On November 14, Federal Energy Regulatory Commission (FERC) announced that it has begun implementing the America’s Water Infrastructure Act of 2018, which was signed into law by President Donald Trump on October 23. According to sections 3003 and 3004 of the Act, FERC must issue new rules to establish an expedited process for issuing and amending licenses for already existing non-powered dams and closed-loop pumped storage projects. FERC says the processes have to seek a final decision from them within two years of the receipt of a completed application.

The Act will help speed up the process of licensing and re-licensing for different hydropower projects. The bill can also expand some hydropower projects from a limit of five megawatts to 40 megawatts.

“There are a lot of hydropower projects coming up on relicensing — about a third of the fleet — so as these projects come up to be relicensed, it’s really important that we reduce the amount of regulatory burden to accelerate a timely relicensing process,” said Justin Ong, a policy associate with Clearpath, a Washington-based organization dedicated to advancing conservative-based clean energy policies.

“Giving our utilities the flexibility to better plan ahead will keep our energy sources safe and save taxpayers money,” Sen. Maria Cantwell of Washington said in a statement about the hydropower provisions.

According to the release in the Federal Register, “the Commission has established three dockets in order to implement the requirements of the Act: RM19-6-000 (Licensing Regulations under America’s Water Infrastructure Act of 2018); AD19-7-000 (Nonpowered Dams List); and AD19-8-000 (Closed-loop Pumped Storage Projects at Abandoned Mines Guidance).”

FERC released a schedule for the implementation of the Act, which plans for a Notice of Proposed Rulemaking for the expedited licensing process in early 2019 and for a final rule to be made in April 2019. They have also planned for a workshop on the closed-loop pump storage projects that are in abandoned mining sites, which is scheduled to be held in February 2019; FERC’s guidance on this should be issued in September 2019.

FERC will also be providing, in April 2019 a draft list of the already existing non-powered dams that have the greatest potential for non-federal development; they will have a finalized list in August 2019. According to the Energy Department, only three percent of the dams in the United States are currently electric; outfitting these already existing dams could help states meet the mandates for clean and renewable energy.

“In [Indiana’s] 8th Congressional District alone, there are six nonpowered dams that could be modernized to produce clean energy,” Rep. Larry Bucshon, R-Ind., said when the House passed the water projects bill in September.

The Act also requires FERC to convene an interagency task force in order to coordinate the different regulatory processes that require authorization for the new processes; the coordination session will be held on December 12. Some of the agencies that will be joining the task force session include the National Oceanic and Atmospheric Administration, the Department of the Interior, the Department of Energy, the U.S. Forest Service, five Indian tribes, and various state agencies.

“Without question, this water infrastructure package is a win for America,” said FERC committee leaders. “It… promotes hydropower development, which creates clean energy jobs here at home and provides consumers with low-cost, emissions-free electricity. We applaud the Senate for passing this vital legislation and urge President Trump to sign it into law soon.”

On November 15, the Federal Energy Regulatory Commission (FERC) issued guidance on how pending cases are going to be affected by a recent order that proposed using a “new approach for calculating the allowed Return on Equity (ROE) to have it be included in the rates of transmission owners” in New England. These new orders were voted on at FERC’s meeting on October 16.

The first order established a paper hearing to two parties involved in ongoing proceedings regarding the Midcontinent Independent System Operator, Inc. (MISO) transmission-owning members to submit briefs concerning FERC’s new approach to determining the base ROE. The order proposes to change the approach for determining ROE by giving four financial models equal weight, as opposed to relying on the discounted cash flow methodology that FERC had been using.

With these new policies, FERC is abandoning its old two-step discounted cash flow methodology that was issued in Opinion No.531, saying they need to stop using that methodology exclusively, and will instead be using the new, broader model to give everything equal weight.

FERC says that by using a wider range of evidence to determine base ROE, their decisions will now be more closely aligned with how investors make their decisions on investments. This order is similar to the Coakley Briefing Order in that it will not make any changes to the new methodology, it instead will help ensure that everyone in these proceedings gets an opportunity to present their arguments and evidence on determining base ROE.

FERC has also essentially raised the burden of proof for a Section 206 proceeding.

During this discussion, FERC Chairman Neil Chatterjee said they plan to consider if additional changes are needed for its transmission incentives and calculation of base ROE. Chatterjee said it was “high time” to see if FERC’s ROE and incentive policies are producing “the level and type of transmission investment the nation needs.”

“FERC needs to stay laser-focused on adopting and enforcing policies that ensure reasonable transmission rates. This especially applies to making sure equity returns included in transmission rates are not excessive,” said Delia Patterson, senior vice president and general counsel at the American Public Power Association.

