Connecticut Challenges a Long-Standing Transmission Incentive
Connecticut’s attorney general and other state agencies have asked the Federal Energy Regulatory Commission to eliminate a 0.5% return on equity adder that Eversource and Avangrid utilities receive for participating in ISO New England. Their argument is straightforward: because state law now requires those utilities to remain in the regional grid operator, their participation is no longer voluntary and therefore should not qualify for an incentive designed to reward voluntary membership.
The complaint, filed on June 11 according to Utility Dive, targets a familiar feature of US transmission regulation with implications beyond Connecticut. It raises a broader question about whether legacy financial incentives still make sense once the behavior they were meant to encourage becomes mandatory.
For ratepayers, the issue may look technical. In practice, it is about whether customers should continue paying extra returns on utility transmission investments when the legal basis for that bonus has changed.
What the RTO Adder Is Supposed to Do
FERC has long offered a menu of incentives intended to spur transmission development. One of them is the so-called RTO adder, an extra 0.5% return on equity for utilities that voluntarily participate in a regional transmission organization or independent system operator. The logic is that utilities giving up some operational independence to join broader regional market structures should receive compensation for doing so.
Connecticut says that logic no longer applies here. A 2025 state law requires Connecticut Light & Power and The United Illuminating Co. to participate in ISO New England, according to the complaint. If participation is mandated by law, the state argues, it cannot reasonably be treated as voluntary for purposes of receiving the extra return.
The complaint therefore rests on a narrow but powerful point: an incentive tied to voluntary conduct should end when that conduct is no longer a choice.
Why This Fits a National Trend
The filing also aligns with a wider pushback against transmission incentives that many consumer advocates say unnecessarily increase customer costs. Utility Dive notes that former FERC chair Mark Christie, ratepayer advocates and others have sought to rein in such benefits.
Recent legal and regulatory developments strengthen Connecticut’s case. The article points out that states including California, Ohio and Maryland require transmission owners to join an RTO or ISO, making them ineligible for the adder. It also cites a key federal appeals court ruling from January 2025 ordering FERC to remove the adder for utilities in Ohio.
That precedent is important because it suggests the debate is no longer theoretical. Courts have already shown a willingness to reject the continued use of the adder when state mandates remove the element of voluntariness.
In Ohio, the Office of the Ohio Consumers’ Counsel said the ruling was expected to save American Electric Power customers $220 million through 2050. Connecticut’s filing does not cite savings on that scale, but the direction of travel is similar: regulators and advocates are increasingly scrutinizing whether transmission incentives remain justified once market structures mature.
The Utility Position
Eversource, for its part, defended the value of transmission investment. A company spokesperson told Utility Dive that ongoing strategic investments in the transmission system have helped eliminate substantial congestion costs and provided customers with billions of dollars in savings over the past several years.
That argument should not be dismissed. Transmission spending can lower costs by improving access to generation and reducing bottlenecks. The dispute here is not whether transmission matters. It is whether a specific premium on utility returns remains warranted.
Eversource also said removing the adder would save an average residential customer about 9 cents a month. That figure cuts both ways. On one hand, it suggests the immediate monthly impact on individual bills is modest. On the other, it underscores how many transmission cost debates involve small per-customer amounts that become large when aggregated across years and service territories.
What FERC Will Need to Decide
The commission is being asked to answer a targeted legal and policy question: does a state mandate to participate in ISO New England nullify the rationale for an incentive reserved for voluntary participation?
Its decision will matter for several reasons:
- It will clarify how FERC applies transmission incentives when state law changes the underlying conditions.
- It may influence similar challenges in other regions.
- It could affect how utilities and regulators think about future transmission cost recovery.
- It will signal how aggressively the commission is willing to revisit older incentive structures.
This is not a fight over whether the grid needs investment. It is a fight over how much extra return utilities should receive, and under what circumstances. That distinction is crucial because transmission policy increasingly sits at the intersection of reliability, decarbonization and affordability.
A Small Rate Case With Bigger Policy Meaning
At first glance, the Connecticut complaint can look like a narrow accounting dispute over half a percentage point. In reality, it reflects a larger regulatory reset. As regional transmission structures become embedded and mandatory in some states, incentives created to encourage voluntary participation become harder to defend politically, legally and economically.
That does not mean every utility incentive is obsolete. It does mean regulators are under growing pressure to prove that such adders still correspond to real risks, tradeoffs or public benefits. If they do not, ratepayer advocates will increasingly argue that customers are funding bonuses for behavior utilities no longer have the option to avoid.
FERC’s ruling in the Connecticut case will therefore be watched well beyond New England. It will show whether the commission sees these incentives as durable tools for supporting transmission buildout, or as policies that must be tightened when conditions change. In an era of rising infrastructure needs and customer cost sensitivity, that distinction is becoming central to how the power sector balances investment with accountability.
This article is based on reporting by Utility Dive. Read the original article.
Originally published on utilitydive.com
