Commissioner Richard Glick Statement
July 18, 2019
Docket No. ER14-2529-005
Order Item: E-13
I join today’s order because the California Parties1
have not demonstrated that Pacific Gas and Electric Company (PG&E) is required by California law or regulation to remain a member of the California Independent System Operator (CAISO). I previously dissented from a Commission order granting an RTO-Participation Incentive to Southern California Edison (SoCal Edison)2
—another of California’s investor-owned utilities that is, as relevant here, in the same shoes as PG&E. In that order, the Commission took the position that the voluntary nature of SoCal Edison’s membership in CAISO was irrelevant to whether an RTO-Participation Incentive was just and reasonable; all that mattered was that SoCal Edison remained a CAISO member.3
I dissented from that order because, assuming that the California Public Utility Commission was correct in arguing that SoCal Edison was required to remain in CAISO—an argument that the Commission at that point did not dispute4
—there was nothing for the RTO-Participation Incentive to incentivize.5
I concluded that awarding a 50-basis-point ROE adder under those circumstances was unjust and unreasonable and not the product of reasoned decisionmaking.
While rehearing was pending in that proceeding, the U.S. Court of Appeals for the Ninth Circuit issued its decision in this PG&E proceeding. The court held that the Commission was arbitrary and capricious in awarding PG&E an RTO participation adder.6
The court explained that the Commission has “a longstanding policy that incentives should only be awarded to induce future behavior”7
and that awarding an RTO-Participation Incentive to a utility that is required to remain in an RTO conflicted with that policy.8
In addition, the Court held that by granting PG&E an RTO-Participation Incentive without addressing the California Public Utility Commission’s arguments that there was nothing to incentivize, the Commission had created a “generic incentive” in violation of its own clearly articulated policy.9
The court remanded the proceeding to the Commission to address those issues and to engage in a case-specific review of PG&E’s application for an RTO-Participation Incentive.
Today’s order responds to the court’s remand by finding that PG&E’s membership in CAISO is voluntary and not required by California law or regulation. I agree with the outcome for the reasons stated in the Commission’s order.10
As a result of that finding, Commission precedent provides that PG&E is presumptively eligible for an RTO-Participation Incentive.11
Because the California Parties opposed awarding PG&E an RTO participation adder on the grounds that the incentive is not justified because PG&E is required to remain in CAISO, they have not rebutted that presumption of eligibility, thereby entitling PG&E to a 50-basis point ROE adder. Nevertheless, the Commission’s reasoning—particularly its decision to resolve this proceeding based entirely on an inquiry into whether PG&E is required to remain in CAISO—suggests that if state law actually required PG&E to remain in CAISO, an RTO-Participation Incentive might well be inappropriate.
Finally, the record in this proceeding reinforces the importance of taking a hard look at the RTO-Participation Incentive in the Commission’s ongoing proceeding to examine its transmission incentives policy.12
The Commission’s current approach to incentivizing RTO participation hands transmission owners across the country hundreds of millions of dollars every year13
with little indication that any of that money makes a meaningful difference in their decisions to enter or remain in an RTO. RTOs provide numerous benefits and there is widespread state support for transmission owners participating in RTOs. Given the broad, and seemingly growing, consensus on the importance of RTOs, the Commission must carefully review whether the RTO-Participation Incentive remains money well spent and is consistent with our obligation under the FPA to ensure that transmission rates are just and reasonable.14
For these reasons, I respectfully concur.
- 11 The California Parties are the California Public Utilities Commission, the Sacramento Municipal Utility District, and the Transmission Agency of Northern California.
- 22 S. California Edison Co., 161 FERC ¶ 61,309 (2017) (Glick, Comm’r, dissenting) (SoCal Edison Order).
- 33 Id. P 25; see also California Pub. Utilities Comm’n v. FERC, 879 F.3d 966, 974 (9th Cir. 2018) (CPUC v. FERC) (explaining that, under the Commission’s interpretation in place at the time, a transmission owner’s “ongoing membership itself is the sole criterion for receipt of an incentive adder”).
- 44 SoCal Edison Order, 161 FERC ¶ 61,309 at P 25 & n.49.
- 55 Id. (Glick, Comm’r, dissenting at 2).
- 66 CPUC v. FERC, 879 F.3d at 977-79.
- 77 Id. at 977; see id. at 979 (“FERC needed to inquire into PG&E’s specific circumstances, i.e., whether it could unilaterally leave the Cal-ISO and thus whether an incentive adder could induce it to remain in the Cal-ISO.”)
- 88 Id. at 978-79 (explaining that the Commission’s award of an incentive adder to PG&E was an unexplained departure from the Commission’s longstanding policy).
- 99 Id. at 979.
- 1010 Pac. Gas & Elec. Co., 168 FERC ¶ 61,038, at PP 42-50 (2019).
- 1111 Order No. 679 provides that a transmission-owning public utility that is a member of an RTO will be presumed eligible for the RTO-Participation Incentive. See Promoting Transmission Investment through Pricing Reform, Order No. 679, Promoting Transmission Investment through Pricing Reform, Order No. 679, 116 FERC ¶ 61,057, at P 327, order on reh’g, Order No. 679-A, 117 FERC ¶ 61,345 (2006), order on reh’g, 119 FERC ¶ 61,062 (2007).
- 1212 Inquiry Regarding the Commission’s Electric Transmission Incentives Policy, 166 FERC ¶ 61,208 (2019); see also id. P 38 (posing questions regarding the RTO-Participation Incentive).
- 1313 PG&E alone earns $30 million annually from the RTO-Participation Incentive. See Protest of the California Public Utilities Commission, Docket No. ER16-2320-001, at 9-10; see also Protest of the California Public Utilities Commission, Docket No. ER18-169-000, at 10 (stating that SoCal Edison would earn over $25 million from the RTO-Participation Incentive in 2018).
- 1414 16 U.S.C. § 824d, 824e; see also 16 U.S.C. 824s(d) (providing that “[a]ll rates approved under the rules adopted pursuant to this section, including any revisions to the rules, are subject to the requirements of sections 824d and 824e of this title that all rates, charges, terms, and conditions be just and reasonable and not unduly discriminatory or preferential”).