The second order gave some additional guidance on the effects of the Coakley Briefing Order in regard to any pending proceedings about base ROE that are already set for hearing and settlement procedures. FERC said in this order that in these types of proceedings it expects the parties involved to address the new methodology that is proposed in the Coakley Briefing Order. This includes presenting evidence based on the new methodology how to apply the new methodology to the facts in these proceedings.

According to FERC’s presentation, “The Coakley Briefing Order addressed issues that the D.C. Circuit remanded to the Commission in Emera Maine v. FERC, related to the New England Transmission Owners’ base ROE as provided for in the ISO New England tariff, which the Commission approved in Opinion No. 531.”

FERC’s new policies are based on the hope that by raising transmission owners’ ROEs, they will encourage some desperately needed investments to respond to changes in the transmission business. They need transmissions to be expanded so they can connect new renewable energy and may affect “how particular resources provide services to the grid and the relative competitiveness of various types of generators.”

Climate activists and transmission owners alike can attest to the importance of bringing more green energy onto the power grid, and the new ROE methodology might help make this happened. During the October meeting where this was voted on, Commissioner Cheryl LaFleur suggested that FERC intends to apply this new policy fairly broadly.

“FERC had coordinated its approaches to determining transmission and pipeline ROEs under the one-stepDCF methodology in the past, it is entirely plausible that FERC will synchronize its ROE methodology for pipelines with the Coakley 2018 proposal soon.”

On November 15, the Federal Energy Regulatory Commission (FERC) took steps to help ensure that their ratepayers will receive beneficial tax deductions from the December 2017 Tax Cuts and Jobs Act. They issued a Note of Proposed Rulemaking, several orders, and a policymaking during this meeting, all related to the Tax Act. The Tax Act cut the corporate tax rate from 35 percent to 21 percent, which came into effect on January 1, 2018.

The Notice of Proposed Rulemaking, RM19-5-000, is proposing to require that each public utility transmission provider with a transmission owner tariff or a rate schedule to revise their rates to account for any changes that fall under the Tax Act. FERC says these proposed rules are intended to address the effects the Tax Act has had on the Accumulated Deferred Income Taxes (ADIT), which is reflected in their transmission rates.

According to the Washington Examiner, “FERC’s proposed tax rule would apply to the interstate transportation of energy only, where it has jurisdiction over the wholesale electricity and natural gas markets.”

The utilities FERC is calling public in this instance are electric utilities, but they are owned by investors, not municipal utilities. Under these reforms the public utilities will:

1. “include mechanisms to deduct any excess ADIT from or add any deficient ADIT to their rate bases
2. include mechanisms in those rates that would raise or lower their income tax allowances by any amortized excess or deficient ADIT
3. incorporate a new permanent worksheet into their rates that will annually track information related to excess or deficient ADIT”

Every public utility with transmission stated rates will determine the amount of excess and deferred income tax that is due to the reduced federal corporate income tax rate, and they are to recover or return that amount from or to their customers.

FERC did not provide a specific mechanism to adjust the rate bases, nor did they give a specific method to return the excess ADIT.

FERC says “We estimate that the total number of public utility transmission providers with formula rates that would have to develop revisions to their formula rates, including the addition of a new permanent worksheet, and make compliance filings in response to this Proposed Rule is 106.”

During that meeting, they also addressed policy statement PL19-2-000, which provides guidance on accounting and ratemaking for ADIT, for all natural gas and oil pipelines and public utilities that fall under FERC’s jurisdiction.

“Among other things, the policy statement states that for a public utility or natural gas pipeline that continues to have an income tax allowance, any excess of deficient ADIT associated with an asset must continue to be amortized in rates even after the sale or retirement of that asset,” FERC said.

FERC will also be considering if it needs to make more changes to its calculation of base returns on equity and to transmission incentives.

“I think we all agree that our policies are overdue for a fresh look with input from all interested stakeholders, not just those that happen to be parties to a pending complaint proceeding,” Chairman Neil Chatterjee said. “Further, with 13 years having passed since Congress established Section 219 of the Federal Power Act, I think it’s high time we look at whether these two sets of policies are producing the level and type of transmission investment that the nation needs.”

“FERC is the federal agency that regulates and oversees interstate transmission of electricity, natural gas and oil and is composed of five commissioners nominated by the president and confirmed by the U.S. Senate,” according to the Nevada Independent.

FERC will be receiving comments on these proposals 30 days after this proposed rule is published in the Federal Register. FERC will also be putting the full text of the proposal on their website, and it will be available in FERC’s Public Reference Room from 8:30 a.m. to 5:00 p.m. Eastern time at 888 First Street, N.E., Room 2A, Washington D.C. 20426.