UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Chapter I 

(Docket No. RM11-26-000) 

Promoting Transmission Investment Through Pricing Reform 

(May 19, 2011) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Notice of Inquiry. 

SUMMARY: In this Notice of Inquiry, the Federal Energy Regulatory Commission 

(Commission) seeks comment on the scope and implementation of its transmission 

incentives regulations and policies under Order No. 679. It has been nearly five years 

since the Commission promulgated rules to implement the directives of section 1241 of 

the Energy Policy Act of 2005 (EPAct 2005), which added a new section 219 to the 

Federal Power Act (FPA). In the past five years, the Commission has received over 75 

applications for transmission incentives. The requested incentives have been varied, and 

the demonstrations supporting the incentives applications have likewise been varied. 

During this time, the electric industry has continued to evolve, and the Commission has 

issued corresponding regulations, policy statements, and case-by-case determinations. 

Given the changes in the electric industry, the Commission’s experience to date applying 

Order No. 679, and the ongoing need to ensure that our incentives regulations and 

policies are encouraging the development of transmission infrastructure in a manner 
Docket No. RM11-26-000 - 2 - 

consistent with FPA sections 219 and 205 and 206, the Commission now issues this 

Notice of Inquiry. 

DATES: Comments are due [Insert date that is 60 days after publication in the 

FEDERAL REGISTER]. 

ADDRESSES: You may submit comments, identified by docket number and in 

accordance with the requirements posted on the Commission’s web site 

http://www.ferc.gov. Comments may be submitted by any of the following methods: 

 Agency Web Site: Documents created electronically using word processing 

software should be filed in native applications or print-to-PDF format, and not in a 

scanned format, at http://www.ferc.gov/docs-filing/efiling.asp. 

 Mail/Hand Delivery: Commenters unable to file comments electronically must 

mail or hand deliver an original of their comments to: Federal Energy Regulatory 

Commission, Secretary of the Commission, 888 First Street, NE, Washington, DC 

20426. These requirements can be found on the Commission’s web site, see, e.g., 

the “Quick Reference Guide for Paper Submissions,” available at 

http://www.ferc.gov/docs-filing/efiling.asp, or via phone from FERC Online 

Support at 202-502-6652 or toll-free at 1-866-208-3676. 

FOR FURTHER INFORMATION CONTACT: 

David Borden (Technical Information) 

Office of Energy Policy and Innovations 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

(202) 502-8734 

David.Borden@ferc.gov 
Docket No. RM11-26-000 - 3 - 

Andrew Weinstein (Legal Information) 

Office of General Counsel – Energy Markets 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

(202) 502-6230 

Andrew.Weinstein@ferc.gov 

SUPPLEMENTARY INFORMATION

:
135 FERC ¶ 61,146 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Promoting Transmission Investment Through Pricing 

Reform 

Docket No. RM11-26-000 

NOTICE OF INQUIRY 

(May 19, 2011) 

1. In this Notice of Inquiry, the Federal Energy Regulatory Commission 

(Commission) seeks comment on the scope and implementation of its transmission 

incentives regulations and policies under Order No. 679.1

 It has been nearly five years 

since the Commission promulgated rules to implement the directives of section 1241 of 

the Energy Policy Act of 2005 (EPAct 2005),2

 which added a new section 219 to the 

Federal Power Act (FPA).3

 In the past five years, the Commission has received over 75 

applications for transmission incentives. Collectively, the applicants in those cases 

sought incentives for investment in over $50 billion in proposed transmission 

infrastructure to ensure reliability or to reduce the cost of delivered power to customers 

 

1 Promoting Transmission Investment through Pricing Reform, Order No. 679, 

71 FR 43294 (Jul. 31, 2006), FERC Stats. & Regs. ¶ 31,222 (2006), order on reh’g, 

Order No. 679-A, 72 FR 1152 (Jan. 10, 2007), FERC Stats. & Regs. ¶ 31,236, order on 

reh’g, 119 FERC ¶ 61,062 (2007). 

2

 Energy Policy Act of 2005, Pub. L. No. 109-58, §§ 1261 et seq., 119 Stat. 594 

(2005). 

3

 16 U.S.C. 824s. 
Docket No. RM11-26-000 - 2 - 

by reducing transmission congestion.4

 The requested incentives have been varied, and 

the demonstrations supporting the incentives applications have likewise been varied. 

2. During this time, the electric industry has continued to evolve, and the 

Commission has issued corresponding regulations, policy statements, and case-by-case 

determinations.5

 Given the changes in the electric industry, the Commission’s 

experience to date applying Order No. 679, and the ongoing need to ensure that our 

incentives regulations and policies are encouraging the development of transmission 

infrastructure in a manner consistent with FPA sections 219 and 205 and 206,6

 the 

Commission now issues this Notice of Inquiry. 

I. Brief History/Background

3. Section 1241 of EPAct 2005 added a new section 219 to the FPA. Section 219(a) 

of the FPA requires the Commission to establish by rule incentive-based, including 

performance-based, rate treatments for the transmission of electric energy in interstate 

commerce by public utilities for the purpose of benefiting consumers by ensuring 

 4

 This figure is the sum of the proposed investment amounts included in 

transmission incentive applications submitted to the Commission pursuant to Order 

No. 679, as of April 2011. However, the approval of transmission rate incentives for 

many of those proposed projects does not mean that all of those proposed projects have 

gone into service or ultimately will be completed. 

5

 In the past five years, the electric industry has experienced significant changes. 

Among others, such changes include the implementation of Order No. 890 transmission 

planning processes; adoption of mandatory and enforceable reliability standards; 

increasing diversity of the generation fleet; and increasing investment in the development 

of smart grid technologies. 

6

 16 U.S.C. 824(d) and 824(e) (2006). 
Docket No. RM11-26-000 - 3 - 

reliability and reducing the cost of delivered power by reducing transmission congestion. 

Section 219(b) requires that the Rule: 

 promote reliable and economically efficient transmission and generation of 

electricity by promoting capital investment in the enlargement, improvement, 

maintenance, and operation of all facilities for the transmission of electric 

energy in interstate commerce, regardless of the ownership of the facilities; 

 provide a return on equity that attracts new investment in transmission 

facilities, including related transmission technologies; 

 encourage deployment of transmission technologies and other measures to 

increase the capacity and efficiency of existing transmission facilities and 

improve the operation of the facilities; and 

 allow the recovery of all prudently incurred costs necessary to comply with 

mandatory reliability standards issued pursuant to section 215 of the FPA, and 

all prudently incurred costs related to transmission infrastructure development 

pursuant to section 216 of the FPA.7

 

4. Section 219(c) requires that the Rule provide for incentives to each transmitting 

utility or electric utility that joins a Transmission Organization and ensure that any 

recoverable costs associated with joining such Transmission Organization may be 

recovered through transmission rates charged by the utility or through the transmission 

 7

 Section 216 addresses designation of and siting of transmission facilities within 

National Interest Electric Transmission Corridors. 16 U.S.C. 824p (2006). 
Docket No. RM11-26-000 - 4 - 

rates charged by the Transmission Organization that provides transmission service to the 

utility. Finally, section 219(d) provides that all rates approved under the Rule are subject 

to the requirements of sections 205 and 206 of the FPA, which require that rates, charges, 

terms and conditions of service be just and reasonable and not unduly discriminatory or 

preferential. 

