Today’s order accepts Valley Link’s proposed Formula Rate, subject to refund and the outcome of hearing and settlement procedures, and grants all of Valley Link’s requested transmission rate incentives,[1] except for Valley Link’s request to use a hypothetical capital structure.[2] While I appreciate my colleagues’ views, in accordance with Commission precedent and consistent with the direction that Congress provided in Section 219 of the Federal Power Act, I would have granted Valley Link’s request to use a hypothetical capital structure, in recognition of its status as a newly formed joint venture entity. Therefore, I respectfully dissent in part.[3]
Rejecting Valley Link’s requested hypothetical capital structure is a departure from Commission precedent.[4] Valley Link’s request is no different than numerous other requests that the Commission has previously approved.[5] Moreover, Valley Link’s justification is consistent with the applicants’ justifications in those cases.[6] Rather than adhering to that precedent, today’s order appears to introduce a new evidentiary standard for approving a hypothetical capital structure, without prior notice to the applicant that it would be subject to new criteria, and applies that new standard to reject Valley Link’s request.[7] Further, the majority departs from precedent even though it is unclear if a majority of Commissioners will agree to do so for the next similarly situated request.
I agree with my colleagues that the Commission must provide incentives to encourage needed transmission infrastructure in a way that ensures rates remain just and reasonable. This is exactly why we should be cautious about departing from the precedent established in Order No. 679, which explicitly balanced the benefits of transmission projects to consumers against the cost of incentives.[8] The Commission can, of course, change its policies on transmission incentives. But changing a policy of significance on a one-off basis, with no notice, with limited public comment, and with an undeveloped record limits the careful and considered deliberation that underpins the 20-year history of the Commission’s incentive policy. I do not support changing the Commission’s transmission incentives policies piecemeal, without fully understanding how those changes may affect investments in transmission infrastructure—particularly when many projects that request these incentives are needed to maintain reliability. Doing so introduces regulatory uncertainty and risks undermining Congress’s purpose in enacting FPA section 219, all at a time when it is clear that the nation badly needs significant investments in new transmission infrastructure to meet the largest demand growth that the country has seen in a generation. Indeed, experts from NERC have stated that at a national level, the limited addition of interstate electric transmission infrastructure, among other factors, contributes to reliability risk.[9] The data bear this out: in 2023, just 59.5 miles of transmission at voltages equal to or greater than 345 kV were completed in the United States, which is the lowest level in the last decade.[10]
Case in point: The Valley Link Project Portfolio here. In FPA section 219, Congress directed the Commission to provide incentives for the purpose of promoting investment in transmission infrastructure that is needed to ensure reliability.[11] In Order No. 679, the Commission found that hypothetical capital structures are among the incentive-based rate treatments that effectuate that purpose.[12]
Here, PJM initiated its 2024 Regional Transmission Expansion Plan to “address reliability violations in PJM,” and, according to PJM, “[i]f left unaddressed, these transmission needs will result in multiple instances of overloaded transmission lines and voltage performance issues, heightening the risk of power outages in the region.”[13] PJM selected the Valley Link Project Portfolio specifically because it was needed to “maintain transmission system reliability to support rapid load growth, evolving resource mix, generation retirements and the associated bulk and regional transmission,”[14] and because the Project Portfolio “provides superior transfer capability compared to the others” by “offer[ing] considerably higher transfer capability as a result of not only one, but two, 765 kV corridors, one in the southern and one in the northern region of the PJM footprint.”[15] And the Governor of Virginia agrees.[16]
Reliability benefits cannot be much clearer than this. Thus, to carry out the Commission’s paramount duty entrusted to it by Congress—to ensure the operational reliability of the bulk power system—and to satisfy Congress’s directive in FPA section 219 to unlock investments in transmission projects that enhance reliability, it follows that the Valley Link Project Portfolio should be eligible for incentive-based rate treatments, including, among others, a hypothetical capital structure within the range that the Commission has previously granted to numerous similarly situated projects. Yet, today, the majority changes course and singles out this Project Portfolio to be its test case for a novel policy change. Denying this incentive adds risk to Valley Link as it works towards financing and building this much-needed infrastructure—and I am unwilling to compromise the economic viability of these necessary reliability projects by acting on an incomplete record to change the Commission’s incentive policy in this proceeding.
For these reasons, I respectfully dissent in part.
[1] Valley Link Transmission Md., LLC, 191 FERC ¶ 61,113 at PP 2-6 (2025).
[2] Id. PP 143-44.
[3] For clarity, I dissent from part III.B.3.e., the final sentence of paragraph 3 on hypothetical capital structure, and ordering paragraph (E), and join in the rest of today’s order.
[4] Promoting Transmission Investment Through Pricing Reform, Order No. 679, 116 FERC ¶ 61,057, at P 131 (2006); see also 18 C.F.R. § 35.35(d)(1)(iv).
