On December 17, 2015, the Commission denied a request for rehearing filed by Potomac-Appalachian Transmission Highline, L.L.C. and its operating companies, PATH West Virginia Transmission Company, LLC and PATH Allegheny Transmission Company, LLC (collectively, “PATH”) of a November 30, 2012 order in which the Commission determined, among other things, that PATH could not include a 50 basis points adder in its Return on Equity (“ROE”) for participation in a Regional Transmission Organization (“RTO”) when recovering costs for a transmission project that had been abandoned.

In 2007, the PJM Interconnection, L.L.C. (“PJM”) Board of Directors approved PATH’s proposed transmission project for inclusion in the PJM Regional Transmission Expansion Plan (“RTEP”). PATH subsequently sought and received approvals from FERC for a number of transmission incentives, including a 50 basis points adder for PATH’s participation in PJM—a FERC-jurisdictional RTO. In 2012, after several reconfigurations and analyses, PJM terminated the PATH project and removed it from the RTEP.

In its November 30, 2012 order, the Commission determined that PATH’s project was abandoned for reasons beyond PATH’s control, and largely approved PATH’s proposal to recover its costs for abandoned plant, subject to certain conditions and the outcome of a hearing. However, the Commission rejected PATH’s proposal to continue earning the 50 basis points RTO participation adder that it had previously been granted. The Commission, citing a prior determination in Order No. 679-A that the RTO participation adder is only applicable to transmission facilities that have been or will be turned over to the operational control of an RTO, reasoned that because PATH’s project had been abandoned, PATH could not turn over operational control of its transmission facilities to PJM, and therefore “the benefits from that project’s inclusion in an RTO will not materialize.” The Commission then stated that it was taking “this opportunity to clarify that continued recovery of a basis point adder for RTO participation is not appropriate for recovery in an abandonment application.” PATH subsequently requested rehearing.

In its December 17, 2015 order, the Commission rejected PATH’s claim that the Commission’s ruling in the November 30, 2012 order went against the Commission’s “settled practice,” stating that the Commission had not previously considered the issue, and that PATH had been unable to point to any prior Commission orders in which a company had requested to continue its RTO participation adder after abandonment. The Commission further stated that “[w]hile this was an issue of first impression, the Commission resolved this issue by applying existing policy, not reversing existing policy.”

In further support of its determination, the Commission also noted that the original order granting the RTO participation adder to PATH expressly conditioned approval not merely on PATH’s membership in an RTO, but on PATH’s participation in an RTO. The Commission stated that, under its regulations, applicants “must propose that operational control of the applicant’s transmission system will be transferred to the Regional Transmission Organization within six months of filing the proposal” in order to demonstrate RTO participation.

Lastly, the Commission stated that its holding in the November 30, 2012 order that “continued recovery of a basis point adder for RTO participation is not appropriate for recovery in an abandonment application,” applied not only for single-use companies like PATH, but also for companies with multiple transmission assets.

A copy of the Commission’s order may be found here.