On March 19, 2026, in Opinion No. 594, FERC issued a long-awaited decision in litigation about the base Return on Equity (ROE) to be earned by the New England Transmission Owners (NETOs). Previous iterations of the Commission had failed to address the 2017 remand from the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) in Emera Maine v. FERC. FERC set the NETOs’ ROE at 9.57%. In addition to applying that new ROE going forward, FERC backdated the new rate to October 16, 2014, and ordered the NETOs to issue refunds with interest to implement that directive. FERC separately required refunds for the 15-month refund period from October 1, 2011, through December 31, 2012. FERC’s authority to backdate new rates under section 206 has been challenged in other cases recently.

This case has been pending since September 30, 2011, when a group of New England transmission customers filed a complaint (First Complaint) pursuant to section 206 of the Federal Power Act (FPA) against the NETOs, disputing the justness and reasonableness of the then-effective base ROE of 11.14%. On June 19, 2014, following a hearing, FERC issued Opinion No. 531, adopting a replacement base ROE of 10.57% and directing NETOs to implement the newly set ROE. This new ROE was based on a two-step DCF model that considers both short-term and long-term growth projections by providing 33% weighting to long-term domestic project (GDP) growth. Citing anomalous capital market conditions, FERC compared four alternative benchmark models (Risk Premium model, CAPM, Expected Earnings model, and state utility commission-approved ROEs) to inform the just and reasonable placement of the ROE within the zone of reasonableness established by the two-step DCF model. FERC concluded at that time that setting the ROE at the midpoint of the upper half of the zone of reasonableness produced by the DCF model was just and reasonable. On October 16, 2014, FERC affirmed the 10.57% ROE in Opinion No. 531-A. Thereafter, NETOs and transmission customers appealed Opinion No. 531 et seq. to the DC Circuit. Three subsequent complaints also challenging NETOs’ ROE were filed against NETOs as these proceedings continued.

In Emera Maine, the DC Circuit vacated and remanded Opinion No. 531 et seq., finding fault with various aspects of FERC’s decision to upset the previous 11.14% ROE and its adoption of the newly set 10.57% ROE. Since the 2017 Emera Maine remand, FERC had not issued a merits determination on the NETOs ROE until the March 19th issuance of Opinion No. 594.

In Opinion No. 594, FERC applied the two-step DCF model and CAPM and first determined that the 11.14% ROE was presumptively unjust and unreasonable because it was outside the zone of reasonableness for NETOs (i.e., 8.72% to 10.41%), in light of FERC’s determination that NETOs have “average risk.” FERC next found that a replacement base ROE of 9.57%, which reflects the midpoint of the composite zone of reasonableness of the models used, was just and reasonable because NETOs are of “average risk.” In determining the composite zone of reasonableness, FERC utilized financial data from October 2012 through March 2013. FERC concluded it was appropriate to use the two-step DCF Model and CAPM and combined them by “averaging the top and bottom of the DCF and CAPM zones of reasonableness to produce a composite zone of reasonableness and then setting the ROE of average risk utilities at the central tendency midpoint of that zone.” FERC elected not to use the Expected Earnings and Risk Premium models at this time.

Separate from its merits determination on the rate itself, FERC made the 9.57% ROE retroactively effective as of October 16, 2014. While Section 206 generally prohibits retroactive relief, FERC asserted authority to backdate the rate as the correction of a legal error in Opinion No. 531 as identified by the DC Circuit in Emera Maine. This is the same rationale that FERC employed in other recent ROE decisions, and its legal authority to backdate rates in this fashion has been challenged in the courts.

Opinion No. 594, issued in Docket No. EL11-66-001 et al., is available here.