Rep. Edward J. Markey (D-Mass.), Chair of the House Subcommittee on Energy and Environment, sent a letter to Chairman Jon Wellinghoff of the Federal Energy Regulatory Commission (FERC) requesting an analysis of the effectiveness of higher incentive-based rates for investments in certain electric transmission projects. Rep. Markey is the chairman of The Energy and Environment Subcommittee, which has oversight authority over FERC and its rulemakings.
"In 2005, I objected to providing higher incentive rates for certain transmission projects. I feared that these incentive transmission rates would amount to a naked giveaway to the utility industry at rate-payers' expense," said Rep. Markey. "I am now requesting that FERC provide Congress and ratepayers with an analysis of how this utility-backed program has functioned over the past three years and whether the promises of increased transmission capacity and efficiency have materialized."
In the 2005 Energy Policy Act, Congress authorized FERC to establish higher incentive-based rate treatments for the transmission of electric energy. FERC finalized its rule, "Promoting Transmission Investment through Pricing Reform," on July 20, 2006 to provide for these incentive transmission rates to foster improvements and investments in electric transmission facilities. FERC has long had the authority regulate the rates, terms, and conditions of wholesale electricity transmission. Typically, the agency has approved an average regulated rate of return of 11 percent on equity for utilities' investments in transmission and generation. Under FERC's incentive rate making rules, utilities have been able to receive a transmission rates approaching 14 percent.
In the letter, Rep. Markey requests information about the transmission incentives that have been granted thus far and the Commission's current progress for granting additional incentive rates.
"Before Congress authorizes any further programs that may negatively impact rate-payers, we must investigate the success of the incentive rate programs already in place. My Energy and Environment Subcommittee will convene hearings to investigate these and other transmission related issues while awaiting a reply from FERC to my inquiries."
Rep. Markey had previously announced during the Energy and Commerce Committee mark-up of "The American Clean Energy and Security Act" that his Subcommittee will hold an oversight hearing on transmission issues in June.