On November 5, 2018, FERC granted in part and denied in part a rehearing request ("Rehearing Order") filed by Ameren Services Company ("Ameren Services"), on behalf of its affiliate Ameren Transmission Company of Illinois (together with Ameren Services, "Ameren") of a FERC order ("February 13 Order") denying Ameren's request pursuant to Order No. 679 for a 100 basis point incentive rate of return on equity ("ROE Incentive") for the Illinois Rivers and Mark Twain components ("Components") of the Grand Rivers Project ("Project"). In the February 13 Order, FERC denied Ameren's requested ROE Incentive for the Components, largely because of construction progress made to date on the Illinois Rivers component. In the Rehearing Order, FERC granted rehearing in part with respect to the Mark Twain component because that component is not substantially complete and, because based on its own merits, the Mark Twain component continues to face risks and challenges that warrant an ROE Incentive. FERC denied rehearing with respect to the Illinois River component, however, upon finding that given the substantial completion of the Illinois Rivers component and limited remaining risks and challenges Ameren faces with respect to that component, Ameren's requested ROE Incentive for Illinois River failed to meet the nexus test.
On December 15, 2017, Ameren, along with the Midcontinent Independent System Operator, Inc., filed a transmission rate incentive request with FERC for the Components of the Project. In the February 13 Order, FERC denied Ameren's requested incentive rate treatments, finding that due to the late stage of the Components' development, including the substantial completion of the Illinois Rivers component, Ameren failed to demonstrate that the remaining risks and challenges associated with the Components warrant the requested ROE Incentive. FERC stated that a project that is further along in construction (and closer to completion) typically faces fewer remaining risks and challenges and found that to be the case with respect to both of these Components of the Project.
On March 15, 2018, Ameren filed a request for rehearing of the February 13 Order arguing that: (1) substantial completion of the Illinois Rivers component does not justify denying the ROE Incentive to the Mark Twain component, and that the record supports granting an ROE Incentive to the Mark Twain component standing alone and (2) FERC erred in denying the ROE Incentive to the Illinois Rivers component based on its construction progress, because it failed to recognize its precedent holding that projects that are nearly complete are still eligible for incentives under Order No. 679.
On rehearing, FERC agreed that the Mark Twain component warranted an ROE Incentive, stating that Ameren had made the four showings it would expect under the 2012 Policy Statement from an applicant seeking an ROE incentive based on a project's risks and challenges. FERC found, however, that a 50 basis point adder, rather than the requested 100 basis points, was appropriate based on the circumstances of the Mark Twain component relative to previous instances where FERC granted a 50 basis point ROE incentive. In denying rehearing with respect to the Illinois Rivers component, FERC found that, although projects that are nearly complete are still eligible for incentives, consideration of where a project is in the construction phase is appropriate. FERC elaborated that, while being under construction does not preclude a project from obtaining ROE incentives, FERC will consider how close the project is to completion when evaluating the risks and challenges of the project and will presume less risk to projects that are further along in the construction process. Here, FERC found that the Illinois River component was 90% complete at the time of its application for the ROE Incentive and that it no longer faces risks and challenges sufficient to warrant the ROE Incentive. FERC therefore affirmed its February 13 Order with respect to the Illinois River component.
A link to FERC's Rehearing Order can be found here.
*Disclosure – Troutman Sanders LLP represented Ameren in this proceeding.
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