FERC Denies Cross-Sound Cable Company’s Application for Incentive Rate Treatment to Comply with IROL-CIP Costs
On August 31, 2021, FERC denied Cross-Sound Cable Company, LLC’s (“Cross-Sound Cable”) application for incentive rate treatment to create a regulatory asset to recover costs incurred between 2016 and 2021 to comply with Interconnection Reliability Operating Limits (“IROL”) Critical Infrastructure Protection (“IROL-CIP”) costs under Schedule 17 of the ISO-New England (“ISO-NE”) Tariff.
In May 2020, the Commission approved ISO-NE’s proposed Schedule 17 of the ISO-NE Tariff, in which ISO-NE provided a cost recovery mechanism for IROL-CIP costs incurred by facilities that ISO-NE identifies as critical to the derivation of IROL. FERC found that Schedule 17 only permits recovery of IROL-CIP costs incurred on or after the effective date of a FPA section 205 filing made by an IROL-critical facility owner to recover those costs. On rehearing, the Commission clarified that IROL-critical facility owners could seek recovery of undepreciated costs of past capital expenditures made to comply with IROL-CIP requirements, but provided that the rule against retroactive ratemaking would apply to any such recovery.
On July 1, 2021, Cross-Sound Cable, a merchant transmission owner of a link between ISO-NE and Long Island, New York, filed a request for incentive rates pursuant to FPA section 219 to create a regulatory asset, to defer, amortize, and recover its IROL-CIP costs incurred from January 1, 2016 through May 31, 2021 under Schedule 17. Cross-Sound Cable also requested an incentive under the Commission’s FPA section 205 authority, in the event that the Commission finds that incentive treatment under FPA section 219 is inappropriate. Alternatively, Cross-Sound Cable requested Commission authorization of its IROL-CIP costs pursuant to the Commission’s remedial authority in FPA section 309.
The Commission denied Cross-Sound Cable’s request, finding that the proposed recovery of IROL-CIP costs incurred prior to the effective date of any FPA section 205 filing would violate the Commission’s rule against retroactive ratemaking, under which the Commission is prohibited “from imposing a rate increase for [power] already sold” or “adjusting current rates to make up for a utility’s over- or under-collection in prior periods.”…