Federal government may back NYRI

NORWICH – Nearly one year after the federal government passed legislation promoting transmission line projects similar to the New York Regional Interconnection, finalized provisions in the 2005 Energy Policy Act could help ease the financial risk of that investment.

“There has been a sustained period of under-investment in the transmission system,” said Federal Energy Regulatory Commission Chairman Joseph T. Kelliher, in a July 20 press release. “It is clear that we need to strengthen the system to meet consumer demand and today’s rule takes a significant turn in that direction. Under-investment in the grid is a national problem. Today, we offer a solution.”

The solution FERC announced in July is a series of incentives that would reimburse various costs and help insure an approved project’s implementation. These incentives include:

• Incentive rates of return on equity for new investment by public utilities (both traditional utilities and stand-alone transmission companies, or transcos).

• Full recovery of prudently incurred construction work in progress.

• Full recovery of prudently incurred pre-operations costs.

• Full recovery of prudently incurred costs of abandoned facilities.

• Use of hypothetical capital structures.

• Accumulated deferred income taxes for transcos.

• Adjustments to book value for transco sales/purchases.

• Accelerated depreciation.

• Deferred cost recovery for utilities with retail rate freezes; and

• A higher rate of return on equity for utilities that join and/or continue to be members of transmission organizations, such as (but not limited to) regional transmission organizations and independent system operators.