A recent federal decision allows New England utilities to essentially maintain the level of guaranteed profits for building transmission, a sign that regulators want to ensure that utilities have the financial incentive to upgrade the region’s system for delivering electricity.
Under the ruling made late last week, the Federal Energy Regulatory Commission cut the rate of return on transmission investments by about 5 percent, from 11.14 percent to 10.57 percent. Consumer advocates had sought a much deeper cut.
The decrease is expected to save New England ratepayers, who typically bear the cost of utility projects, some $50 million. That’s less than half the savings consumer advocates had hoped for. The rate of return remains much too generous to utilities, they said.
“They should be trying to balance the interests of consumers and the interests of investors,” said attorney Charlie Harak, with the nonprofit National Consumer Law Center in Boston. Instead, he said, regulators “really tilted the field toward investors.”
The decision comes as the New England states work together to bring more energy into the region, including hydropower from Canada. Several proposals are in the works. Local power officials have said such projects are needed to help replace recently shuttered coal and nuclear plants, as well as ensure that the region can meet future energy demand.
In a statement, acting regulatory commission chairwoman Cheryl LaFleur, a Massachusetts native and former National Grid executive, said she expects the new rate of return to provide “some certainty” for transmission developers.
“I am mindful that ongoing changes in the resource mix,” she said, “will require the construction of a significant amount of transmission in the coming years.”
The ruling is a setback for consumer advocates. It stems from a challenge filed in 2011 by Attorney General Martha Coakley, the state’s ratepayer advocate, who said the profits utilities received for building transmission was excessive. She estimated that lowering the return rate to 9.2 percent would save consumers roughly $115 million.
Last year, a federal administrative law judge agreed with Coakley and recommended the rate of return be cut to at least 9.7 percent. But last week, the regulatory commission set that recommendation aside.
Coakley’s office said the attorney general believes the new 10.57 percent rate of return is still too high and is looking at options for “further litigation.”
One commissioner, John Norris, also said the rate was too high. “I am concerned that this determination subjects consumers to unjust and unreasonable rates,” he said in a dissenting opinion.
Meanwhile, both Northeast Utilities and National Grid, the state’s largest utilities, said they were still reviewing the decision and its ramifications.
Another case, seeking to cut the utilities rate of return to 8.7 percent and save consumers an estimated $150 million a year, is still pending before the commission. The National Consumer Law Center and other groups filed that case at the end of 2012.