Commissioner See’s Concurrence on Midcontinent Grid Solutions Iowa, LLC

Typically when I join the majority’s decision in full, I let that decision speak for itself.  One portion of today’s order, though, involves an issue that has recently garnered serious and respectful disagreement among the Commission.[1]  So I write separately to explain why I am persuaded today’s outcome is the right call under Commission precedent.

To begin, I share our dissenting colleague’s concerns that a hypothetical capital structure of 60% equity and 40% debt can heighten the potential for unjustified rates.  Commissioner Chang explains how hypothetical capital structures with equity skewing high can be more costly without offsetting gains.  I agree.  I also agree that the record presents a less-than-ideal case for the particular structure Midcontinent Grid Solutions Iowa, LLC (MGS Iowa) seeks.  (Future applicants might take note that bringing stronger record support for their chosen hypothetical capital structure could make for a smoother path.)  But when it comes to our fundamental duty to ensure just and reasonable rates, I do find enough here to justify the 60%/40% incentive within that broad rubric.  As more fully explained in the majority order, MGS Iowa’s hypothetical capital structure will last only until MGS Iowa obtains long-term debt financing and a project has been placed in service; MGS Iowa will use its actual capital structure after that.  New transmission projects come with significant financing risks and consistent determinations from the Commission promote stability—which in turn increases regulatory certainty to support utilities’ efforts to obtain financing.  No parties opposed MGS Iowa’s request to use a hypothetical capital structure.  And the requested hypothetical capital structure is within the bounds of what the Commission has approved in the past.

More generally, my vote today is for regulatory transparency and predictability.  Our transmission incentives policy operates case-by-case,[2] so I see room for those who parse the facts before us today differently.  But for my part, I cannot overlook how the Commission has granted similar requests in similar cases very consistently over the better part of a decade.[3]  Regulatory certainty drives stable investments, and we need smart investments to build out the grid now more than ever.  Taking a sharp turn from the Commission’s nearly unanimous precedent in this area thus gives me pause. 

None of this suggests I’m closed off to revisiting Commission policy in this and other incentives-related areas.  Yes, the Commission should be in the business of encouraging needed infrastructure and the investment environment that supports it.  But we must also ensure that the steps we take—especially in today’s construction-heavy era—remain within our just-and-reasonable ambit.  And I take seriously Commissioner Chang’s reminder that the Commission should never persist in an error simply because it’s become repeated.  But since I cannot meaningfully disentangle requiring a more robust evidentiary case here from the myriad cases where we did not ask for the same, and because in my view granting the requested incentive does not go into unjust and unreasonable territory, I would reserve changes to the Commission’s practice for a policy statement or other generic action.