USA Law and Practice Contributed by: David P. Flynn, Lindsey E. Haubenreich, Thomas F. Puchner, Dennis W. Elsenbeck and Zachary R. Hirschfeld, Phillips Lytle LLP
• V = gross value of property – facility cost plus working capital; • D = accrued depreciation – depreciation of assets; and • R = overall rate of return – sufficient to allow the utility to maintain financial integrity, attract addi- tional capital and earn a return comparable to similarly situated companies. FERC issued Opinion No 569-A, which accepts the use of an alternative model – the “risk premium mod- el” – for determining whether a rate of return on equity is just and reasonable under Section 206 of the FPA. Rehearing the Case If any party to a FERC hearing is aggrieved by or does not agree with the result of FERC’s order on the hear- ing, that party may request that FERC rehear the case. If FERC does not act on the request for a rehearing within 30 days, the request is deemed denied. After FERC issues an order upon rehearing, the par- ties to the hearing have the right to petition the United States Court of Appeals for review of the order – typi- cally the United States Court of Appeals for the Dis- trict of Columbia Circuit or the jurisdiction in which the utility has its principal place of business. FERC has authority to take in and resolve complaints by assigning the case to alternative dispute resolution, issuing an order on the merits based on the pleadings, or establishing a hearing before an administrative law judge. 4.7 Open-Access and Non-Discriminatory Transmission Pursuant to a series of FERC Orders first promulgated in 1996, transmission services must be provided on a non-discriminatory and open-access basis. FERC issued three key orders to require open access to transmission facilities. • Order No 888, issued in April 1996, required all public utilities that own, control or operate facilities used for transmitting electrical energy in interstate commerce to file OATTs. Order No 888 permit- ted public utilities and transmitting utilities to
seek recovery of legitimate, prudent and verifiable stranded costs associated with providing such open access. • Order No 889 required all public utilities that own, control or operate facilities used for transmitting electrical energy in interstate commerce to partici- pate in an OASIS to provide actual and potential open access transmission customers with informa- tion that would enable them to obtain open-access non-discriminatory service. • Order No 890 was issued in February 2007 to strengthen the OATT, reduce opportunities for undue discrimination, facilitate FERC’s enforce- ment and increase overall transparency. Issued in July 2011, Order No 1000 amended Order 890 by requiring public utility transmission providers to participate in a regional transmission planning pro- cess that produces a regional transmission plan. 5. Distribution 5.1 Constructing and Operating Electricity Distribution Facilities The distribution system – which can include storage and microgrids – is primarily governed and regulated at the state level. State law and state utility commis- sion regulations govern the methods and standards by which prudent distribution system investments are recovered in a utility’s rate base or through other appropriate mechanisms. Construction, siting, zon- ing and other land use considerations and approvals generally fall within the purview of relevant city, county and municipal authorities, which vary significantly by state. While the substantive and procedural regulatory pro- cess for constructing and operating distribution facili- ties varies by state, state utility commission regula- tions generally focus on compliance with reliability, operational and safety standards. While some state utility commissions have authority over the siting and approval of permits for the construction of distribu- tion infrastructure, most states require the involve- ment and/or approval of multiple agencies, beyond 5.2 Regulatory Process for Obtaining Approvals to Construct and Operate Electricity Distribution Facilities
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