Electric Co-op Today

It’s one thing to offer incentives for grid construction. But it’s something else to provide those incentives once the risks are mitigated, NRECA said.

NRECA has asked federal regulators to rethink policies on incentives for new transmission. (Photo By: Debi Bishop)

The association told the Federal Energy Regulatory Commission that it does not oppose grid construction incentives, provided “there are clear benefits [that] would not have resulted but for the incentives.”

However, it asserted, “A project should never be granted a higher return on the basis that it is ‘more risky’ if the increased risk has already been … shifted to customers.”

NRECA’s views were submitted in response to a FERC notice of inquiry [Docket RM11-26]. The agency is seeking input on whether incentives policies are appropriately promoting grid investment. NRECA said consumers are often disadvantaged.

“The commission’s incentive policy has tilted in favor of windfalls to transmission providers at the expense of ratepayers,” the association wrote, “rather than always meeting the goal of benefitting consumers.”

NRECA offered the commission a four-part solution to the current imbalance:

• No incentive should be available for routine projects;
• Risk-reducing incentives might be appropriate for projects with demonstrable and unusually high risks;
• Return-enhancing incentives should only be available for projects with extremely high risks that cannot be mitigated by risk-reducing incentives; and
• In no case should a project receive both risk-reducing incentives and return-enhancing incentives.

Additionally, NRECA said that incentives for utilities to join regional transmission organizations should be higher than for remaining in one. If the latter incentives are not terminated totally, they should be phased down over time, the association said.

As for utilities obligated to join a transmission organization “by statute, order or contract,” NRECA added, “it is difficult to fathom any rationale for incenting a public utility to do what it is already required to do.”

Tags: Federal Energy Regulatory Commission, Transmission and Distribution