FERC Says ISO-NE Transmission Rates Charged To LSEs Appear Unjust, Unreasonable

FERC issued an order yesterday finding that the ISO New England participating transmission owners' current Regional Network Service (RNS) and Local Network Service (LNS) formula rates appear to be unjust, unreasonable, unduly discriminatory or preferential, or otherwise unlawful.

"The formula rates appear to lack sufficient detail in order to determine how certain costs are derived and recovered in the formula rates. Accordingly, the Commission establishes hearing and settlement judge procedures to develop just and reasonable formula rate protocols to be included in the ISO-NE Tariff and to examine the justness and reasonableness of the RNS and LNS rates," FERC said.

For example, FERC said that the RNS and LNS formula rates exclude the derivation of several components such as post-employment benefits other than pension costs (PBOPs), depreciation rates, and asset retirement obligations, nor are these components stated. In addition, because the RNS and LNS formula rates cover different time periods for service, include different line item calculations, are a hybrid of historical and forward-looking costs, and are not filed together, FERC's preliminary analysis indicates that the timing and synchronization of the RNS and LNS rates are not reconcilable through the filing of formula rate protocols alone, which could result in an over-recovery of costs.

Further, the RNS formula rate defines the inputs and allocation factors to be used by every PTO for calculating its annual revenue requirement. However, because the ISO-NE PTOs formula rates are written out in words and not a mathematical formula, FERC's preliminary analysis indicates that the ISO-NE PTOs may have different interpretations of the single RNS formula applicable to all the PTOs. The Commission’s policy requires that all of the formula calculations be incorporated into rate schedules so that public utilities cannot unilaterally revise the calculations at their discretion

FERC also said that ISO-NE’s tariff lacks adequate transparency and challenge procedures with regard to the formula rates for ISO-NE Participating Transmission Owners (PTOs).

Docket No. EL16-19