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Home > Transmission Strategy > Insights > Watch Out Below for Falling Returns on Equity in MISO. Should Public Power and G&T Transmission Owners within MISO be Concerned? (white paper)

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Watch Out Below for Falling Returns on Equity in MISO. Should Public Power and G&T Transmission Owners within MISO be Concerned? (white paper)

As interest rates remain at historically low levels, pressure is building on FERC to lower the returns on equity used in transmission rate formulae across the country. This pressure has come to a boiling point in MISO as industrial and commercial customers have filed a joint complaint challenging the reasonableness of ROEs, equity adders and the percentage of equity allowed in capital structures for IOUs and independent transmission companies. Based on precedent, any reduction in the standard MISO ROE will likely also apply to public power entities. Although a lower ROE will reduce revenue generated from transmission investments, it is likely that most public power entities in MISO will see a net benefit through lower transmission tariffs. That, combined with continued healthy margins from new transmission investment, will be an important strategy for joint action agencies, municipals and G&T. Understanding the dynamics of this potential new environment will be important for many public power entities.

Download the MISO falling returns white paper