[5] See, e.g., Transource Kan., LLC, 151 FERC ¶ 61,010, at PP 25-26 (2015) (granting 60/40 hypothetical capital structure request for a developer that was both a new corporate entity lacking an actual capital structure and a subsidiary of incumbent transmission owners with existing capital structures); Green Power Express LLP, 127 FERC ¶ 61,031, at PP 72-76 (2009) (same); see also Viridon Mid-Atl. LLC, 186 FERC ¶ 61,074, at P 29 (2024); NextEra Energy Transmission Sw., LLC, 161 FERC ¶ 61,139, at P 35 (2017). Despite these and numerous other instances in which the Commission has approved 60/40 hypothetical capital structure requests for similarly situated projects, the majority instead relies on one case in which the Commission rejected a 60/40 hypothetical capital structure request. See Valley Link Transmission Md., LLC, 191 FERC ¶ 61,113 at P 143 n.185 (citing N.Y. Indep. Sys. Operator, Inc., 151 FERC ¶ 61,004, at P 84 (2015)). But the circumstances there are not implicated here.
[6] Compare Transmittal at 39 (“[T]he primary risks that the Hypothetical Capital Structure Incentive addresses are the fluctuations in the Companies’ capital structure during the development and construction phase of the Project Portfolio, as well as the associated financing risks. As new transmission developers, the Companies do not have stable debt to equity capital structures. As such, during the development and construction phase of the Project Portfolio, each Company’s actual capital structure is expected to fluctuate due to the timing, amount, and frequency of new borrowings and equity infusions. Similarly, the substantial investment needed to develop the Project Portfolio will also cause actual capitalization to fluctuate significantly in accordance with the cash demands of project construction.” (footnotes omitted)), with Transource Kan., LLC, 151 FERC ¶ 61,010 at P 22 (“Transource Kansas states that, as a nonincumbent transmission developer with no existing assets, Transource Kansas will have an unstable capital structure during the development and construction period prior to the time when long term debt is issued.”), and Green Power Express LLP, 127 FERC ¶ 61,031 at P 69 (“Green Power proposes to use a hypothetical capital structure because it expects its actual capital structure to fluctuate during the development and construction phases of the Project due to the timing and frequency of new borrowings and new equity infusions. Given the substantial projected cost of the Project and the resulting need for a significant amount of investment during the construction phase, the use of a hypothetical capital structure until some of the Project assets are placed into service will provide Green Power with regulatory certainty, support its efforts to obtain investment grade credit ratings, and smooth out the wide swings in the debt to equity ratio that can result from the cash demands of the construction.”); see also Viridon Mid-Atl. LLC, 186 FERC ¶ 61,074, at P 28 (2024); NextEra Energy Transmission Sw., LLC, 161 FERC ¶ 61,139, at P 27 (2017).
[7] See Valley Link Transmission Md., LLC, 191 FERC ¶ 61,113 at PP 143-44.
[8] See Order No. 679, 116 FERC ¶ 61,057 at P 6 (“Section 219(a) states that transmission incentives should be ‘benefiting consumers by ensuring reliability and reducing the cost of delivered power by reducing transmission congestion’ (emphasis added). The purpose of our Rule is to benefit customers by providing real incentives to encourage new infrastructure, not simply increasing rates in a manner that has no correlation to encouraging new investment.”).
[9] See James B. Robb, President and Chief Executive Officer, North American Electric Reliability Corporation (NERC), Testimony before the United States Senate Committee on Energy and Natural Resources, at 4 (June 1, 2023), https://www.energy.senate.gov/services/files/D47C2B83-A0A7-4E0B-ABF2-9574D9990C11.
[10] See FERC’s Office of Energy Projects Energy Infrastructure Updates from 2012-2023, which are available at https://www.ferc.gov/staff-reports-and-papers.
[11] See 16 U.S.C. § 824s(a) (“[T]he Commission shall establish, by rule, incentive-based . . . rate treatments for the transmission of electric energy in interstate commerce by public utilities for the purpose of benefitting consumers by ensuring reliability and reducing the cost of delivered power by reducing transmission congestion.”).
[12] See Order No. 679, 116 FERC ¶ 61,057 at P 131 (“The Commission finds that hypothetical capital structures can be an effective tool available to public utilities to foster transmission investment . . . .”).
[13] See Transmittal, Ex. JLL-001, Testimony of Jacquelyn Lee Lojeck (Lojeck Test.) at 9.
[14] PJM Apr. 21 Answer at 3.
[15] Lojeck Test., Ex. JLL-002 (PJM, Reliability Analysis Report 2024 RTEP Window 1 (Feb. 10, 2025), at 20; see also PJM Apr. 8 Answer at 8-9 (identifying in the 2024 RTEP cycle analyses 173 transmission line thermal overloads, including at 765 kV and 500 kV along transmission paths connecting Western PJM to Southern and Eastern PJM); id. at 13 (identifying the Valley Link Project Portfolio as the more efficient or cost-effective solution to address the west-east regional transfer reinforcement needs for years 2029 and 2032).
[16] See, e.g., Governor Youngkin Comment at 1 (“As Virginia and the Broader PJM region’s energy landscape evolves, these projects are critical for ensuring that reliable electric service is uninterrupted. . . . This new ‘backbone’ transmission infrastructure is crucial to reliably serving the growing needs of all Virginians. These projects will also support economic development and an ‘all of the above’ power generation mix for homes, businesses, and critical infrastructure important for regional and national security.”).