MBO Clients Successfully Litigate Formula Transmission Rates

On January 15, 2009, the Federal Energy Regulatory Commission issued an "Order on Initial Decision" in Idaho Power Company, FERC Docket No. ER06-787-002, et al. This was an important victory for transmission customers, including the Bonneville Power Administration, PNGC Power, and Raft River Rural Electric Cooperative, Inc. represented by Miller, Balis & O'Neil, P.C.

The Commission's January 15 order affirmed in substantive part the underlying initial decision of a FERC Presiding Administrative Law Judge issued a year prior, which contained a key determination concerning the treatment of certain pre-Order No. 888 transmission agreements under Idaho Power's new formula open access transmission tariff rates. At the request of the transmission customers, FERC affirmed that the appropriate ratemaking treatment was to include the grandfathered agreements as part of the total firm load rather than crediting the revenue that Idaho Power received against the transmission revenue requirement. The Commission thereafter reversed the remedy proposed by the Administrative Law Judge, and found that the grandfathered contract demands (not the twelve coincident peak demand) should be used as the appropriate measure of the load when performing the cost allocation under the formula rates. Finally, the Commission reversed the determination that OATT short-term firm point-topoint service must be cost-allocated rather than revenue-credited. Both of these reversals were advocated by the transmission customers.

The affirmation of the ratemaking treatment and the reversal of the remedy produced a significant reduction in transmission rates. As reported by Idaho Power in a recent SEC Form 8-K, the Commission's order results in refunds with interest dating back to June 2006 in an amount in excess of $ 13 million. The impact of the determination will also reach into future rate years under the formula rate structure. All other ratemaking issues associated with Idaho Power's proposal to switch to formula transmission rates were resolved through negotiations directed by another FERC Administrative Law Judge. Through those negotiations, MBO assisted its clients in securing important ratemaking principles and valuable implementation procedures to ensure that future adjustments will be transparent and reflected appropriate costs.

In recent years, MBO has assisted clients located throughout the country in proceedings before the FERC relating to formula transmission rates. If you have questions concerning such rates, or would like a copy of the Commission order or underlying briefs submitted in this litigation, please contact Craig Silverstein at csilverstein@mbolaw.com.