Federal Power Act Section 219
In the Energy Policy Act of 2005, Congress added section 219 to the FPA, directing the Commission to establish, by rule, incentive-based rate treatments to promote capital investment in electric transmission infrastructure.
Order No. 679 & Order No. 679-A
The Commission subsequently issued Order No. 679 establishing the processes by which a public utility may seek transmission rate incentives pursuant to section 219.
Pursuant to Order No. 679, an applicant may seek to obtain incentive rate treatment for a transmission infrastructure investment that satisfies the requirements of section 219, i.e., the applicant must show that the facilities for which it seeks incentives either ensure reliability or reduce the cost of delivered power by reducing transmission congestion.
Order No. 679 established a process for an applicant to demonstrate that it meets this standard, including a rebuttable presumption that the standard is met if: (1) the transmission project results from a fair and open regional planning process that considers and evaluates projects for reliability or congestion and is found to be acceptable to the Commission; or (2) a project has received construction approval from an appropriate state commission or state siting authority.
In addition to satisfying the section 219 requirement of ensuring reliability or reducing the cost of delivered power by reducing congestion, Order No. 679 requires
an applicant to demonstrate that there is a nexus between the incentive sought and the investment being made.
In Order No. 679-A, the Commission clarified that the nexus test is met when an applicant demonstrates that the total package of incentives requested is “tailored to address the demonstrable risks or challenges faced by the applicant
The Commission noted that this nexus test is fact-specific and requires the Commission to review each application on a case-by-case basis.
Promoting Transmission Investment Through Pricing Reform Policy Statement
In November 2012, Commission issued a Policy Statement, Promoting Transmission Investment Through Pricing Reform, providing guidance regarding its evaluation of applications for transmission rate incentives under section 219 and Order No. 679.
Applicants must provide sufficient support to allow the Commission to evaluate each element of the package and the interrelationship of all elements of the package.