinction be appropriate in terms of eligibility for, or the
amount of, a Transco adder?
(2) Transmission Organizations (RTO/ISO)
    34. Section 219(c) directs that the Commission ``shall to the
extent within its jurisdiction, provide for incentives to each
transmission utility or electric utility that joins a Transmission
Organization.'' In pre- as well as post-Order No. 679 cases, the
Commission typically has awarded a 50 basis-point ROE adder to
utilities that either join or already are members of an RTO or ISO.\38\
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    \38\ See Proposed Pricing Policy for Efficient Operation and
Expansion of Transmission Grid, 102 FERC ] 61,032 (2003).
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    35. While section 219 requires an incentive for membership in a
Transmission Organization, the Commission invites comments on what
level of the RTO/ISO ROE adder is appropriate. In particular, the
Commission seeks comment on the following:
    (Q45) Is it appropriate to offer a standard ROE adder for all
utilities that join or remain members of an RTO/ISO?
    (Q46) In the alternative, are there other incentives that the
Commission should consider to encourage joining or remaining in an RTO/
ISO?
    (Q47) Should the existing 50 basis point adder be increased to
better encourage the formation and continuance of RTO/ISO arrangements?
    (Q48) Is the existing 50 basis point adder appropriately scaled to
encourage the formation and continuance of RTO/ISO arrangements?
iii. Abandonment
    36. Order No. 679 stated that transmission developers may be
entitled to recover 100 percent of the prudently incurred costs related
to certain transmission facilities if such facilities are later
abandoned or cancelled. The genesis of the Commission's abandoned plant
policy can be found in Opinion No. 295,\39\ where the Commission stated
that ratepayers and shareholders should equally share the costs of
prudently incurred investments in abandoned or cancelled generation
facilities. Thus, it was originally Commission policy that 50 percent
of the prudently incurred costs would be amortized over the life of the
plant as an expense, and the remaining 50 percent would be written off
as a loss. This policy was later extended and made applicable to
transmission projects.\40\ In Southern California Edison (SCE),\41\ the
Commission granted the recovery of 100 percent of the prudently
incurred costs related to certain proposed transmission facilities in
the event those facilities were later cancelled or abandoned. The
Commission's determination in SCE served as the foundation for the
abandoned plant policy articulated in Order No. 679.
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    \39\ New England Power Company, 42 FERC ] 61,016 (1988).
    \40\ Public Service Company of New Mexico, 75 FERC ] 61,266, at
61,859 (1996).
    \41\ Southern California Edison Company, 112 FERC ] 61,014
(2005).
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    (Q49) How does the current incentive allowing recovery of 100
percent of prudently incurred abandoned plant costs affect the sharing
of risks between investors and customers? Are there reasonable
conditions or safeguards that could be imposed to ensure risks are
appropriately allocated? For example, should recovery of abandoned
plant costs be exclusive of carrying charges? Should carrying charges
exclude any ROE incentive?
    (Q50) Should abandoned plant costs be prohibited in instances where
an affiliated project eliminates the need for a transmission project?
    (Q51) Are there additional measures that can be taken to either
limit the risk of abandonment, or mitigate the impact of allowing
recovery of 100 percent of abandoned plant costs on customers?
    (Q52) Some intervenors in various transmission incentives
proceedings have raised concerns that the incentive of allowing 100
percent recovery of prudently-incurred abandoned plant costs could
encourage applicants to pursue projects of greater risk. How

