US FERC 18 CFR 35.35 Transmission Incentives: A Solar Integration Guide

Key Takeaways

• 18 CFR 35.35 allows 100 percent of prudently incurred Construction Work in Progress (CWIP) in rate base (August 2026).
• It provides for 100 percent recovery of prudently incurred costs for abandoned transmission facilities (August 2026).
• The regulation offers a rate of return on equity incentive sufficient to attract new investment in transmission facilities (August 2026).
• Public utilities must file an annual FERC-730 report on transmission investment activity (August 2026).

Understanding US FERC 18 CFR 35.35 for Solar Integration

The Federal Energy Regulatory Commission (FERC) regulation 18 CFR 35.35, titled "Transmission infrastructure investment," establishes incentive-based rate treatments for public utilities. This regulation, promulgated under Section 219 of the Federal Power Act, aims to encourage investment in new transmission facilities. Its purpose is to ensure grid reliability and facilitate the integration of utility-scale solar energy into the national grid.

Key Incentives for Transmission Investment

FERC 18 CFR 35.35 outlines several specific incentives designed to attract capital to transmission projects. These provisions aim to mitigate financial risks and enhance the profitability of such investments.

Construction Work in Progress (CWIP) in Rate Base

One significant incentive is the inclusion of "100 percent of prudently incurred Construction Work in Progress (CWIP) in rate base." This allows utilities to recover costs during the construction phase, rather than waiting until the project is operational.

Recovery of Abandoned Facility Costs

The regulation also provides for "Recovery of 100 percent of prudently incurred costs of transmission facilities that are cancelled or abandoned due to factors beyond the control of the public utility." This provision reduces the financial risk associated with unforeseen project cancellations.

Return on Equity (ROE) Incentives

To attract new investment, 18 CFR 35.35 offers "A rate of return on equity sufficient to attract new investment in transmission facilities." This ensures that investors receive a competitive return on their capital.

Other Financial Incentives

Additional incentives include "Recovery of prudently incurred pre-commercial operations costs," allowing for the recovery of expenses before a facility becomes commercially active. The regulation also mentions a "Hypothetical capital structure," "Accelerated depreciation used for rate recovery," and "Deferred cost recovery."

Regional Transmission Organization (RTO) and Independent System Operator (ISO) Membership

The regulation encourages participation in organized markets by providing incentives for membership in a "Regional Transmission Organization, Independent System Operator, independent transmission provider, or other Commission-approved transmission organization."

Application and Reporting Requirements

Transmission developers seeking incentive rate treatments under 18 CFR 35.35 must navigate specific application and reporting processes.