Investment analysts have signaled in recent years a preference for electric utility investment in rate regulated activities, including transmission and distribution. Meanwhile, FERC’s Order No. 1000 reforms sought to create new opportunities for utilities and other developers to compete for regionally planned transmission projects. FERC’s policies on ratemaking for transmission service have been in flux, and challenges to utilities’ return on equity are now commonplace, placing a premium on understanding how utilities subject to FERC’s jurisdiction recover their transmission cost of service.
This course will provide attendees with a review of FERC’s regulation of transmission-owning utilities and a working knowledge of cost-of-service rates for transmission. Attendees will learn how to construct a revenue requirement and calculate transmission rates from utility books and records using FERC’s cost of service statements or a formula rate. They will learn about the latest developments in FERC ratemaking policy and precedent on hot button issues such as ROE and tax reform. Attendees will return to their organizations ready to participate and add value in any initiative related to FERC transmission ratemaking.
Learning Outcomes
- Gain working knowledge of FERC’s regulation of electric utilities under Part II of the Federal Power Act
- Achieve familiarity with FERC’s Uniform System of Accounts
- Discuss how to construct a transmission revenue requirement and transmission rates based on utility accounting records, including rate base, rate of return, depreciation, expenses, and taxes
- Identify how to populate and true-up a formula rate template
- Examine how to estimate the return on equity using FERC’s evolving methodology
- Review recent FERC ratemaking developments in areas such as ROE, income taxes, and incentive rates
TUESDAY, NOVEMBER 16, 2021 : CENTRAL TIME
8:45 – 9:00 a.m.
Log In and Welcome
12:30 – 1:15 p.m.
Lunch Break
9:00 a.m. – 4:30 p.m.
Course Timing
Introduction to FERC’s Regulation of Electric Utilities
- Part II of the Federal Power Act: Regulation of Wholesale Sales and Transmission in Interstate Commerce
- FPA Section 205: Utility Rate Filings
- FPA Section 206: Third Party Complaints and FERC Investigations
- Rate Review Process
- Administrative Process for Rate Filings
- Standards for Ratemaking
- Landmark Rulemakings: Transmission
- Order No. 888: Mandatory Open Access and the Pro Forma OATT
- Order No. 2000: Regional Transmission Organizations
- Order No. 679: Incentive Rate Treatments for Transmission
- Order No. 890: Refinements of the Pro Forma OATT
- Order No. 1000: Regional and Interregional Transmission Planning
Introduction to Cost of Service Rates
- Uniform System of Accounts (“USofA”)
- Purpose of USofA
- USofA Roadmap
- Step Through the Development of a Revenue Requirement and Rate Design by Reviewing Key Components of Cost of Service Rates
- Rate Base
- Rate of Return, Including ROE
- Depreciation
- O&M and A&G
- Taxes
- Billing Determinants
- Group Exercise: Build a Transmission Rate
Formula Rates
- History of Formula Rates for FERC-Jurisdictional Services
- Stated Rates vs. Formula Rates – Pros and Cons
- In Depth Review of Sample Formula Rate:
- Populating Values from FERC Form No. 1
- Fixed Values:
- ROE
- Depreciation Rates
- PBOPs
- Annual Update Process
- Calculation of True-Up Adjustment
- Projected Costs
- Discovery and Challenge Procedures
- FERC Informational Filing
WEDNESDAY, NOVEMBER 17, 2021 : CENTRAL TIME
9:00 a.m. – 12:00 p.m.
Course Timing
Current Issues
- ROE: Opinion Nos. 569 and 569-A and Where We Go from Here
- Income Taxes: Congressional Tax Reform and Impacts on Utility Rates
- Incentive Rates
- Use of Formula Rates by Non-Jurisdictional Municipal and Cooperative Utilities in RTO/ISO Regions
- Use of Formula Rates by Competitive Transmission Developers for Competitive Order No. 1000 Projects