NEMA Welcomes FERC Issuance of Performance-based Transmission Rule

ROSSLYN, Va., July 21, 2006-NEMA today welcomed a Federal Energy Regulatory Commission rule implementing incentive-based transmission rate provision in the Energy Policy Act of 2005. Issued in late July, the rule would allow increased rates of return for projects intended to increase transmission reliability or reduce congestion costs. NEMA drafted the provision and shepherded it though the legislative process.

NEMA President Evan Gaddis says the rule "will ultimately strengthen our electrical infrastructure, help the country keep up with growing demand for power, and prevent disruptions in electrical service."

The rule states that Congress clearly intended rate incentives for more transmission investment. The rule says that incentives for reliability, congestion reduction, or both will be allowed. The rule applies to projects under consideration as of the date of EPAct 2005 enactment, August 8, 2005.
It allows broad inclusion of such measures as construction work in progress and reimbursement for projects that had to be abandoned for reasons outside transmission company control.

A rebuttable presumption that incentive-based rates are justified will be made for the three projects below. Opponents of incentive-based rates in these cases would have to make a strong showing that they were not justified:

o A transmission project in an open planning project intended to address reliability and/or congestion;
o a project that has received state construction approval; or
o a proposed project in a National Interest Electric Transmission Corridor.
FERC backed up the generic language with specific actions in separate proceedings for American Electric Power- and Allegheny Power Systems-proposed lines in the PJM (Pennsylvania, New Jersey, Maryland) region, allowing increased rates of return.

NEMA is the trade association of choice for the electrical manufacturing industry. Founded in 1926 and headquartered near Washington, D.C., its 430 member companies manufacture products used in the generation, transmission and distribution, control, and end-use of electricity. These products are used in utility, medical imaging, industrial, commercial, institutional, and residential applications. Domestic production of electrical products sold worldwide exceeds $120 billion. In addition to its headquarters in Rosslyn, Virginia, NEMA also has offices in Beijing, Sao Paulo, and Mexico City.

Jason Peak
Senior Editor
(703) 841-3222


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