Dive Brief:
- Large electricity users in the Midwest want federal regulators to reduce the profits that American Transmission Corp. and other Midwest utilities are earning on the construction of high-voltage lines.
- The Wisconsin Industrial Energy Group and similar groups in Illinois, Indiana and Minnesota told the Federal Energy Regulatory Commission (FERC) on Nov. 12 that the return on equity for grid projects in the Midcontinent Independent System Operator should be capped at 9.15%. Current rates of return on large transmission projects can exceed 12%, which can translate into millions of dollars in added profits.
Dive Insight:
Congress in 2005 said FERC could provide enhanced return on high-priced, large-scale transmission projects because of the inherent risks involved and the need to upgrade the nation's aging and unreliable grid. FERC has been generous in granting such added incentives even as some state regulators, citing a period of low interest rates, have cut returns on grid projects by the local utilities they regulate. This new challenge to returns on grid projects in MISO is similar to one that is pending at FERC by stakeholders in New England against transmission owning utilities. In that case, an administrative law judge has recommended a limit of 11.14% on profits, but a final decision rests with FERC commissioners.