Promoting Transmission Investment Through Pricing Reform

The Commission issues this policy statement to provide guidance regarding its evaluation of applications for electric transmission incentives under section 219 of the Federal Power Act. In the six years since the Commission implemented section 219 by issuing Order No. 679, the Commission has acted on numerous applications for transmission incentives. The Commission has now determined it would be beneficial to provide additional guidance and clarity with respect to certain aspects of its transmission incentives policies under section 219 of the Federal Power Act and Order No. 679. In particular, the Commission: reframes its nexus test to focus more directly on the requirements of Order No. 679; expects applicants to take all reasonable steps to mitigate the risks of a project, including requesting those incentives designed to reduce the risk of a project, before seeking an incentive return on equity (ROE) based on a project's risks and challenges; provides general guidance that may inform applications for an incentive ROE based on a project's risks and challenges; and promotes additional transparency with respect to the impacts of the Commission's incentives policies. The Commission finds that the additional guidance provided through this policy statement is necessary to encourage transmission infrastructure investment while maintaining just and reasonable rates, consistent with section 219 of the Federal Power Act. The Commission will apply this policy statement on a prospective basis to incentive applications received after the date of its issuance.