1. FERC NOI on Incentive Rates
May 25, 2011 1

2. Background
FERC seeks comment on the scope and implementation of its transmission incentives regulations and policies under Order No. 679 (Docket RM )
75 requests for Transmission Incentives from FERC since 2005
Application of Order 679 is becoming inconsistent in different regions of the country
RSC concerns with incentive rates with Highway Byway cost allocation
FERC has 74 question related to incentive rates for comment.
A Brief Review of the NOI and emphasis on Communications 2

3. Order 679 – Transmission Investment through Pricing Reform
Section 219(a) – requires FERC develop incentive based rate treatments for transmission development.
Section 219(b) – requires:
Promote reliability and efficient transmission regardless of ownership.
Provide an ROE to attract ownership and new technology.
Allow recovery of prudently incurred costs.
Section 219(c) – requires incentives for RTO membership
Section 219(d) – requires rates cannot be unduly discriminate but just and reasonable. 3

4. NOI Content 74 Questions relate to the following areas
Overall impact of the incentive policy
Adequacy of thresholds of Section 219(b)
Application of advanced transmission technology
Nexus Test for meeting qualifications to get incentive rates
Effects of incentives
Role of cost estimates
Risks/Challenges for appropriate incentive rates
Development of Transco’s
Right level of ROE
CWIP and Abandonment
Other incentives 4

5. Options for CAWG Consideration
Everyone file separately.
File jointly with RTO.
File jointly with Utilities.
Not File at this time.
Avoid Different RSC and FERC Policies 5

6. Additional Information
CAWG Incentive Chart.doc
FERC Docket RM 6