5. On July 20, 2006, the Commission issued Order No. 679, Promoting Transmission 

Investment through Pricing Reform, which was further refined in Order No. 679-A, and a 

subsequent order on rehearing, issued in December 2006, and April 2007, respectively. 

In this series of orders, the Commission stated that Section 219 reflects Congress’ 

determination that the Commission’s traditional ratemaking policies may not be sufficient 

to encourage new transmission infrastructure.8

 Thus, the Commission identified 

instances where its policies may no longer have struck the appropriate balance in 

encouraging new investments and set forth several broad categories of incentive rate 

treatments. The Commission declined to adopt specific criteria or conditions that 

applicants would be required to meet in order for their projects to be considered eligible 

for incentive rate treatments. The Commission stated that it would not establish such 

criteria “at this time,” on the grounds that to do so “now would limit the flexibility of the 

Rule.”9

 Instead, as discussed more fully below, the Commission required that each 

applicant satisfy the statutory threshold set forth in section 219(a), by demonstrating that 

 8

 Order No. 679, FERC Stats. & Regs. ¶ 31,222 at P 5. 

9 Id. P 43. 
Docket No. RM11-26-000 - 5 - 

the facilities for which it seeks incentives either ensure reliability or reduce the cost of 

delivered power by reducing transmission congestion. Once that threshold is met, the 

applicant must demonstrate that there is a nexus between the incentive sought and the 

investment being made. 

6. With respect to the statutory threshold, the Commission established rebuttable 

presumptions to assist in determining whether proposed facilities either ensure reliability 

or reduce the cost of delivered power by reducing transmission congestion, consistent 

with section 219(a) of the FPA. The rebuttable presumptions apply to a transmission 

project that (i) results from a fair and open regional planning process that considers and 

evaluates projects for reliability and/or congestion and is found to be acceptable to the 

Commission; or (ii) has received construction approval from an appropriate state 

commission or state siting authority.10 If a proposed project does not qualify for the 

rebuttable presumption, an applicant bears the burden of otherwise demonstrating that its 

project satisfies the statutory criteria and therefore is eligible for incentives. 

7. As mentioned above, after satisfying the statutory threshold of section 219(a), 

applicants for incentives must then show that there is a nexus between the incentive 

sought and the investment being made, i.e., that the incentives being requested are 

“rationally tailored to the risks and challenges faced by a project.”11 In Order No. 679-A, 

the Commission stated that “[i]n evaluating whether an applicant has satisfied this nexus 

 10 Id. P 58. 

11 Id. P 26. 
Docket No. RM11-26-000 - 6 - 

test, the Commission will examine the total package of incentives being sought, the interrelationship between any incentives, and how any requested incentives address the risks 

and challenges faced by a project.”12 

8. The Commission stated that the rebuttable presumptions and the nexus test are not 

prescriptive by design, and are intended to be applied on a case-by-case basis.13 The 

Commission also stated that the “most compelling” candidates for incentives are “new 

projects that present special risks or challenges, not routine investments made in the 

ordinary course of expanding the system to provide safe and reliable transmission 

service.”14

9. The Commission also discussed the potential benefits of specific incentives for 

which applications could be filed under Order No. 679. These incentives included 

incentive adders to a base return on equity (ROE), recovery of 100 percent of prudently 

incurred costs of transmission facilities that are cancelled or abandoned due to factors 

that are beyond the control of the public utility, inclusion of 100 percent of construction 

work in progress (CWIP) in rate base, hypothetical capital structures, accelerated 

depreciation for rate recovery, and recovery of prudently incurred pre-commercial 

operations costs. 

 12 Order No. 679-A, FERC Stats. & Regs. ¶ 31,236 at P 21. 

13 Order No. 679, FERC Stats. & Regs. ¶ 31,222 at P 22, 24. 

14 Id. P 23, 60. 
Docket No. RM11-26-000 - 7 - 

II. Subject of the Notice of Inquiry

10. In Order No. 679, the Commission established a policy for rate incentives to 

achieve the goals of section 219 to promote “transmission infrastructure investment that 

will help ensure the reliability of the bulk power transmission system in the United States 

and reduce the cost of delivered power to customers by reducing transmission 

congestion.”15 The Commission believes that there remains a need for additional 

transmission investment to ensure the reliable operation of the grid and reduce the cost of 

delivered power by reducing transmission congestion. 

11. By issuing this Notice of Inquiry, the Commission is not departing from the 

Congressional mandate set forth in section 219. 

12. Similarly, by issuing this Notice of Inquiry, the Commission is not departing from 

its longstanding recognition of the need to balance consumer and investor interests. For 

example, in Order No. 679, the Commission stated: 

The incentives adopted by this Final Rule are properly 

understood only in the context of the traditional regulatory 

principles they seek to further. The longstanding rule is that 

utility rate regulation must adequately balance both consumer 

and investor interests. It is not enough to ensure investors are 

properly compensated, and it is not enough to ensure that 

consumers are protected against excessive rates. Our policies 

 15 Id. P 1. 
Docket No. RM11-26-000 - 8 - 

must ensure both outcomes and, in doing so, strike the 

appropriate balance between these twin objectives.16 

13. This Notice of Inquiry does not seek to overturn the need for balance between 

consumer and investor interests. In Order No. 679, the Commission stated that the 

purpose of the incentives policy “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.”17 We will continue to balance the interests 

of consumers and investors and ensure that our implementation of section 219 provides 

incentives to encourage new infrastructure as we evaluate future requests for incentives 

for investment in transmission infrastructure.18 

14. The Commission has discretion in implementing transmission incentives policies 

to achieve the broad goals of section 219. Through this Notice of Inquiry, the 

Commission is seeking input from stakeholders on the scope and implementation of its 

transmission incentives policies, and on what steps the Commission could take evaluating 

future requests for incentives for investment in transmission infrastructure to ensure that 

its incentives policies appropriately encourage the development of transmission 

infrastructure in a manner consistent with our statutory responsibilities. 

 16 Id. P 21. 

17 Id. P 6. 

18 During the pendency of this proceeding, the Commission will continue to 

evaluate incentive requests under Order No. 679 on a case-by-case basis. 
Docket No. RM11-26-000 - 9 - 

15. Immediately below, the Commission poses a number of overarching questions 

about our incentives policies under Order No. 679. The ensuing sections of this Notice of 

Inquiry pose more specific questions with respect to various aspects of the Commission’s 

implementation of its transmission incentive policies. 

Q 1) What have been the effects of the incentives policies adopted in 

Order No. 679 with respect to the goals set forth in section 219? 

Q 2) Are the Commission’s incentives policies appropriately 

promoting investment in transmission infrastructure in accordance with 

section 219? 

Q 3) Some barriers to construction of new transmission facilities fall 

outside of the Commission’s jurisdiction. How do the Commission’s 

incentives policies affect such barriers? 

Q 4) How can the Commission’s rate incentives policies balance the 

need for regulatory certainty with the changing investment climate over 

time? Are there metrics the Commission should monitor to achieve this 

balance, and if so, what are they? Are there other factors that change 

over time that the Commission should consider in evaluating incentives 

applications? Should the Commission consider these changes over time 

on a generic or case-by-case basis? 

Q 5) Should specific rate incentives be tailored to address specific 

goals set forth by Congress in section 219? 
Docket No. RM11-26-000 - 10 - 

Q 6) Are there other factors or considerations which the Commission 

should consider as part of its transmission incentives policies, in order 

to be consistent with the goals of section 219? 

