Federal regulators side with OPC, ruling that transmission owner failed to justify requested profit level
BALTIMORE – Agreeing with the Office of People’s Counsel, the Federal Energy Regulatory Commission (FERC) ruled last week that transmission owner Grid Growth Ventures failed to demonstrate that its proposal to recover $1.1 billion in transmission project costs meets the “just and reasonable” legal standard and that the resulting rates “may be unjust, unreasonable, unduly discriminatory or preferential, or otherwise unlawful.”
In March, OPC challenged the proposal from Grid Growth Ventures—indirectly controlled by utility holding companies American Electric Power Company and FirstEnergy Corp.—to recover costs associated with building five new, large transmission projects in Ohio. Through the cost allocation rules of the regional transmission organization, PJM Interconnection, LLC, Maryland customers would pay a portion of those costs.
OPC’s filing challenged the company’s proposed “return on equity” (ROE)—a component of utility rates that provides for the utility’s financial return for investors—as excessive. In its order last week, FERC agreed that the company had not justified its proposed ROE and set the matter for hearing and settlement proceedings.
“Return on equity substantially impacts utility profits and what customers pay in their rates,” Maryland People’s Counsel David S. Lapp said. “Maryland ratepayers should not be asked—and many simply cannot afford—to pay for excessive profits for utility investors.”
OPC’s filings also challenged, unsuccessfully, the company’s proposal for several types of “incentives” and its proposed allocation of equity and debt, known as its “capital structure,” which OPC argued would impose an undue burden on ratepayers because of an unreasonably high equity ratio. In a partial dissent, Commissioner Chang agreed with OPC that the company did not adequately justify its request. FERC Chair Swett and the remaining Commissioners wrote in a separate concurrence that “[w]hile modifications to the Commission’s approach [to hypothetical capital structure incentives] are not ripe for today’s order, we remain committed to reexamining the policy.”
“FERC’s action is an important step in protecting residential customers from excessive utility profits,” Lapp said. “We will continue working through the FERC process to protect Maryland residential customers from paying any unreasonable costs related to these projects.”
The Grid Growth projects are part of PJM’s 2025 Regional Transmission Expansion Plan (RTEP), Window 1. Like the two previous RTEPs, the 2025 transmission plan is driven primarily by data center load growth outside of Maryland. In May, OPC filed a complaint challenging PJM’s allocation of such data-center driven costs to Maryland customers.
For more on OPC’s advocacy at FERC and PJM, including regarding data centers, visit OPC’s website.
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers in electric, natural gas, telecommunications, private water and certain transportation matters before the Public Service Commission, federal regulatory agencies, and the courts.
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