Energy Client Alert, January 5, 2007

On December 22, 2006, the Federal Energy Regulatory Commission ("FERC" or "the Commission") issued Order No. 679-A, essentially reaffirming on rehearing its July 20, 2006 Final Rule that, pursuant to the Energy Policy Act of 2005 ("EPAct 2005"), promotes transmission investment by establishing incentive-based rate treatments for electric transmission by public utilities. Various entities had argued that the Final Rule was too permissive in offering rate incentives. The Commission partly agreed, but explained that Order No. 679-A does not intend to "depart from a fundamental commitment to provide incentives to support the development of transmission infrastructure." The Commission accordingly maintained the Final Rule’s rate incentives, though it modified the way they are to be applied.