Q 7) Have the incentives granted to transmission projects had an 

impact on consumer rates and service, including impacts related to 

reliability and the reduction of congestion? 

Q 8) Have the incentives granted to transmission projects had an 

impact on investment patterns in the electricity industry? Do the 

incentives impact the allocation of investment capital among 

transmission, generation, and distribution facilities? 

Q 9) How should the Commission best balance the promotion of 

transmission investment with the assurance of just and reasonable rates? 

A. Section 219(a) Statutory Threshold

16. In Order No. 679, the Commission required that each applicant seeking 

transmission incentives in accordance with section 219 of the FPA, first satisfy the 

statutory threshold set forth in section 219(a) by demonstrating that a proposed project 

for which it seeks incentives either ensures reliability or reduces the cost of delivered 

power by reducing transmission congestion. The Commission has established rebuttable 

presumptions that a proposed transmission project satisfies the section 219(a) statutory 

threshold if such project: (i) results from a fair and open regional planning process that 

considers and evaluates a project for reliability and/or congestion, and is found to be 

acceptable to the Commission; or (ii) has received construction approval from an 
Docket No. RM11-26-000 - 11 - 

appropriate state commission or state siting authority. In the alternative, if a proposed 

project does not qualify for the rebuttable presumption, an applicant can nevertheless 

make an independent showing that its project either ensures reliability or reduces 

transmission congestion and therefore is eligible for incentives. 

17. The Commission seeks comment regarding the following issues: 

Q 10) Do the rebuttable presumptions established in Order No. 679 

serve as appropriate bases for satisfying the statutory threshold for 

section 219(a)? 

Q 11) Are there other criteria that the Commission should adopt as 

additional rebuttable presumptions for satisfying the statutory threshold 

for section 219(a)? 

Q 12) What types of information, data, or studies should the 

Commission consider in evaluating whether an applicant has made an 

independent showing that satisfies section 219(a)? 

Q 13) Would it assist applicants if the Commission established a 

procedure that applicants may follow to make such an independent 

showing? If so, what should be the characteristics of that procedure? 

Q 14) In some cases, when an applicant has sought incentives, the 

Commission has conditionally approved the request subject to the 

project receiving approval in a regional transmission planning process 
Docket No. RM11-26-000 - 12 - 

or state siting process.19 Intervenors in various rate proceedings have 

raised concerns that a project scope may change in the planning and 

siting process. In light of this, how should the Commission balance the 

value of and need for the requested incentives in promoting project 

development and financing with the potential uncertainty surrounding 

project scope? 

B. Additional Goals in Section 219

18. The Commission in Order No. 679 interpreted section 219 as intended to promote 

capital investment in a wide range of infrastructure that ensures reliability or reduces the 

cost of delivered power by reducing transmission congestion. This interpretation is 

primarily based on the language of section 219(a). In addition, section 219(b)(1) states 

that “the Commission shall promote reliable and economically efficient transmission and 

generation of electricity by promoting capital investment in the enlargement, 

improvement, maintenance, and operation of all facilities for the transmission of electric 

energy in interstate commerce...” Similarly, section 219(b)(3) encourages the 

“deployment of transmission technologies and other measures to increase the capacity 

and efficiency of existing transmission facilities and improve the operation of the 

facilities.” The Commission stated that the “reliability benefits of operation and 

maintenance capital spending are obvious, and we expect applicants incurring this type of 

 19 As discussed above, these processes are related to satisfying the rebuttable 

presumptions set forth in Order No. 679. 
Docket No. RM11-26-000 - 13 - 

capital spending will be able to demonstrate reliability benefits and thereby be eligible for 

incentive treatment.”20 

19. To date, the vast majority of applications for transmission incentives filed with the 

Commission have focused on the enlargement of facilities, including construction of new 

transmission facilities. Few applications have focused on the improvement, maintenance, 

and operations of transmission facilities or on increasing their capacity or efficiency.21 

20. The Commission requests comment on whether there is a need for the 

Commission to promote the other goals set forth in the statute, such as greater efficiency, 

including economic efficiency, and improved operations in transmission assets through 

specifically tailored incentives. The use of advanced transmission technologies to bring 

about efficiencies and/or improved operations is discussed further and separately below. 

Specifically, the Commission poses the following questions. 

Q 15) Pursuant to section 219(b)(1), what steps could the Commission 

take to “promote reliable and economically efficient transmission and 

generation of electricity by promoting capital investment in the 

enlargement, improvement, maintenance, and operation of all facilities 

for the transmission of electric energy in interstate commerce”? 

 20 Id. P 56. 

21 For example, this could include software improvements that enhance scheduling 

and dispatch or investment in tools to enhance self-healing grid capabilities or improved 

situational awareness. 
Docket No. RM11-26-000 - 14 - 

Q 16) How would these steps affect other aspects of the Commission’s 

rate-making policy? 

Q 17) Pursuant to section 219(b)(3), what steps could the Commission 

take to “increase the capacity and efficiency of existing transmission 

facilities and improve the operation of the facilities”? 

Q 18) As indicated above, applicants must show that their project meets 

the threshold under section 219(a). What showing should the 

Commission require to support a request for incentives under section 

219(b)(1) and (b)(3)? 

C. Order No. 679 Nexus Test

21. Once a proposed project satisfies the section 219(a) statutory threshold, the 

applicant must demonstrate that there is a nexus between the incentive sought and the 

investment being made – i.e., that the incentives being requested are “rationally tailored 

to the risks and challenges faced” by a project.22 In evaluating whether an applicant for 

incentives has satisfied the nexus test, the Commission stated that it will examine the 

total package of incentives being sought, the inter-relationship between any incentives, 

and how any requested incentives address the risks and challenges faced by a project.23 

The nexus test is not prescriptive by design and the Commission did not specify criteria 

for measuring the nexus. The Commission did emphasize that the “most compelling” 

 22 Id. P 26. 

23 Order No. 679-A, FERC Stats. & Regs. ¶ 31,236 at P 21. 
Docket No. RM11-26-000 - 15 - 

candidates for incentives are “new projects that present special risks or challenges, not 

routine investments made in the ordinary course of expanding the system to provide safe 

and reliable transmission service.”24 

22. As the Commission has reached case-by-case determinations on incentive 

applications, and faced new facts and circumstances in each case, the Commission’s 

application of the nexus test has evolved. 

23. One development with respect to the nexus test is the Commission’s finding that 

the question of whether a project is routine or non-routine is particularly probative in 

evaluating whether there is a nexus between a project and the incentives sought.25 The 

Commission has offered guidance on the factors that will be considered in evaluating 

whether a project is routine or non-routine, including: (1) the scope of a project, e.g., 

investment dollars, increase in transfer capability, and size of a project; 2) the effect of a 

project, e.g., improving reliability or reducing congestion costs; and 3) the challenges or 

risks faced by a project, e.g., siting, long lead times, regulatory and political risks, and 

financing challenges.26 

24. Another development with respect to the nexus test involves whether that test 

applies to each individual project for which an applicant requests incentives, or instead 

applies to groups of projects. The Commission has stated that an applicant may 

demonstrate that several individual projects are appropriately considered as a single 

 24 Id. P 23, 60. 

25 Baltimore Gas and Electric Company, 120 FERC ¶ 61,084 (2007). 

26 Id. P 43. 
Docket No. RM11-26-000 - 16 - 

overall project based on their characteristics or combined purpose, and seek incentives 

for that single overall project.27 The Commission has also stated that if the applicant is 

unable to satisfy that criterion, then the applicant may still file a single application for 

incentives, but the Commission will consider each individual project separately in 

applying the nexus test and determining whether each project is routine or non-routine.28 

25. Thus, the nexus test has been fundamental to the Commission’s implementation of 

Order No. 679, and the required demonstration for satisfying the nexus test has evolved 

over time on a case-by-case basis. The Commission is interested in comments on the 

following: 

Q 19) Does the focus of the nexus test on the risks and challenges of a 

given transmission project remain appropriate for the purpose of 

justifying incentives? Is that focus more appropriate for some 

incentives than others? What other factors should the Commission 

consider? 

