Explainer: ISO New England has no role in setting transmission rates

In late December 2015, the Federal Energy Regulatory Commission (FERC) initiated an inquiry into the transmission rates charged by transmission owners in the ISO New England region. FERC initiated the inquiry, including settlement proceedings, after concluding that the rates set by the transmission owners “appear to be unjust, unreasonable, unduly discriminatory or preferential” and that the ISO New England Open Access Transmission Tariff lacks adequate transparency and challenge procedures regarding the transmission rates.

Despite the fact that the inquiry involves the Tariff, the ISO itself is not involved in developing the formulas used to arrive at the transmission rates, in setting the rates, or in approving the rates. In fact, the transmission owners develop the language in the rate-making sections of the Tariff, subject to FERC approval. That is why the region’s transmission owners are named as parties in the FERC proceeding, and ISO New England is not named as a party to the proceeding.

ISO New England’s only role in this matter is to provide the settlement function it provides to all market participants. The ISO collects the amounts due from transmission customers and turns over the collections to the transmission owners according to the terms of the Tariff. In effect, ISO New England acts as a clearinghouse for charges and credits.

While the ISO is not a party in this matter, the ISO has filed for intervenor status so that it can be involved in the settlement discussions. This is to ensure that any changes to the Tariff will not affect our ability to meet our responsibility to effectively administer the rates at issue.

Prior to this order in December, the transmission owners have been working with stakeholders on enhancing the transparency regarding their rates and how they are set.