Commissioner Christie’s Dissent to NY Transco’s Application Including Incentives and ROE, ER24-232

Docket No. ER24-232-000

While I have approved granting incentives to transmission developers in prior cases that generally fit within FERC’s existing practices and precedent,[1] I dissent in this case because I agree with the joint protestors New York State Public Service Commission (NYSPSC), the City of New York, and Multiple Intervenors[2] (collectively, Ratepayer Advocates) that the incentives granted in this order go beyond the Commission’s practices and what should be accepted by this Commission.[3]  While the order sends the final computation of NY Transco’s ROE to an Administrative Law Judge for further hearing and settlement proceedings, the points made by the NYSPSC remain persuasive.  It also appears that regardless of an ALJ determination on the ROE, the extent of the incentives will be egregiously unfair to New York consumers.[4] 

By way of example with respect to the ROE Risk Adder, the NYSPSC and its joint protestors note that “such a broad and sweeping range of incentives is not appropriate here.”[5]  They support this conclusion by noting, inter alia:

• “NY Transco is simultaneously seeking a panoply of risk-reducing incentives – CWIP and Project Abandonment Incentives – plus a 150 basis point adder to the base ROE.  However, [NY Transco has] not demonstrated that the risk-reducing incentives will be insufficient, generally, nor [has NY Transco] demonstrated that there are special risks and challenges that are not otherwise mitigatable for the Project.  In short, there are redundancies and overlaps in risk mitigation efforts, either already in place or being proposed, that undermine NY Transco’s request.”[6]
• “Of the 13 cases presented by [a NY Transco witness], not one application approved by the Commission included the same base ROE and level of incentives being requested by NY Transco here.  In fact, in all but one of the 13 cases listed, the Commission declined to approve a portfolio of incentives that included CWIP, Project Abandonment, Risks and Challenges ROE Adder, and RTO Participation Adder.  This lack of evidence further underscores the unreasonableness of NY Transco’s proposal.”[7]
• “NY Transco also neglects to acknowledge that this is a fully regulated project, the revenue recovery for which is essentially assured (i.e., NY Transco will not need to rely on market-based revenues).  Because NY Transco was selected by the NYISO as the most ‘efficient and cost-effective solution,’ it is assured of a cost allocation mechanism to recover its costs under the NYISO’s Open Access Transmission Tariff (‘OATT’).  The OATT provisions related to the [Public Policy Transmission Need (PPTN)] process significantly increase regulatory certainty and reduce Project risks.  It should also be recognized that NY Transco’s Project was selected through the PPTN competitive solicitation process, in part, based on the NYISO Board’s finding that it had ‘relatively low procurement, permitting, and construction risks compared to other proposals . . . .’  Because these low risks were used as a basis in selecting the Project, NY Transco’s claims that such risk must now be mitigated through extensive incentives should be rejected.”[8]
• “In discussing its need for a Risks and Challenges ROE Adder, NY Transco relies heavily upon the size of the Project and the densely populated urban area and waterways/coastlines that will need to be constructed upon for justification of extraordinary risk.  However, throughout its Application, NY Transco asserts that [it is] engaging resources from both NY Transco’s affiliates and the New York Power Authority (‘NYPA’) (NY Transco’s Project partner) to improve efficiency, leverage experience and capability, and improve the development and construction process.  All of these actions mitigate risk and the need for additional ROE incentives.  Indeed, NY Transco has access to centuries of institutional knowledge and experience in constructing electric infrastructure in densely populated urban areas and waterways/coastlines.  NY Transco’s affiliate, Con Edison, celebrated two centuries of operating in New York City earlier this year and NYPA, which has been in existence since 1931, has unique knowledge navigating state project development, will be a co-developer of the Project.”[9]
• “NY Transco’s request to utilize the 100% CWIP Incentive and Project Abandonment Incentive will only further reduce lending/investor and cash flow risk, making the inclusion of a 150 basis point Risks and Challenges ROE Adder excessive and unreasonable.  The Ratepayer Advocates submit that there are factual questions surrounding NY Transco’s perceived siting and permitting risks, especially given its request for a Project Abandonment Incentive.  Specifically, NY Transco notes the need for all siting and permitting to be completed simultaneously to enable the effective construction of the project.  This approach, coupled with NY Transco’s extensive community outreach that commenced well before the Project was selected in June 2023, appears to address siting and permitting risks.  The inclusion of the Abandoned Plant Incentive will resolve any remaining risk associated with a failure to receive siting and permitting approvals in a timely manner.  Accordingly, there is no rational basis for the Risks and Challenges ROE Adder together with the other requested incentives. NY Transco’s requests are not consistent with the requirements of the Policy Statement, and their inclusion would make NY Transco’s resulting rates even more unjust and unreasonable. For all of these reasons, the Commission should reject NY Transco’s request for incentive adders in its entirety.[10]

I dissent as I find the arguments of and questions raised by the NYSPSC, City of New York, and Multiple Intervenors compelling.

For these reasons, I respectfully dissent.