Q 20) Would focusing on project characteristics or effects be a more 

effective means than focusing on a project’s risks and challenges as the 

basis for granting incentives? What characteristics or effects would be 

 27 See PJM Interconnection, L.L.C., 133 FERC ¶ 61,273 at 45 (2010) (citing 

PacifiCorp, 125 FERC ¶ 61,076 (2008)). 

28 Id.
Docket No. RM11-26-000 - 17 - 

appropriate for the Commission to consider for that purpose, consistent 

with section 219?29

Q 21) What risks and challenges are transmission developers facing 

today? Have such risks and challenges evolved since the issuance of 

Order No. 679, and if so how? 

Q 22) Is the distinction between a routine and non-routine project in 

analyzing “risks and challenges” useful in providing guidance to the 

industry on how to apply the nexus test? Does this distinction 

appropriately differentiate between the level of difficulty in constructing 

various transmission projects? 

Q 23) What types of criteria should the Commission consider when 

evaluating the “scope of a project” or the “effect of a project,” in 

determining whether a project is routine or non-routine? Should the 

Commission establish bright line criteria, such that a project meeting 

those criteria is non-routine regardless of the applicant, or should this 

evaluation depend on the circumstances of the applicant, e.g. the 

estimated cost of the project relative to the applicant’s transmission rate 

base? 

 29 For example, this could include transmission projects that are multi-state or high 

voltage in nature. 
Docket No. RM11-26-000 - 18 - 

Q 24) Are there aspects of the Commission’s accounting and ratemaking 

policies, including the use of formula rates, that reduce or increase the 

risks and challenges of a transmission project? If so, how should the 

Commission take into account the effect of its accounting and 

ratemaking policies in evaluating incentive applications? 

Q 25) In Order No. 679-A, the Commission stated that “[i]n general, we 

do not consider that contractual commitments or mandatory projects, 

such as section 215 reliability projects, disqualify a request for 

incentive-based rate treatment. Provided applicants are able to 

demonstrate they meet the requirements of section 219, including 

establishing the required nexus between the requested incentive and the 

investment, they may qualify for incentive-based rate treatments. A 

prior contractual commitment or statute may have a bearing on our 

nexus evaluation of individual applications.”30 Is the existence of a 

contractual commitment to build a relevant factor in considering 

applications for rate incentives? 

Q 26) The Commission has encouraged the joint ownership of 

transmission facilities but declined in Order No. 679 to make it a 

 30 Order No. 679-A, FERC Stats. & Regs. ¶ 31,236 at P 122. 
Docket No. RM11-26-000 - 19 - 

requirement for receiving incentives.31 Does this approach adequately 

account for the benefits of joint ownership? Are there other approaches to 

providing incentives that encourage joint ownership of transmission 

facilities? 

D. Interrelationship of Incentives

26. In determining whether an applicant has satisfied the nexus test, the Commission 

evaluates the interrelationship between the requested incentives.32 However, the 

Commission has stated that receiving a particular incentive does not preclude receiving 

other incentives.33 The Commission seeks comment regarding whether and/or how the 

Commission should consider the effects of granting certain incentives in evaluating 

whether to grant other incentives, and at what level. The Commission seeks comment on 

the following: 

Q 27) Are there specific criteria the Commission should use in evaluating 

whether and how to adjust certain incentives to account for the 

impacts of other incentives? 

Q 28) Do certain incentives sufficiently mitigate the risks and challenges of 

a transmission project so as to obviate the need for granting other 

incentives, or warrant adjustment in the level of those incentives? For 

 31 Order No. 679, FERC Stats. & Regs. ¶ 31,222 at P 356, 357; Order No. 679-A, 

FERC Stats. & Regs. ¶ 31,236 at 102. 

32 Order No. 679-A, FERC Stats. & Regs. ¶ 31,236 at P 21. 

33 Id.
Docket No. RM11-26-000 - 20 - 

example, should granting 100 percent CWIP and recovery of the costs 

of abandoned plant affect the evaluation of a request for an incentive 

ROE adder based on a project’s risks and challenges? 

E. The Role of Cost Estimates

27. The Commission has generally denied proposals to limit incentives to budgeted 

amounts.34 Intervenors in various transmission incentive proceedings have asserted that 

the Commission’s incentive policies may have the unintended effect of discouraging cost 

containment. However, others have responded that changes in cost estimates are not due 

to any failure of the applicant to contain costs but are due to changes imposed on the 

applicant in the state siting process or other factors beyond the applicant’s control that 

cause costs to change. 

28. As noted above, the Commission created a rebuttable presumption that a project is 

eligible under FPA section 219 for incentive rate treatments if that project results from a 

fair and open regional planning process that evaluates projects for reliability and/or 

congestion. The submission of an estimate of project costs is part of some regional 

planning processes. These estimates may be used to select certain projects for 

development. Because the estimated and actual costs of a project may change 

significantly through the development and construction process, and there can be 

 34 Order No. 679, FERC Stats. & Regs. ¶ 31,222 at P 121, n. 81; P 166. See also

Virginia Electric and Power Co., 124 FERC ¶ 61,207 at P 53 (2008). 
Docket No. RM11-26-000 - 21 - 

significant unknowns at the time a project is selected for development in a regional 

transmission planning process, the Commission seeks comment on the following: 

Q 29) Should the Commission limit the application of incentives to the 

cost estimate utilized for including or retaining the project in the plan 

submitted through the regional planning process? If so, which 

incentives should be applied to the cost estimate, and which should be 

applied to all prudently incurred costs? 

Q 30) How could such an approach be implemented? Would this 

approach work in all regions of the country? What processes for 

developing, evaluating, and updating cost estimates must be in place 

within regional transmission planning processes to facilitate such an 

approach? 

Q 31) If a change in cost estimate is not due to the failure to contain 

costs but instead reflects the real cost in building the proposed 

transmission line, should the Commission take that consideration into 

account, and if so, how? 

Q 32) Should new reporting requirements be in place to allow the 

Commission to audit compliance with a requirement to limit incentives 

to some project cost estimate? 
Docket No. RM11-26-000 - 22 - 

F. Individual Incentives

29. Order No. 679 identified specific incentives that the Commission may grant to 

qualifying applicants, including: incentive ROE adders, opportunity to recover 100 

percent of prudently incurred costs of transmission facilities that are cancelled or 

abandoned for reasons beyond the control of the public utility, inclusion of 100 percent of 

prudently incurred CWIP in rate base, recovery of pre-commercial operations costs, 

hypothetical capital structures, accelerated depreciation, and deferred cost recovery. 

