On June 3, 2009, Rep. Edward Markey (D-MA), chairman of the House Subcommittee on Energy and Environment, sent a letter to FERC Chairman Jon Wellinghoff requesting “information on the level and focus of transmission investments in response to FERC’s transmission incentive policy.”
Section 1241 of the Energy Policy Act of 2005 (“EPAct 2005”) authorized FERC to establish incentive-based rate treatment for public utilities. In July 2006, FERC issued a final rule to provide incentive rates for certain transmission projects on a case-by-case basis.
During drafting of EPAct 2005, Rep. Markey was hesitant about the incentive-based rate treatments. He commented in his letter saying, “I feared that these incentive transmission rates would amount to a naked giveaway to the utility industry at ratepayers’ expense. I am now requesting that FERC provide Congress and ratepayers with an analysis of how this utility-backed program has functioned over the past three years and whether the promises of increased transmission capacity and efficiency have materialized.”
Rep. Markey’s letter requested an analysis on the incentives that have already been granted, the transmission facilities currently planned and constructed by utilities that have received incentive rates, and the nature of the benefits that have resulted from approved incentive rates. The letter posed nine direct questions to FERC, including what financial value has been given to each utility for completed projects, what projects with approved incentive rates are being developed, and whether customers have paid for approved projects that were not placed in service. In addition, Rep. Markey questioned whether FERC has review processes in place to ensure the process is cost beneficial and whether available incentives will encourage new investments.
Rep. Markey stated that “[b]efore Congress authorizes any further programs that may negatively impact rate-payers, we must investigate the success of the incentive rate programs already in place. My Energy and Environment Subcommittee will convene hearings to investigate these and other transmission related issues while awaiting a reply from FERC to my inquiries.”
A copy of Rep. Markey’s letter is available at: http://markey.house.gov/docs/energy_environment/090603_markey_ferctransmissionltr.pdf.