State utility regulators urge FERC to slash ROE transmission incentive

AI generated summary

Utility regulators from approximately 35 states are calling on the Federal Energy Regulatory Commission (FERC) to significantly limit or eliminate a 0.5% return on equity (ROE) incentive provided to utilities that participate in regional transmission organizations (RTOs). They argue that this incentive unnecessarily increases costs for ratepayers, as utilities would likely engage in RTO membership without the added financial benefit. The regulators are advocating for a policy change that would restrict this incentive to a maximum of three years, a proposal previously suggested by FERC in 2021 but not yet adopted.

Utilities, however, warn that limiting or removing the ROE incentive could lead to substantial reductions in their annual income. For instance, Public Service Enterprise Group estimates a potential loss of around $40 million in annual net income if the incentive is eliminated. Other utility companies, like American Electric Power, have also projected significant impacts on their pretax income. Meanwhile, various industry groups have expressed concerns that removing these incentives could deter investment in transmission infrastructure, potentially leading to higher costs for consumers and uncertainty in the energy market.