On August 6, 2013, FERC Administrative Law Judge Michael J. Cianci issued an initial decision on the complaint filed against the New England Transmission Owners (NETOs) seeking to reduce their currently effective 11.14% base return on equity (ROE) (FERC Docket Nos. EL11-66-000, et al.). Applying FERC’s traditional discounted cash flow (DCF) analysis to financial data largely for the period May 2012 – October 2012, Judge Cianci would require the NETOs to use a 10.6% base ROE to make refunds for transmission service provided between October 1, 2011 and December 31, 2012. Applying the same DCF analysis to financial data largely for the period October 2012 – March 2013, Judge Cianci would allow the NETOs a 9.7% ROE that would apply prospectively once FERC ultimately issues its order in the case (assuming FERC sustains Judge Cianci’s rulings; see PP* 544, 559-560). These rulings undoubtedly are disappointing both to the NETOs, who opposed any reduction in the 11.14% base ROE, and the complainants, who advocated substantially lower ROEs (8.3% to 8.9%) than Judge Cianci would allow.
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On June 6, 2013, the Edison Electric Institute (EEI) issued a white paper urging the Federal Energy Regulatory Commission (FERC) to reevaluate the method it uses to establish returns on equity (ROEs) for transmission investments. In the white paper, EEI asserts that investment in transmission infrastructure provides considerable benefits to transmission customers, and notes that transmission investment by its members has nearly doubled between 2001 and 2011.
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