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FERC and Transmission Incentives

FERC today issued a Notice of Proposed Rulemaking (NOPR) that focuses transmission incentives on the benefits to consumers. It would eliminate Order No. 679’s “nexus test” and instead provide a series of incentives based on economic and reliability benefits.

Among the proposed reforms:

Increase the RTO Adder from 50 basis points to 100 basis points and make the incentive available regardless of whether that participation is voluntary.

Provide 50 or 100 basis point ROE Adder for transmission projects that meet a pre-construction benefit-to-cost ratio in the top 25 percent or top 10%, respectively, of projects examined over a sample period.

Provide up to a 50 basis point ROE adder for projects that demonstrate reliability benefits by providing quantitative analysis, where possible, as well as qualitative analysis.

Offer a 100-basis-point incentive for transmission technologies that enhance reliability, efficiency and capacity as well as improve the operation of new or existing transmission facilities.


The NOPR proposes to replace the current policy of limiting incentives to the base ROE zone of reasonableness with a 250-basis-point cap on total ROE incentives.  Comments on the NOPR are due approximately mid-June 2020.  

Paul Dumais's picture

Thank Paul for the Post!

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Matt Chester's picture
Matt Chester on Mar 20, 2020 12:50 pm GMT

How exactly does the basis point system work? What's the tangible value of 50/100 basis points to these projects?

Paul Dumais's picture
Paul Dumais on Mar 23, 2020 8:47 pm GMT


The 50/100 basis points is an adder to the return on equity.  For example, if the base return on equity is 10.5% and the transmission owner is granted a 50 basis point incentive, the total return on equity will be 11%.  The return on equity is a component of the total return, which includes both debt and equity.  The transmission owner earns its total return on its investment in transmission projects.  For a tranmission owner that is granted a return on equity incentive adder, the adder will increase its earnings on the project being incented, to the direct benefit of investors in the transmission owner.   

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