should the Commission consider and address this factor?
    (Q53) Should the Commission allow recovery for partial abandonment
of projects? If so, how should partial abandonment be defined? What
criteria should the Commission consider when deciding whether a project
has been partially abandoned? What would be the consequences of the
Commission allowing recovery of abandoned plant cost for a portion of a
project and later denying recovery of abandoned plant costs for the
entire project (e.g., finding that abandonment of the full project was
under the control of the project developer)?
    (Q54) If the recovery of abandoned plant costs were made contingent
on the abandonment or cancellation of all or a substantial portion of a
transmission project, how should the Commission define a ``project''
for the purpose of applying the abandoned plant incentive? The
Commission has stated that several individual transmission projects may
be characterized as a single project, or as several individual
projects, depending on the showing made by the applicant. Should this
characterization limit how an applicant may recover abandoned plant
costs?
    (Q55) If a project developer is granted the incentive for 100
percent recovery of abandoned plant costs, but is denied a request to
recover abandoned plant costs under this incentive, then is it
appropriate to recover those costs through other accounting treatments
in a subsequent section 205 filing? If so, what accounting treatments
would be appropriate?
    (Q56) If a utility receives recovery of abandoned plant costs
incentives and subsequently abandons its project, what rate of return
(including incentive ROE adders), if any, should be applied to the
abandoned plant costs until the costs are ultimately recovered in
rates?
iv. Construction Work in Progress (CWIP) in Rate Base
    37. Order No. 679 provides the opportunity for public utilities,
where appropriate, to include 100 percent of prudently incurred
transmission-related CWIP in rate base.\42\ The Commission's general
policy has been to allow only 50 percent of the non-pollution control/
fuel conversion construction costs as CWIP in rate base. The remaining
construction costs, including allowance for funds used during
construction (AFUDC), generally would have been capitalized and
included in rate base only when the plant went into commercial
operation, i.e., when the plant became used and useful.\43\ The
Commission's policy set forth in Order No. 679 authorizes 100 percent
of CWIP to be included in rate base prior to commercial operation
provides utilities with additional cash flow in the form of an
immediate earned return.\44\ Order No. 679 also eliminated the
requirement that utilities provide forward-looking cost allocation
ratios based on the customers' average usage of the transmission line.
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    \42\ See Order No. 679, FERC Stats. & Regs. ] 31,222 at P 29.
    \43\ There are two mutually exclusive ratemaking methodologies
by which public utilities may recover financing costs (also referred
to as ``carrying charges'') on construction capital in rates: accrue
carrying charges on CWIP in the form AFUDC or earn a return on CWIP
included in rate base. Under AFUDC, carrying charges are capitalized
as a component of construction and recovered from ratepayers when
the completed construction project goes into service. Under CWIP in
rate base, carrying charges are recovered through its return on rate
base while construction is underway unlike AFUDC. CWIP in rate base
increases the regulated utility's cash flow during the construction
period. This in turn decreases the amount of capital the regulated
utility must raise to finance construction projects, and thus may
reduce the cost of capital. When a regulated utility is permitted to
include CWIP in rate base, it is not allowed to also accrue AFUDC on
the same construction project costs.
    \44\ See Order No. 679, FERC Stats. & Regs. ] 31,222 at P 103
n.70 (citing 18 CFR 35.25(c)(3)).
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    (Q57) What are the appropriate bases for evaluating a request to
recover 100 percent of CWIP? Does including 100 percent of CWIP in rate
base more appropriately address project specific risks and challenges
or the aggregate risks and challenges associated with all projects an
applicant is undertaking in a certain time period? If the aggregate
risks and challenges are more appropriately addressed by including 100
percent of CWIP in rate base, how should the risks be reconciled with a
Commission policy to evaluate risks and challenges on a project
specific basis?
    (Q58) What is the impact on ratepayers of allowing 100 percent CWIP
in rate base prior to commercial operation? What kind of information
should an applicant submit to make a showing that granting 100 percent
CWIP will benefit consumers?
    (Q59) In addition to the rate impact data required under 18 CFR
35.13(h)(31) and (32), what rate impacts tests could be considered in
evaluating a request for including 100 percent of CWIP in rate base?
    (Q60) Should the CWIP incentive not apply or be suspended in
circumstances where an incentives project has been suspended for an
indefinite period of time and there is no additional construction
activity on the project?
    (Q61) In the past, the Commission implemented a phasing-in of rate
treatments to limit their rate impact to consumers.\45\ Should the
Commission consider such limits for certain incentives such as CWIP?
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    \45\ Construction Work In Progress for Public Utilities;
Inclusion of Costs in Rate Base, Order No. 298, 48 Fed. Reg. 24,323
(June 1, 1983), FERC Stats. & Regs. ] 30,455 (1983), clarification
on order on reh'g, Order No. 298-B, 48 Fed. Reg. 55,281 (December
12, 1983), FERC Stats. & Regs. ] 30,524 (1983). (Where the
Commission limited the rate increase due to CWIP in rate base to 6
percent in the first year and an additional 6 percent in the second
year, stating that ``[t]his initial limitation on CWIP in rate base
ensures that, in those instances in which utilities have
disproportionately large construction programs, the initial impacts
of the final rule on consumers will not be severe.'').
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    (Q62) If the applicant is granted an incentive ROE adder and 100
percent CWIP in rate base, should the incentive ROE adder be applied to
100 percent of CWIP included in rate base?
v. Other Incentives
1. Hypothetical Capital Structure
    38. A hypothetical capital structure allows an applicant to
determine its overall rate of return for revenue requirement and
ratemaking purposes based on a capital structure that is usually more
heavily weighted towards equity financing compared to its actual
capital structure. The relatively higher cost of equity compared to the
cost of debt and the heavier weighting of equity may serve to increase
the overall return, enhance cash flows, lower financing costs, and
improve credit ratings. In practice, the Commission has placed
limitations on this incentive by requiring that the actual capital
structure match the hypothetical capital structure at some point over
time, such as when a project commences operations. The Commission seeks
comment on the following:
    (Q63) Is there a reasonable debt to equity split, or a procedure
for determining such, that should be applied generally to future
applications, or that can be applied generally to classifications, such
as a general split for publicly owned projects and a general split for
investor owned projects? Or is this best suited for case by case
determination? What kind of information should an applicant provide in
order to support an application for a hypothetical capital structure?
    (Q64) Is there a reasonable point in time at which the actual
capital structure should be required to match the hypothetical capital
structure and that should be applicable generally to future
applications?

