WESTFIELD –The Federal Energy Regulatory Commission (FERC) issued a decision cutting the profit electrical transmission companies can make on their investment to upgrade transmission facilities in the New England region
Deregulation of the electrical industry in the 1990s unbundled energy generation, transmission and sale to consumers. Power companies, prior to deregulation often controlled generation, transmission and retail sale of electrical power to end consumers, a vertical monopoly. The goal of deregulation was to foster greater competition in that industry.
Transmission companies have been investing in new high-tension power facilities, with a rate of return set by the FERC.
The transmission owners had been charging a rate of return or interest on their investment, of 11.14 per cent to recoup their investment, but FERC issued a decision lowering that rate of interest to 10.57 percent.
The FERC decision requires the transmission owner to reimburse $60 million to New England electrical consumers which translates to about $28 million for Massachusetts electrical customers. Municipally-owned utilities will see a refund of about $4 million.
The Massachusetts Municipal Wholesale Electric Company (MMWEC) and other utilities claimed the 11.14 percent profit margin was too high, given changes in economic conditions and interest rates since 2006 when the 11.14 ROE was established. Utility regulators and consumer advocates from throughout New England, as well as U.S. Sen. Edward Markey, also supported the complaint.
MMWEC, a non-profit, public corporation and political subdivision of the Commonwealth of Massachusetts, is the joint action agency for public power in Massachusetts, providing a variety of power supply, financial, risk management and other services to the state’s consumer-owned municipal utilities.
The Oct. 16 FERC decision found the higher rate to be “unjust and unreasonable”, set the new rate at 10.57% and ordered refunds of overpayments for the period from October 2011 through December 2012. Litigation is continuing at the FERC to secure additional refunds.
The Westfield Gas Electric Department ratepayers will see a drop of $4.50 a year as a result of the FERC decision and $180,000 will be refunded to the municipal utility.
WG&E Energy Supply Manager Tony Contrino said yesterday that “transmission providers get a guaranteed return on their investment, which had been 11.14 percent.”
“As those projects are done, the return is going down to 10.57 percent, which is still a good investment,” Contrino said. “The region needs (upgraded transmission capabilities).”
“As a result of the FERC decision consumers see a lower transmission cost, about 35 to 40 cents a month, that we have to collect,” Contrino said.
“This is an important and positive decision for all New England consumers, and it’s gratifying to see these years of effort coming to a close with a large net benefit for our customers, ” MMWEC Chief Executive Officer Ronald C. DeCurzio said in a press release. “We are pursuing additional refunds of over payments made in 2013 and 2014 and will continue our work to ensure that transmission investments are justified and beneficial to consumers.”
DeCurzio said in the MMWEC release that the refunds certainly are welcome, but the benefit increases as the lower rate of return is applied in years ahead to long-term transmission investments. The current $7 billion invested in New England transmission facilities is expected to increase to $11 billion by 2017, and the costs avoided with a lower rate of return will increase as the transmission investment base grows.
