The Commission's order applies the same methodology
used for natural gas and oil pipeline return on equity and discards
the former one-step calculation in favor of a two-step calculation
that uses short- and long-term growth projections.
On June 19, the Federal Energy Regulatory Commission (the
Commission) issued Opinion No. 531,1 which affirmed in
part and denied in part an initial decision2 on the
return on equity (ROE) for the public utility transmission-owning
members of ISO New England (ISO-NE). In addition, the Commission
announced a modification to its policies regarding ROE calculation
for electric utilities.
Opinion No. 531 tentatively determined that the "just and
reasonable base ROE" for the ISO-NE transmission owners would
be 10.57%, which is halfway between the midpoint and the maximum
point of a "zone of reasonableness" based on a range of
cost-of-equity estimates. The Commission determined that the base
ROE should be set above the midpoint because of
