On January 17, 2019, FERC denied North Carolina Electric Membership Corporation’s (“NCEMC”) Formal Challenge and Complaint against Duke Energy Progress, LLC’s (“DEP”) transmission formula rate and Joint Open Access Transmission Tariff (“Joint OATT”) for failing to reflect in its wholesale transmission rates reductions related to federal, and North Carolina state, corporate income tax changes.  For various reasons discussed below, FERC denied NCEMC’s Complaint because it found that DEP had correctly applied its historical test year formula rate methodology.

On January 15, 2019, the U.S. Court of Appeals for the D.C. Circuit (“D.C. Circuit”) in San Diego Gas & Electric Co. v. FERC, No. 16-1433, denied San Diego Gas & Electric’s (“SDG&E”) petition for review of FERC orders declining retroactive application of its cancelled or abandoned electric transmission facilities incentive (“Abandonment Incentive”).  The D.C. Circuit’s decision denies SDG&E the eligibility to recover, in the case of abandonment, approximately $15 million in development costs associated with its South Orange County Reliability Enhancement Project (“SOCRE Project”).  The decision also prompted a dissent from Senior Circuit Judge A. Raymond Randolph, who argued that the underlying FERC orders were contrary to the plain language of the regulation at issue, as well as the Commission’s own precedent.

On December 20, 2018, FERC issued a series of nine orders addressing how certain public utilities calculate accumulated deferred income tax (“ADIT”) balances in their transmission formula rates.  The orders were the result of separate proceedings under Section 206 of the Federal Power Act (“FPA”), which FERC initiated after concluding in a June 21, 2018 order (“June Order”) that the use of its former “two-step” ADIT averaging methodology may be unjust and unreasonable.

On December 11, 2018, FERC approved the Midcontinent Independent System Operator, Inc.’s (“MISO”) proposed tariff revisions to remove the service territory of Entergy New Orleans, LLC (“Entergy New Orleans”) from Cost Allocation Zone 9 to its own new Cost Allocation Zone 12 (“Proposal”).  FERC found that the Proposal was just and reasonable because it would result in an allocation of costs that is at least roughly commensurate with MISO’s Transmission Expansion Plan (“MTEP”) economic project benefits.

On October 15, 2018, FERC issued two orders involving rate of return on equity (“ROE”): the first was an order directing parties in two proceedings involving the base ROE of the transmission owning members of the Midcontinent Independent System Operator, Inc. (“MISO”) to submit briefs concerning a proposed change in FERC’s approach to determining the base ROE of public utilities previously outlined in Martha Coakley v. Bangor Hydro-Elec. Co. (“Coakley Briefing Order”) (see October 25, 2018 edition of the WER); the second was an order providing guidance regarding the effect of the Coakley Briefing Order on pending proceedings involving base ROE issues that have been set for hearing and settlement judge procedures.

On November 5, 2018, FERC granted in part and denied in part a rehearing request (“Rehearing Order”) filed by Ameren Services Company (“Ameren Services”), on behalf of its affiliate Ameren Transmission Company of Illinois (together with Ameren Services, “Ameren”) of a FERC order (“February 13 Order”) denying Ameren’s request pursuant to Order No. 679 for a 100 basis point incentive rate of return on equity (“ROE Incentive”) for the Illinois Rivers and Mark Twain components (“Components”) of the Grand Rivers Project (“Project”).  In the February 13 Order, FERC denied Ameren’s requested ROE Incentive for the Components, largely because of construction progress made to date on the Illinois Rivers component.  In the Rehearing Order, FERC granted rehearing in part with respect to the Mark Twain component because that component is not substantially complete and, because based on its own merits, the Mark Twain component continues to face risks and challenges that warrant an ROE Incentive.  FERC denied rehearing with respect to the Illinois River component, however, upon finding that given the substantial completion of the Illinois Rivers component and limited remaining risks and challenges Ameren faces with respect to that component, Ameren’s requested ROE Incentive for Illinois River failed to meet the nexus test.