Below the Commission briefly explains each incentive and seeks comment on a number 

of questions. The Commission also poses questions immediately below on two more 

general matters: 

Q 33) The Commission has general ratemaking policies with respect to 

CWIP and recovery of abandoned plant costs, as discussed below. 

Pursuant to Order No. 679, incentives above and beyond those general 

ratemaking policies may be requested on a case-by-case basis. Would it 

be appropriate to remove these issues from the case-by-case analysis of 

incentive requests, in favor of exploring changes to the Commission’s 

general ratemaking policies? What would be the impact on ratepayers 

of revising these ratemaking policies, rather than authorizing higher 

levels of CWIP or recovery of costs of abandoned plant on a case-bycase basis? 

Q 34) The Commission stated in Order No. 679 that it had not 

established specific eligibility criteria or conditions for incentives 
Docket No. RM11-26-000 - 23 - 

because it would limit the Commission’s flexibility with respect to its 

application of the Rule. The Commission is interested in receiving 

comments regarding whether the establishment of criteria for eligibility 

for particular incentives would enhance regulatory certainty and 

predictability and serve to further encourage appropriate investment in 

transmission infrastructure. Should the Commission establish specific 

criteria or conditions that applicants must meet in order to be eligible for 

these individual incentives? 

i. Incentive ROE Adder for Project Risks and Challenges

30. Under Order No. 679, the Commission allows for an incentive ROE based on a 

project’s risks and challenges that was intended to make transmission investment more 

attractive where the “risks of a particular project exceed the normal risks undertaken by a 

utility (and hence are not reflected in a traditional discounted cash flow (DCF) 

analysis).”35 An applicant’s overall ROE, inclusive of any incentive ROE adder, is 

capped at the top end of the zone of reasonableness for the applicable proxy group under 

the Commission’s traditional DCF analysis. 

31. The Commission seeks comment on the application of this incentive, and whether 

the Commission considers the appropriate factors in evaluating whether a project is 

 35 Order No. 679, FERC Stats. & Regs. ¶ 31,222 at P 27. 
Docket No. RM11-26-000 - 24 - 

entitled to an incentive ROE adder based on a project’s risks and challenges. 

Specifically: 

Q 35) What risks and challenges are appropriately addressed by the 

incentive ROE adder? Is it appropriate for the Commission to evaluate 

these risks and challenges on a project-by-project basis or on an 

aggregate basis for the applicant? 

Q 36) Are there other considerations that the Commission should focus on 

when awarding an incentive ROE adder? 

Q 37) Does the base ROE adequately compensate investors for the 

financial risk of the company, including risks associated with the 

particular transmission project for which incentives are sought? 

Q 38) In determining the incentive ROE adder, and the requisite risks and 

challenges that support such an adder, should the Commission identify 

with specificity the types of risks and challenges that most warrant an 

incentive ROE adder? 

Q 39) In determining the incentive ROE adder, should the Commission 

make a distinction between financial barriers to transmission 

development such as the ability to attract capital, and regulatory 

barriers, such as siting or environmental challenges? If so, how? 

Q 40) In determining the incentive ROE adder, how should the 

Commission balance the impact of other risk-reducing incentives (such 

as CWIP and abandoned plant recovery)? 
Docket No. RM11-26-000 - 25 - 

Q 41) Does regulatory assurance of cost recovery, either at the state or 

regional levels, mitigate the risks and challenges facing a transmission 

project? If so, how should the Commission give consideration to this 

mitigation in evaluating a request for incentive ROE adder based on a 

project’s risks and challenges? 

ii. Other Incentive ROE Adders 

32. In Order No. 679, the Commission offered incentive ROE adders for the creation 

of a Transco or participation in a regional transmission organization (RTO) or 

independent system operator (ISO). Those incentive ROE adders are discussed below.

1) Transcos

33. In Order No. 679, the Commission addressed incentives to encourage the 

development of transmission only companies (i.e., Transcos),36 and in particular, found it 

appropriate to “provide to Transcos a ROE that both encourages Transco formation and is 

sufficient to attract investment after the Transco is formed.”37 The Commission seeks 

comment regarding the following questions: 

Q 42) Is it appropriate to promote voluntary formation of Transcos, as 

defined in Order No. 679, through an ROE adder? Would other 

incentives promote Transco formation more effectively? 

 36 Order No. 679 defines a Transco broadly. Order No. 679, FERC Stats. & Regs. 

¶ 31,222 at P 201. 

37 See Id.P 221. 
Docket No. RM11-26-000 - 26 - 

Q 43) Order No. 679 does not distinguish between Transcos that are 

independent of generation-owning market participants and Transcos that 

are affiliated with such market participants. Would such a distinction be 

appropriate in terms of eligibility for, or the amount of, a Transco 

adder? 

Q 44) Further, Order No. 679 did not distinguish between Transcos that 

result from divestiture of a vertically-integrated utility’s existing 

transmission system and Transcos that are created for the purpose of 

developing a particular new transmission facility. Would such a 

distinction be appropriate in terms of eligibility for, or the amount of, a 

Transco adder? 

2) Transmission Organizations (RTO/ISO)

34. Section 219(c) directs that the Commission “shall to the extent within its 

jurisdiction, provide for incentives to each transmission utility or electric utility that joins 

a Transmission Organization.” In pre- as well as post-Order No. 679 cases, the 

Commission typically has awarded a 50 basis-point ROE adder to utilities that either join 

or already are members of an RTO or ISO.38 

 38 See Proposed Pricing Policy for Efficient Operation and Expansion of 

Transmission Grid, 102 FERC ¶ 61,032 (2003). 
Docket No. RM11-26-000 - 27 - 

35. While section 219 requires an incentive for membership in a Transmission 

Organization, the Commission invites comments on what level of the RTO/ISO ROE 

adder is appropriate. In particular, the Commission seeks comment on the following: 

Q 45) Is it appropriate to offer a standard ROE adder for all utilities that 

join or remain members of an RTO/ISO? 

Q 46) In the alternative, are there other incentives that the Commission 

should consider to encourage joining or remaining in an RTO/ISO? 

Q 47) Should the existing 50 basis point adder be increased to better 

encourage the formation and continuance of RTO/ISO arrangements? 

Q 48) Is the existing 50 basis point adder appropriately scaled to encourage 

the formation and continuance of RTO/ISO arrangements? 

iii. Abandonment

36. Order No. 679 stated that transmission developers may be entitled to recover 100 

percent of the prudently incurred costs related to certain transmission facilities if such 

facilities are later abandoned or cancelled. The genesis of the Commission’s abandoned 

plant policy can be found in Opinion No. 295,39 where the Commission stated that 

ratepayers and shareholders should equally share the costs of prudently incurred 

investments in abandoned or cancelled generation facilities. Thus, it was originally 

Commission policy that 50 percent of the prudently incurred costs would be amortized 

over the life of the plant as an expense, and the remaining 50 percent would be written off 

 39 New England Power Company, 42 FERC ¶ 61,016 (1988). 
Docket No. RM11-26-000 - 28 - 

as a loss. This policy was later extended and made applicable to transmission projects.40 

In Southern California Edison (SCE),41 the Commission granted the recovery of 100 

percent of the prudently incurred costs related to certain proposed transmission facilities 

in the event those facilities were later cancelled or abandoned. The Commission’s 

determination in SCE served as the foundation for the abandoned plant policy articulated 

in Order No. 679. 

