On February 28, 2013, FERC accepted and suspended Potomac Electric Power Company and Delmarva Power & Light Company’s (collectively, “PHI Companies”) tariff revisions to recover costs related to abandonment of the Mid-Atlantic Power Pathway (“MAPP”) Project.  The Commission, however, required the removal of previously-awarded return on equity (“ROE”) incentive adders for regional transmission organization (“RTO”) participation and for the risks and challenges of the project.  FERC concluded that due to the abandonment of the MAPP Project, the adders were no longer appropriate.  FERC set the issue of the reasonableness of the specific amount of abandonment costs for hearing.

In the February 28 order, FERC found that circumstances beyond the PHI Companies’ control resulted in abandonment of the MAPP Project.  Specifically, PJM Interconnection L.L.C. removed the MAPP Project from its regional transmission expansion plan in 2012 after revising its load forecast.  In accordance with its previous incentive order (Pepco Holdings, Inc), FERC concluded that the PHI Companies qualified to recover 100 percent of the abandonment costs prudently incurred on or after November 1, 2008.  The Commission also found that the PHI Companies could recover 50 percent of abandonment costs for the MAPP project incurred prior to November 1, 2008, in accordance with pre-Order No. 679 policy.  The Commission found that the specific amount of abandonment costs that the PHI Companies proposed raised an issue of material fact and set the issue for hearing.

In this case, the PHI Companies sought recovery of abandonment costs, and an additional 200 basis points of ROE incentives, which included a 50 basis point adder for RTO participation and a 150 basis point adder for the risks and challenges related to bringing the MAPP Project into service.  In the February 28 order, FERC found the additional 200 basis points of incentives on top of the base ROE of 10.80 percent was “not appropriate.”  FERC stated that once a project is canceled, none of the incentives other than the ability to recover prudently incurred abandonment costs continues to apply.  In rejecting the recovery of the RTO adder, the Commission explained that even though the developer had joined an RTO, the facility at issue would not be transferred to the RTO’s control, and benefits from including that project in an RTO would not “materialize.”  Similarly, the Commission found that the 150 basis point adder for specific financial, technology-related, regulatory, environmental and construction risks for bringing the MAPP Project into service was “no longer warranted.”  FERC stated that the Commission did not intend for this particular incentive to apply once a project is abandoned.   The Commission thus rejected the PHI Companies’ requested ROE of 12.8 percent.

A copy of FERC’s order is available here.