The Federal Energy Regulatory Commission (FERC) is being urged to cut down the planned return on equity and reject certain incentives for the Valley Link transmission project, which has an estimated cost of $3 billion. This request comes from a recent filing by the Maryland Office of People’s Counsel.
Valley Link consists of two major 765-kV transmission lines and is part of the latest Regional Transmission Expansion Plan approved by PJM Interconnection’s board earlier this year. The project aims to commence operations in December 2029. It is being developed by Valley Link Transmission, a collaboration involving major energy companies: Transource Energy, Dominion Energy, and FirstEnergy.
In mid-March, Valley Link Transmission asked FERC for approval of its proposed rates and various incentives. The company claims these measures will enhance reliability and foster teamwork in creating large-scale infrastructure in the PJM region, which is critical for efficient and economical transmission development.
The project is seeking a base return on equity of 10.9%, along with an additional 0.5% for being part of PJM. It also requests incentives such as the ability to recover costs incurred if the project fails and operates with a theoretical capital structure of 60% equity and 40% debt.
Valley Link argues that these incentives are essential to minimize the financial risks associated with being a new transmission developer. However, the Maryland Office of People’s Counsel argues that the proposed incentives would unfairly shift financial risks to consumers. They asserted that the proposed base return on equity seems excessively high, urging FERC to reject the application.
The Office criticized Valley Link’s description of itself as a “start-up,” noting that the companies involved are well-established utilities with commendable credit ratings. If FERC does not deny the application, the office has called for a formal hearing to analyze the proposal thoroughly.
Additionally, residents have expressed their concerns about the project, citing historical issues with similar projects that have led to financial burdens on ratepayers. This sentiment was echoed by a Virginia resident who highlighted the unfortunate fallout of the Potomac-Appalachian Transmission Highline project, which was abandoned in 2012, resulting in significant costs for consumers.
FERC Chairman Mark Christie referenced the previous PATH project as a cautionary tale of how financial incentives for transmission projects can inadvertently lead to consumer cost increases. Concerns continue to grow as demand for electricity increases, particularly from data centers in Virginia. Some advocate for investing in new power generation facilities instead of expanding transmission lines, emphasizing the need to evaluate both transmission and generation options comprehensively.