Q 49) How does the current incentive allowing recovery of 100 percent 

of prudently incurred abandoned plant costs affect the sharing of risks 

between investors and customers? Are there reasonable conditions or 

safeguards that could be imposed to ensure risks are appropriately 

allocated? For example, should recovery of abandoned plant costs be 

exclusive of carrying charges? Should carrying charges exclude any 

ROE incentive? 

Q 50) Should abandoned plant costs be prohibited in instances where an 

affiliated project eliminates the need for a transmission project? 

Q 51) Are there additional measures that can be taken to either limit the 

risk of abandonment, or mitigate the impact of allowing recovery of 100 

percent of abandoned plant costs on customers? 

 40 Public Service Company of New Mexico, 75 FERC ¶ 61,266, at 61,859 (1996). 

41 Southern California Edison Company, 112 FERC ¶ 61,014 (2005). 
Docket No. RM11-26-000 - 29 - 

Q 52) Some intervenors in various transmission incentives proceedings 

have raised concerns that the incentive of allowing 100 percent recovery 

of prudently-incurred abandoned plant costs could encourage applicants 

to pursue projects of greater risk. How should the Commission consider 

and address this factor? 

Q 53) Should the Commission allow recovery for partial abandonment 

of projects? If so, how should partial abandonment be defined? What 

criteria should the Commission consider when deciding whether a 

project has been partially abandoned? What would be the consequences 

of the Commission allowing recovery of abandoned plant cost for a 

portion of a project and later denying recovery of abandoned plant costs 

for the entire project (e.g., finding that abandonment of the full project 

was under the control of the project developer)? 

Q 54) If the recovery of abandoned plant costs were made contingent on 

the abandonment or cancellation of all or a substantial portion of a 

transmission project, how should the Commission define a “project” for 

the purpose of applying the abandoned plant incentive? The 

Commission has stated that several individual transmission projects may 

be characterized as a single project, or as several individual projects, 

depending on the showing made by the applicant. Should this 

characterization limit how an applicant may recover abandoned plant 

costs? 
Docket No. RM11-26-000 - 30 - 

Q 55) If a project developer is granted the incentive for 100 percent 

recovery of abandoned plant costs, but is denied a request to recover 

abandoned plant costs under this incentive, then is it appropriate to 

recover those costs through other accounting treatments in a subsequent 

section 205 filing? If so, what accounting treatments would be 

appropriate? 

Q 56) If a utility receives recovery of abandoned plant costs incentives 

and subsequently abandons its project, what rate of return (including 

incentive ROE adders), if any, should be applied to the abandoned plant 

costs until the costs are ultimately recovered in rates? 

iv. Construction Work In Progress (CWIP) in Rate Base

37. Order No. 679 provides the opportunity for public utilities, where appropriate, to 

include 100 percent of prudently incurred transmission-related CWIP in rate base.42 The 

Commission’s general policy has been to allow only 50 percent of the non-pollution 

control/fuel conversion construction costs as CWIP in rate base. The remaining 

construction costs, including allowance for funds used during construction (AFUDC), 

generally would have been capitalized and included in rate base only when the plant went 

into commercial operation, i.e., when the plant became used and useful.43 The 

 

 (continued...) 

42 See Order No. 679, FERC Stats. & Regs. ¶ 31,222 at P 29. 

43 There are two mutually exclusive ratemaking methodologies by which public 

utilities may recover financing costs (also referred to as “carrying charges”) on 

construction capital in rates: accrue carrying charges on CWIP in the form AFUDC or 
Docket No. RM11-26-000 - 31 - 

Commission’s policy set forth in Order No. 679 authorizes 100 percent of CWIP to be 

included in rate base prior to commercial operation provides utilities with additional cash 

flow in the form of an immediate earned return.44 Order No. 679 also eliminated the 

requirement that utilities provide forward-looking cost allocation ratios based on the 

customers’ average usage of the transmission line. 

Q 57) What are the appropriate bases for evaluating a request to recover 

100 percent of CWIP? Does including 100 percent of CWIP in rate 

base more appropriately address project specific risks and challenges or 

the aggregate risks and challenges associated with all projects an 

applicant is undertaking in a certain time period? If the aggregate risks 

and challenges are more appropriately addressed by including 100 

percent of CWIP in rate base, how should the risks be reconciled with a 

Commission policy to evaluate risks and challenges on a project specific 

basis? 

 

earn a return on CWIP included in rate base. Under AFUDC, carrying charges are 

capitalized as a component of construction and recovered from ratepayers when the 

completed construction project goes into service. Under CWIP in rate base, carrying 

charges are recovered through its return on rate base while construction is underway 

unlike AFUDC. CWIP in rate base increases the regulated utility’s cash flow during the 

construction period. This in turn decreases the amount of capital the regulated utility 

must raise to finance construction projects, and thus may reduce the cost of capital. 

When a regulated utility is permitted to include CWIP in rate base, it is not allowed to 

also accrue AFUDC on the same construction project costs. 

44 See Order No. 679, FERC Stats. & Regs. ¶ 31,222 at P 103 n.70 (citing 18 CFR 

35.25(c)(3)). 
Docket No. RM11-26-000 - 32 - 

Q 58) What is the impact on ratepayers of allowing 100 percent CWIP 

in rate base prior to commercial operation? What kind of information 

should an applicant submit to make a showing that granting 100 percent 

CWIP will benefit consumers? 

Q 59) In addition to the rate impact data required under 18 C.F.R. § 

35.13(h)(31) and (32), what rate impacts tests could be considered in 

evaluating a request for including 100 percent of CWIP in rate base? 

Q 60) Should the CWIP incentive not apply or be suspended in 

circumstances where an incentives project has been suspended for an 

indefinite period of time and there is no additional construction activity 

on the project? 

Q 61) In the past, the Commission implemented a phasing-in of rate 

treatments to limit their rate impact to consumers.45 Should the 

Commission consider such limits for certain incentives such as CWIP? 

 45 Construction Work In Progress for Public Utilities; Inclusion of Costs in Rate 

Base, Order No. 298, 48 Fed. Reg. 24,323 (June 1, 1983), FERC Stats. & Regs. ¶ 30,455 

(1983), clarification on order on reh’g, Order No. 298-B, 48 Fed. Reg. 55,281 

(December 12, 1983), FERC Stats. & Regs. ¶ 30,524 (1983). (Where the Commission 

limited the rate increase due to CWIP in rate base to 6 percent in the first year and an 

additional 6 percent in the second year, stating that “[t]his initial limitation on CWIP in 

rate base ensures that, in those instances in which utilities have disproportionately large 

construction programs, the initial impacts of the final rule on consumers will not be 

severe.”). 
Docket No. RM11-26-000 - 33 - 

Q 62) If the applicant is granted an incentive ROE adder and 100 

percent CWIP in rate base, should the incentive ROE adder be applied 

to 100 percent of CWIP included in rate base? 

v. Other Incentives

1. Hypothetical Capital Structure

38. A hypothetical capital structure allows an applicant to determine its overall rate of 

return for revenue requirement and ratemaking purposes based on a capital structure that 

is usually more heavily weighted towards equity financing compared to its actual capital 

structure. The relatively higher cost of equity compared to the cost of debt and the 

heavier weighting of equity may serve to increase the overall return, enhance cash flows, 

lower financing costs, and improve credit ratings. In practice, the Commission has 

placed limitations on this incentive by requiring that the actual capital structure match the 

hypothetical capital structure at some point over time, such as when a project commences 

operations. The Commission seeks comment on the following: 

Q 63) Is there a reasonable debt to equity split, or a procedure for 

determining such, that should be applied generally to future 

applications, or that can be applied generally to classifications, such as a 

general split for publicly owned projects and a general split for investor 

owned projects? Or is this best suited for case by case determination? 