2. Pre-Commercial Cost Recovery

    39. In Order No. 679, the Commission permitted, as an incentive,
applicants to

expense pre-commercial costs and to recover them in current rates.\46\
Absent this incentive, pre-commercial costs would generally be
capitalized as part of CWIP, and subsequently earn a return on equity
as well as a return of equity through depreciation, once a project goes
into service. The incentive aspect of pre-commercial cost recovery
allows applicants to expense and recover the costs through rates during
the construction period which improves project cash flows and financial
metrics, and mitigates the uncertainty over cost recovery of
expenditures incurred prior to a project's regulatory approval and
commercial operation. Further, for new market entrants with no
established rate mechanism, the Commission has allowed the deferral of
pre-commercial costs as a regulatory asset.\47\ Where deferred recovery
and regulatory asset treatment are provided, utilities defer the pre-
commercial costs until they have an established rate structure in
place, at which time they may file to recover the costs, including
carrying charges,\48\ generally over the construction period, or five
years. The Commission seeks comment on the following questions:
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    \46\ The Commission explained that pre-commercial costs
generally include, for example, expenditures for preliminary
surveys, plans and investigations, made for the purpose of
determining the feasibility of utility projects, and the costs of
studies and analyses mandated by regulatory bodies related to plant
in service which are included in Account 183. The Commission also
stated that it would entertain proposals by public utilities to
expense other types of costs on a case-by-case basis. Order No. 679,
FERC Stats. & Regs. ] 31,222 at P 122.
    \47\ The Commission has allowed legal fees and company formation
and start-up costs to be expensed and recovered, with recovery
contingent on the entity having a rate in place to recover such
costs. The grant of the incentive does not create the mechanism by
which to recover the costs.
    \48\ Applicants seeking deferred recovery of pre-commercial
costs as a regulatory asset have typically requested carrying
charges on the regulatory asset from the time it is established
until it is fully amortized. The Commission, in practice, permits
carrying charges on pre-commercial costs at the overall cost of
capital, including the incentive ROE adder.
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    (Q65) CWIP related costs should not be recorded as pre-commercial
costs. What additional measures could be considered to prevent the
inclusion of costs as pre-commercial that should appropriately be
recorded as CWIP and recovered over the useful life of a project? In
the case of deferred recovery, would limiting the period of time that
carrying charges will be allowed help to ensure timely development of a
project and guard against unreasonable delays?
    (Q66) If incentives for both pre-commercial cost recovery on a
deferred basis and 100 percent recovery of abandoned plant costs are
granted, is there a relationship between the two incentives such that
the Commission should review the types of costs that are included in
the regulatory asset, the allowance of carrying charges, or the time
period over which a regulatory asset is recovered in rates for pre-
commercial cost recovery?
    (Q67) Does the current practice of allowing carrying charges on
deferred recovery of pre-commercial costs at the overall cost of
capital, including incentive ROE adders, appropriately balance the
sharing of risks of transmission project development between utility
applicants and customers and affect the overall level of pre-commercial
costs? How should this practice be changed to better allocate the risks
between applicants and customers and to ensure that pre-commercial
costs are reasonable?
3. Accelerated Depreciation
    40. Accelerated depreciation is a regulatory incentive that allows
an applicant to recover its return of capital costs more rapidly than
under traditional regulatory treatment, e.g., 15 years or less. As a
non-cash expense, accelerated depreciation may serve to enhance the
applicant's cash flows and credit ratings. There have been very few
incentive requests for accelerated depreciation as a transmission
incentive. The Commission seeks comment on whether there are issues
that the Commission should consider in reviewing this incentive.
4. Advanced Technology
    41. In Order No. 679, the Commission required each applicant
seeking incentives under the rule to submit a Technology Statement that
describes the advanced technologies it considered for the subject
project and, if those technologies are not to be employed in a project,
an explanation for that decision.\49\ The Commission recognized that in
enacting FPA section 219 as part of EPAct 2005, Congress envisioned a
connection to section 1223 of EPAct 2005, which required the Commission
to ``encourage, as appropriate, the deployment of advanced transmission
technologies.'' \50\ The Commission observed that section 1223 lists 18
specific advanced transmission technologies, but also stated that this
list of technologies was not intended to be exclusive and that the
Commission ``expect[s] new technologies to continually evolve.'' \51\
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    \49\ Order No. 679, FERC Stats. & Regs. ] 31,222 at P 302.
    \50\ Id. P 290, 302.
    \51\ Id. P 290.
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    42. The Commission's consideration of the required Technology
Statements has evolved with experience in processing applications under
Order No. 679. For example, the Commission has clarified that an
applicant's proposal to use a technology listed in section 1223 does
not compel the Commission to grant that applicant any particular
incentives. The Commission has stated that it retains discretion to
make such determinations on a case-by-case basis, noting that the
Congressional directive in section 1223 requires the Commission to
encourage the deployment of such technologies ``as appropriate.'' \52\
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    \52\ The Nevada Hydro Co., Inc., 122 FERC ] 61,272, at P 84
(2008); NSTAR Electric Co., 127 FERC ] 61,052, at P 27 (2009)
(NSTAR).
---------------------------------------------------------------------------

