Item E-1: Commissioner James Danly Dissent on Electric Transmission Incentives Policy Under Section 219 of the Federal Power Act

Commissioner James Danly Statement
April 15, 2021
Docket No.  RM20-10-000

That “that” is a word that the English language overtasks and that leads to confusion cannot be disputed.  But “that” does not mean “to,” and that is what the majority freights “that” with in this order.  That is why I dissent.    

Section 219(c) of the Federal Power Act provides that “the Commission shall . . .  provide for incentives to each transmitting utility or electric utility that joins a Transmission Organization.”[1]  And this is what the Commission has done since this text was added to the Federal Power Act in 2005,[2] providing a 50-basis-point adder to the return on equity of transmission utilities in Regional Transmission Organizations (RTO).[3]  These incentives do not expire unless the transmission utility leaves the RTO.[4]

The majority, however, states that it now “believe[s] that it is reasonable to read FPA section 219(c) to direct the Commission to provide an incentive for ‘join[ing]’ a Transmission Organization and not for remaining in a Transmission Organization in perpetuity.”[5]  The incentive, therefore, would be limited to “each transmitting utility or electric utility to join[] a Transmission Organization” and the incentive would expire after three years.  I disagree because that is not what the statute says.

First, the Commission’s new belief contradicts fourteen years of precedent interpreting unchanged statutory text.

Second, the Commission’s consistent interpretation of the statute since its inception is correct.  The Commission is to provide incentives to a utility “that joins” an RTO.  The statute does not limit the incentive solely to encourage utilities “to join” an RTO; it does not address the issue of whether they “remain” in the RTO.  If Congress intended the RTO adder to only apply as an incentive “to join” an RTO, it would have said so.  It did not.  The statute requires incentives to an entity “that joins” an RTO, full stop, no limitation.

It is not our role to second guess Congress.  It is irrelevant whether the majority “believes” the RTO adder is no longer necessary as an incentive for a utility “that joins” an RTO to stay in the RTO.  If the majority or anyone else has a problem with the statute, their sole recourse is through Congress.

Just as the statutory text is not limited to an incentive for a utility “to join” an RTO, it also is not limited to a utility that “voluntarily” joins a Transmission Organization.  That word does not appear in the statute.  I oppose inserting this further limitation into the statutory text.[6]  

The majority also fails to consider the effects of its proposed change on utilities that have not yet joined an RTO.  There are large portions of the country that have no RTO.  Recent events suggest that utilities in these regions are contemplating joining an existing RTO or forming a new one.  The Commission should be taking actions to encourage such decisions.  Instead, we are proposing to reduce the benefits to utilities that join RTOs based on a strained, erroneous interpretation of the statute.  Utilities considering RTO participation are sure to take note not only of the reduction in benefits attendant to RTO participation that the Commission proposes today, but also of the Commission’s willingness to take extraordinary steps to reduce those benefits.  This is not the signal we should be sending to utilities that, to date, have resisted RTO participation.

For similar reasons, I support a 100-basis point adder to a utility “that joins” an RTO.  RTOs provide enormous cost benefits to consumers.  We should continue to provide strong incentives to utilities to join and to remain in RTOs so that consumers can reap the cost benefits of power markets.  That is what the statute requires, and I would strengthen these incentives for any utility “that joins” an RTO.   

For these reasons, I respectfully dissent.