What kind of information should an applicant provide in order to 

support an application for a hypothetical capital structure? 
Docket No. RM11-26-000 - 34 - 

Q 64) Is there a reasonable point in time at which the actual capital 

structure should be required to match the hypothetical capital structure 

and that should be applicable generally to future applications? 

2. Pre-Commercial Cost Recovery 

39. In Order No. 679, the Commission permitted, as an incentive, applicants to 

expense pre-commercial costs and to recover them in current rates.46 Absent this 

incentive, pre-commercial costs would generally be capitalized as part of CWIP, and 

subsequently earn a return on equity as well as a return of equity through depreciation, 

once a project goes into service. The incentive aspect of pre-commercial cost recovery 

allows applicants to expense and recover the costs through rates during the construction 

period which improves project cash flows and financial metrics, and mitigates the 

uncertainty over cost recovery of expenditures incurred prior to a project’s regulatory 

approval and commercial operation. Further, for new market entrants with no established 

rate mechanism, the Commission has allowed the deferral of pre-commercial costs as a 

 46 The Commission explained that pre-commercial costs generally include, for 

example, expenditures for preliminary surveys, plans and investigations, made for the 

purpose of determining the feasibility of utility projects, and the costs of studies and 

analyses mandated by regulatory bodies related to plant in service which are included in 

Account 183. The Commission also stated that it would entertain proposals by public 

utilities to expense other types of costs on a case-by-case basis. Order No. 679, FERC 

Stats. & Regs. ¶ 31,222 at P 122. 
Docket No. RM11-26-000 - 35 - 

regulatory asset.47 Where deferred recovery and regulatory asset treatment are provided, 

utilities defer the pre-commercial costs until they have an established rate structure in 

place, at which time they may file to recover the costs, including carrying charges,48

generally over the construction period, or five years. The Commission seeks comment on 

the following questions: 

Q 65) CWIP related costs should not be recorded as pre-commercial costs. 

What additional measures could be considered to prevent the inclusion 

of costs as pre-commercial that should appropriately be recorded as 

CWIP and recovered over the useful life of a project? In the case of 

deferred recovery, would limiting the period of time that carrying 

charges will be allowed help to ensure timely development of a project 

and guard against unreasonable delays? 

Q 66) If incentives for both pre-commercial cost recovery on a deferred 

basis and 100 percent recovery of abandoned plant costs are granted, is 

there a relationship between the two incentives such that the 

Commission should review the types of costs that are included in the 

 47 The Commission has allowed legal fees and company formation and start-up 

costs to be expensed and recovered, with recovery contingent on the entity having a rate 

in place to recover such costs. The grant of the incentive does not create the mechanism 

by which to recover the costs. 

48 Applicants seeking deferred recovery of pre-commercial costs as a regulatory 

asset have typically requested carrying charges on the regulatory asset from the time it is 

established until it is fully amortized. The Commission, in practice, permits carrying 

charges on pre-commercial costs at the overall cost of capital, including the incentive 

ROE adder. 
Docket No. RM11-26-000 - 36 - 

regulatory asset, the allowance of carrying charges, or the time period 

over which a regulatory asset is recovered in rates for pre-commercial 

cost recovery? 

Q 67) Does the current practice of allowing carrying charges on deferred 

recovery of pre-commercial costs at the overall cost of capital, including 

incentive ROE adders, appropriately balance the sharing of risks of 

transmission project development between utility applicants and 

customers and affect the overall level of pre-commercial costs? How 

should this practice be changed to better allocate the risks between 

applicants and customers and to ensure that pre-commercial costs are 

reasonable? 

3. Accelerated Depreciation

40. Accelerated depreciation is a regulatory incentive that allows an applicant to 

recover its return of capital costs more rapidly than under traditional regulatory treatment, 

e.g., 15 years or less. As a non-cash expense, accelerated depreciation may serve to 

enhance the applicant’s cash flows and credit ratings. There have been very few 

incentive requests for accelerated depreciation as a transmission incentive. The 

Commission seeks comment on whether there are issues that the Commission should 

consider in reviewing this incentive. 

4. Advanced Technology

41. In Order No. 679, the Commission required each applicant seeking incentives 

under the rule to submit a Technology Statement that describes the advanced 
Docket No. RM11-26-000 - 37 - 

technologies it considered for the subject project and, if those technologies are not to be 

employed in a project, an explanation for that decision.49 The Commission recognized 

that in enacting FPA section 219 as part of EPAct 2005, Congress envisioned a 

connection to section 1223 of EPAct 2005, which required the Commission to 

“encourage, as appropriate, the deployment of advanced transmission technologies.”50

The Commission observed that section 1223 lists 18 specific advanced transmission 

technologies, but also stated that this list of technologies was not intended to be exclusive 

and that the Commission “expect[s] new technologies to continually evolve.”51 

42. The Commission’s consideration of the required Technology Statements has 

evolved with experience in processing applications under Order No. 679. For example, 

the Commission has clarified that an applicant’s proposal to use a technology listed in 

section 1223 does not compel the Commission to grant that applicant any particular 

incentives. The Commission has stated that it retains discretion to make such 

determinations on a case-by-case basis, noting that the Congressional directive in section 

1223 requires the Commission to encourage the deployment of such technologies “as 

appropriate.”52

 49 Order No. 679, FERC Stats. & Regs. ¶ 31,222 at P 302. 

50 Id. P 290, 302. 

51 Id. P 290. 

52 The Nevada Hydro Co., Inc., 122 FERC ¶ 61,272, at P 84 (2008); NSTAR 

Electric Co., 127 FERC ¶ 61,052, at P 27 (2009) (NSTAR). 
Docket No. RM11-26-000 - 38 - 

43. The Commission has also explained that an applicant’s proposal to use advanced 

technologies may be relevant both as part of the Commission’s nexus analysis for an 

incentive ROE adder based on a project’s risks and challenges and as a possible basis for 

a separate advanced technology incentive ROE adder. In the former context, the 

Commission has observed that advanced technologies present “technology-related” risks 

and challenges that are appropriately considered under the Order No. 679 nexus test 

together with other types of risks and challenges associated with a project.53 In the latter 

context, the Commission has stated it reviews record evidence to decide if the proposed 

technology warrants a separate adder because it reflects a new or innovative domestic use 

of the technology that will improve reliability, reduce congestion, or improve 

efficiency.54 The Commission has explained the relationship between these issues, noting 

that consideration of an applicant’s proposal to use advanced technologies as part of the 

nexus analysis does not necessarily mean that the applicant qualifies for a separate 

advanced technology incentive ROE adder.55 As discussed above, the use of advanced 

technology may be relevant to achieving the goals of section 219, including increasing 

the efficiency of new and existing transmission facilities. 