    43. The Commission has also explained that an applicant's proposal
to use advanced technologies may be relevant both as part of the
Commission's nexus analysis for an incentive ROE adder based on a
project's risks and challenges and as a possible basis for a separate
advanced technology incentive ROE adder. In the former context, the
Commission has observed that advanced technologies present
``technology-related'' risks and challenges that are appropriately
considered under the Order No. 679 nexus test together with other types
of risks and challenges associated with a project.\53\ In the latter
context, the Commission has stated it reviews record evidence to decide
if the proposed technology warrants a separate adder because it
reflects a new or innovative domestic use of the technology that will
improve reliability, reduce congestion, or improve efficiency.\54\ The
Commission has explained the relationship between these issues, noting
that consideration of an applicant's proposal to use advanced
technologies as part of the nexus analysis does not necessarily mean
that the applicant qualifies for a separate advanced technology
incentive ROE adder.\55\ As discussed above, the use of advanced
technology may be relevant to achieving the goals of section 219,
including increasing the efficiency of new and existing transmission
facilities.
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    \53\ PacifiCorp, 125 FERC ] 61,076, at P 51 (2008); Tallgrass
Transmission, LLC, 125 FERC ] 61,248, at P 55 (2008) (Tallgrass).
    \54\ The United Illuminating Co., 126 FERC ] 61,043, at P 14
(2009); NSTAR, 127 FERC ] 61,052 at P 27.
    \55\ Tallgrass, 125 FERC ] 61,248 at P 59-60.
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    44. The Commission is interested in receiving comments on the
following issues:
    (Q68) Should the Commission change the way it determines what
constitutes

an ``advanced'' technology that is appropriate for incentives?
    (Q69) Section 1223 of EPAct 2005 defines advanced transmission
technology and lists technologies that fall within that definition. How
should the Commission account for what Order No. 679 identified as the
evolving nature of technology?
    (Q70) Does the above-noted standard--examining whether a proposal
reflects a new or innovative domestic use of a technology that will
improve reliability, reduce congestion, or improve efficiency--strike
an appropriate balance?
    (Q71) Should an applicant's level of previous experience with a
technology be a factor in determining whether that technology is
``advanced'' for purposes of evaluating a request for incentives? If an
applicant has previous experience using a technology that otherwise has
not been widely adopted, should that applicant's proposed use of the
technology be considered ``advanced''? If an applicant has no previous
experience in using a technology that is otherwise widely adopted,
should that applicant's proposed use of the technology be considered
``advanced''?
    (Q72) Where the Commission grants an incentive ROE adder for the
use of advanced technology, should that adder apply to the entire cost
of a project, or just to the advanced technology?
    (Q73) Should incentives for advanced technology continue to be
assessed on a case-by-case basis, or would it be preferable and
practical to establish generic standards for advanced technology
incentives? For example, should the Commission consider identifying
particular technologies or applications of technology that may be
appropriately granted incentives?
    (Q74) What types of incentives, e.g., incentive ROE adder,
accelerated depreciation, will be most effective in encouraging the
deployment of advanced technology?

