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ARTICLE · 02 DECEMBER 2005

Energy Client Alert - December 1, 2005

New transmission infrastructure can increase reliability and also reduce the costs of transmission congestion. To address the national problem of underinvestment in transmission, the Energy Policy Act of 2005 requires the Federal Energy Regulatory Commission to provide incentives for transmission of electric energy in interstate commerce.

United StatesEnergy and Natural Resources

FERC Proposes Incentives To Invest In Transmission

New transmission infrastructure can increase reliability and also reduce the costs of transmission congestion. To address the national problem of underinvestment in transmission, the Energy Policy Act of 2005 ("EPACT 2005") requires the Federal Energy Regulatory Commission ("FERC") to provide incentives for transmission of electric energy in interstate commerce. On November 17, 2005, FERC issued a Notice of Proposed Rulemaking proposing transmission pricing reforms designed to implement such incentives. Certain reforms are directed at all utilities (including transmission companies), and certain additional reforms are aimed at stand-alone transmission companies only. Included among the incentives proposed for all jurisdictional utilities are: (1) a rate of return on equity sufficient to attract new investment; (2) recovery (through rates) of all prudent transmission-related construction costs for work in progress; (3) expensing

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