 53 PacifiCorp, 125 FERC ¶ 61,076, at P 51 (2008); Tallgrass Transmission, LLC, 

125 FERC ¶ 61,248, at P 55 (2008) (Tallgrass). 

54 The United Illuminating Co., 126 FERC ¶ 61,043, at P 14 (2009); NSTAR, 

127 FERC ¶ 61,052 at P 27. 

55 Tallgrass, 125 FERC ¶ 61,248 at P 59-60. 
Docket No. RM11-26-000 - 39 - 

44. The Commission is interested in receiving comments on the following issues: 

Q 68) Should the Commission change the way it determines what 

constitutes an “advanced” technology that is appropriate for incentives? 

Q 69) Section 1223 of EPAct 2005 defines advanced transmission 

technology and lists technologies that fall within that definition. How 

should the Commission account for what Order No. 679 identified as 

the evolving nature of technology? 

Q 70) Does the above-noted standard -- examining whether a proposal 

reflects a new or innovative domestic use of a technology that will 

improve reliability, reduce congestion, or improve efficiency -- strike an 

appropriate balance? 

Q 71) Should an applicant’s level of previous experience with a 

technology be a factor in determining whether that technology is 

“advanced” for purposes of evaluating a request for incentives? If an 

applicant has previous experience using a technology that otherwise has 

not been widely adopted, should that applicant’s proposed use of the 

technology be considered “advanced”? If an applicant has no previous 

experience in using a technology that is otherwise widely adopted, 

should that applicant’s proposed use of the technology be considered 

“advanced”? 
Docket No. RM11-26-000 - 40 - 

Q 72) Where the Commission grants an incentive ROE adder for the use 

of advanced technology, should that adder apply to the entire cost of a 

project, or just to the advanced technology? 

Q 73) Should incentives for advanced technology continue to be 

assessed on a case-by-case basis, or would it be preferable and practical 

to establish generic standards for advanced technology incentives? For 

example, should the Commission consider identifying particular 

technologies or applications of technology that may be appropriately 

granted incentives? 

Q 74) What types of incentives, e.g., incentive ROE adder, accelerated 

depreciation, will be most effective in encouraging the deployment of 

advanced technology? 

Comment Procedures

45. The Commission invites interested persons to submit comments, and other 

information on the matters, issues and specific questions identified in this notice. 

46. Comments are due [Insert date that is 60 days from publication in the FEDERAL 

REGISTER]. Comments must refer to Docket No. RM11-26-000, and must include the 

commenter’s name, the organization they represent, if applicable, and their address in 

their comments. 

47. The Commission encourages comments to be filed electronically via the eFiling 

link on the Commission’s web site at http://www.ferc.gov. The Commission accepts 

most standard word processing formats. Documents created electronically using word 
Docket No. RM11-26-000 - 41 - 

processing software should be filed in native applications or print-to-PDF format and not 

in a scanned format. Commenters filing electronically do not need to make a paper 

filing. 

48. Commenters unable to file comments electronically must mail or hand deliver an 

original copy of their comments to: Federal Energy Regulatory Commission, Secretary 

of the Commission, 888 First Street NE, Washington, DC 20426. These requirements 

can be found on the Commission’s web site, see, e.g., the “Quick Reference Guide for 

Paper Submissions,” available at http://www.ferc.gov/docs-filing/efiling.asp, or via 

phone from FERC Online Support at 202-502-6652 or toll-free at 1-866-208-3676. 

49. All comments will be placed in the Commission’s public files and may be viewed, 

printed, or downloaded remotely as described in the Document Availability section 

below. Commenters on this proposal are not required to serve copies of their comments 

on other commenters. 

Document Availability

50. In addition to publishing the full text of this document in the Federal Register, the 

Commission provides all interested persons an opportunity to view and/or print the 

contents of this document via the Internet through FERC’s Home Page 

(http://www.ferc.gov) and in FERC’s Public Reference Room during normal business 

hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street, NE, Room 2A, 

Washington, DC 20426. 

51. From FERC’s Home Page on the Internet, this information is available on 

eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft 
Docket No. RM11-26-000 - 42 - 

Word format for viewing, printing, and/or downloading. To access this document in 

eLibrary, type the docket number excluding the last three digits of this document in the 

docket number field. 

52. User assistance is available for eLibrary and the FERC’s website during normal 

business hours from FERC Online Support at 202-502-6652 (toll free at 1-866-208-3676) 

or email at ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502-

8371, TTY (202) 502-8659. E-mail the Public Reference Room at 

public.referenceroom@ferc.gov. 

 By direction of the Commission. Commissioner Moeller is concurring with a 

separate statement attached. 

( S E A L ) 

Kimberly D. Bose, 

Secretary. 

 
UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Promoting Transmission Investment 

Through Pricing Reform 

Docket No. RM11-26-000 

 (Issued May 19, 2011) 

MOELLER, Commissioner, concurring: 

Because regulatory certainty is critically important to those who invest in our 

nation’s infrastructure, this Commission should ensure that if it decides to make changes 

to its incentive policies, it does so only prospectively. The law explicitly requires this 

Commission to “provide a return on equity that attracts new investment in transmission 

facilities” and to “provide for incentives to each ... utility that joins a Transmission 

Organization.”1

 These directives from Congress would be frustrated were this 

Commission to increase regulatory uncertainty by changing long-held investor 

expectations. 

As I have repeatedly stressed, this nation should have policies that encourage 

needed investment in transmission projects.2

 The new construction of transmission lines 

is often the lowest-cost way to improve the delivery of electricity service. By building 

 1

 Section 219 of the Federal Power Act at 16 U.S.C. 824s. 

2 Transmission Planning and Cost Allocation by Transmission Owning and 

Operating Public Utilities 131 FERC ¶ 61,253 (2010) (Moeller, Comm’r, concurring);

NSTAR Elec. Co., 125 FERC ¶ 61,313 (2008) (Moeller, Comm’r, dissenting in part) (“... 

the Commission should do what it can to encourage capital investment in needed 

transmission infrastructure projects.”); Commonwealth Edison Co. and Commonwealth 

Edison Co. of Indiana, 125 FERC ¶ 61,250 (2008) (Moeller, Comm’r, dissenting) (“... 

now is not the time for this Commission to discourage investment in needed transmission 

infrastructure.”); New York Indep. Sys.Operator, Inc., 129 FERC ¶ 61,045 (2009) 

(Moeller, Comm’r, dissenting) (“The main issue here is whether needed transmission is 

being built ... I have encouraged investment in transmission infrastructure ...”); Southern 

California Edison Co., 129 FERC ¶ 61,013 (2009) (Moeller, Comm’r, dissenting in part)

(“The transmission that is needed in this nation will not be built unless the companies that 

build it can attract adequate investment dollars.”);
Docket No. RM11-26-000 - 2 - 

 

needed transmission, our electrical service can maintain reliability at levels that are the 

envy of the world, while simultaneously improving consumer access to lower cost power 

generation – all while permitting more efficient and cost-effective renewable resources to 

compete on an equal basis with traditional sources of power.3

 

I look forward to reviewing the responses of the public on this Notice of Inquiry, 

as they will inform this Commission as it moves forward in its consideration of its 

incentive policy. Given my interest in getting needed transmission built, I am 

particularly interested in any comments regarding how our incentive policies have been 

successful in encouraging investment, and comments that show how our policies can be 

improved in a way that encourages further development of needed transmission. 

 _______________________ 

 Philip D. Moeller 

 Commissioner 

3 Transmission Planning and Cost Allocation by Transmission Owning and 

Operating Public Utilities 131 FERC ¶ 61,253 (2010) (Moeller, Comm’r, concurring).