Comment Procedures

    45. The Commission invites interested persons to submit comments,
and other information on the matters, issues and specific questions
identified in this notice.
    46. Comments are due July 26, 2011. Comments must refer to Docket
No. RM11-26-000, and must include the commenter's name, the
organization they represent, if applicable, and their address in their
comments.
    47. The Commission encourages comments to be filed electronically
via the eFiling link on the Commission's Web site 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.
    48. Commenters unable to file comments electronically must mail or
hand deliver an original copy of their comments to: Federal Energy
Regulatory Commission, Secretary of the Commission, 888 First Street,
NE., Washington, DC 20426. These requirements can be found on the
Commission's Web site, see, e.g., the ``Quick Reference Guide for Paper
Submissions,'' available at http://www.ferc.gov/docs-filing/efiling.asp, or via phone from FERC Online Support at<PHONE_NUMBER> or
toll-free at 1-866-208-3676.
    49. 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.

Document Availability

    50. 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 FERC's Home Page (http://www.ferc.gov) and in FERC's
Public Reference Room during normal business hours (8:30 a.m. to 5 p.m.
Eastern time) at 888 First Street, NE., Room 2A, Washington, DC 20426.
    51. From FERC'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.
    52. User assistance is available for eLibrary and the FERC's
website during normal business hours from FERC Online Support at 202-
502-6652 (toll free at 1-866-208-3676) or e-mail at
<EMAIL_ADDRESS>or the Public Reference Room at (202) 502-
8371, TTY<PHONE_NUMBER>. E-mail the Public Reference Room at
<EMAIL_ADDRESS>
    By direction of the Commission. Commissioner Moeller is
concurring with a separate statement attached.

    Issued: May 19, 2011.
Kimberly D. Bose,
Secretary.

    MOELLER, Commissioner, concurring:
    Because regulatory certainty is critically important to those who
invest in our nation's infrastructure, this Commission should ensure
that if it decides to make changes to its incentive policies, it does
so only prospectively. The law explicitly requires this Commission to
``provide a return on equity that attracts new investment in
transmission facilities'' and to ``provide for incentives to each * * *
utility that joins a Transmission Organization.'' \56\ These directives
from Congress would be frustrated were this Commission to increase
regulatory uncertainty by changing long-held investor expectations.
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    \56\ Section 219 of the Federal Power Act at 16 U.S.C. 824s.
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    As I have repeatedly stressed, this nation should have policies
that encourage needed investment in transmission projects.\57\ The new
construction of transmission lines is often the lowest-cost way to
improve the delivery of electricity service. By building needed
transmission, our electrical service can maintain reliability at levels
that are the envy of the world, while simultaneously improving consumer
access to lower cost power generation--all while permitting more
efficient and cost-effective renewable resources to compete on an equal
basis with traditional sources of power.\58\
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    \57\ Transmission Planning and Cost Allocation by Transmission
Owning and Operating Public Utilities 131 FERC ] 61,253 (2010)
(Moeller, Comm'r, concurring); NSTAR Elec. Co., 125 FERC ] 61,313
(2008) (Moeller, Comm'r, dissenting in part) (``* * * the Commission
should do what it can to encourage capital investment in needed
transmission infrastructure projects.''); Commonwealth Edison Co.
and Commonwealth Edison Co. of Indiana, 125 FERC ] 61,250 (2008)
(Moeller, Comm'r, dissenting) (``* * * now is not the time for this
Commission to discourage investment in needed transmission
infrastructure.''); New York Indep. Sys.Operator, Inc., 129 FERC ]
61,045 (2009) (Moeller, Comm'r, dissenting) (``The main issue here
is whether needed transmission is being built * * * I have
encouraged investment in transmission infrastructure * * *'');
Southern California Edison Co., 129 FERC ] 61,013 (2009) (Moeller,
Comm'r, dissenting in part) (``The transmission that is needed in
this nation will not be built unless the companies that build it can
attract adequate investment dollars.'');
    \58\ Transmission Planning and Cost Allocation by Transmission
Owning and Operating Public Utilities 131 FERC ] 61,253 (2010)
(Moeller, Comm'r, concurring).
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    I look forward to reviewing the responses of the public on this
Notice of Inquiry, as they will inform this Commission as it moves
forward in its

consideration of its incentive policy. Given my interest in getting
needed transmission built, I am particularly interested in any comments
regarding how our incentive policies have been successful in
encouraging investment, and comments that show how our policies can be
improved in a way that encourages further development of needed
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transmission.

Philip D. Moeller,
Commissioner.

[FR Doc. 2011-13150 Filed 5-26-11; 8:45 am]
BILLING CODE 6717-01-P