Eversource, Avangrid, and other transmission owners in New England recently requested the Federal Energy Regulatory Commission (FERC) to increase their base return on equity (ROE) from 9.57% to 11.39%. This request follows FERC’s decision about six weeks ago, which set the ROE at the lower rate.
The transmission companies are suggesting that the new ROE should take effect on June 30. In mid-March, FERC had reduced the base ROE from 10.57% to 9.57%, a move that came after a lengthy legal battle lasting 15 years. As a result, FERC has ordered these transmission owners to refund approximately $1.5 billion to ratepayers by May 20, 2027. Eversource and Avangrid are currently challenging FERC’s decision in court.
The transmission owners argue that FERC’s reduction is based on outdated financial conditions from nearly a decade ago. In their recent filing, they claimed the proposed ROE is calculated using updated financial information, taking into account current risks, including geopolitical issues and supply chain challenges.
Eversource and Avangrid highlighted that increasing demand and changing energy generation patterns show the importance of steady transmission investments. They emphasize that access to reasonable capital is crucial, and an appropriate regulatory framework for ROE is necessary to reflect current market conditions.
The proposed ROE can significantly impact a utility’s profits, particularly depending on the size of its transmission network. For example, a small change in ROE could result in millions of dollars in earnings for companies like Eversource.
The transmission companies believe their proposed ROE fulfills FERC’s requirement of being “just and reasonable,” and hence should be approved without any hearings. However, at a recent ISO New England meeting, the proposal only received limited support, with only 20% of the Transmission Committee and 25% of the Participants Committee backing it.
The Maine Office of Public Advocate, which represents ratepayers, has voiced strong opposition against the request. Deputy Public Advocate Andrew Landry expressed disappointment, stating that the transmission owners’ proposal mirrors the flawed analysis FERC previously rejected.
Landry confirmed that they would vigorously contest the request, emphasizing that while the transmission owners claim economic changes, their proposal still reflects issues already addressed by FERC.