Playing to a tough crowd

Pam Boschee, Managing Editor

FERC seems to be sweetening the pot when it comes to transmission investment. Last month, the commission proposed to allow additional percentage points on a utility’s return on equity when it participates in a regional transmission organization (RTO), divests its RTO-operated transmission assets, or pursues additional measures that promote efficient operation and expansion of the transmission grid.

I imagine the commissioners, exasperated, sitting around a conference table, looking at one another, asking, “What more can we do?”

After all, they proposed RTOs as a foundation and then ran the Standard Market Design up the flagpole. Now, they’re waving higher returns as enticement.

It’s a shame, too, that the timing of these incentives is so unfortunate. It’s possible that if the overall economy were more robust, these proposals might be perceived in a different light and would be met with more enthusiasm—and more money—from investors and other stakeholders.

FERC is facing considerable obstacles to their good intentions—they’re playing to a tough crowd. Wall Street wasn’t doing somersaults over the news that the gross domestic product in the fourth quarter grew at a stunted rate of 0.7 percent—lower than the hoped for, and guardedly optimistic, rate of 0.9 percent.

Senior executives in global energy utilities also remain a hard sell. A recent Cap Gemini Ernst & Young survey found that more than 40 percent are now less positive about the prospects for deregulation. They’re concerned about interventions in markets by regulators and governments. Concerned, not comforted.

In other words, FERC is finding that it’s hard to be a ray of sunshine in the dark and gloom of a stalled storm—and the silver linings don’t seem to be materializing either.

FERC must be running out of ideas. I wonder if they’ve considered a matching program. It seems to work well for other types of fund-raising endeavors.

For every dollar spent on improving existing or building new transmission, FERC would contribute a matching dollar for further investment.

On second thought, until there’s sighting of a silver lining, I don’t think even this incentive would please this crowd.


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