On September 30, 2011, Martha Coakley, Attorney General of the Commonwealth of Massachusetts, and various state officials and commissions from the other New England states (collectively, the “Complainants”) filed a Complaint against Bangor Hydro-Electric Company and the other ISO-New England transmission owners (collectively, “TOs”) and ISO New England Inc  (“ISO-NE”).   The Complainants argue that the 11.14 percent base return on equity (“Base ROE”) that is used to calculate formula rates for transmission service under the ISO-NE Open Access Transmission Tariff (“OATT”) is unjust and unreasonable, and should be 9.2 percent.

TOs recover transmission revenue requirements through formula rates which are part of the ISO-NE OATT.   Rates for regional network service are calculated using a formula rate that includes a Base ROE that is fixed and does not change from year to year, as other formula rate inputs.  The current Base ROE for the ISO-NE is 11.14 percent, and was developed in a 2004 proceeding involving Bangor Hydro and updated for bond yield information through August 2006.  The complainants argue that the Base ROE is no longer just and reasonable due to change in capital markets since the 2004 Bangor Hydro proceeding.  They offer evidence and testimony that the Base ROE should not exceed 9.2 percent.   Complainants put forth evidence that the Commission’s Discounted Cash Flow model places the zone of reasonableness for the ROE rate to be between 7.0 percent and 11.4 percent.  The midpoint of this range is 9.2 percent, and accordingly the complainants’ support a Base ROE of 9.2 percent.

In the September 30th complaint, the complainants argue that the current Base ROE in ISO-NE would result in New England electric consumers overpaying by $113 million annually, as compared to a 9.2 percent Base ROE.  Accordingly, they argue that the Commission should institute an investigation through “paper hearing” procedures and establish the earliest possible refund effective date.

On October 4, 2011, ISO- NE filed a Motion for Dismissal and to Postpone the Answer date.  On October 6, 2011, the Complainants answered ISO- NE’s pleading, and Commission action is pending on the initial flurry of motions.   

A copy of the complaint is available here.