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`UNITED STATES OF AMERICA
`BEFORE THE
`FEDERAL ENERGY REGULATORY COMMISSION
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`Docket No. RM22-5-000
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`Rate Recovery, Reporting, and Accounting
`Treatment of Industry Association Dues and
`Certain Civic, Political, and Related Expenses
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`COMMENTS OF
`THE AMERICAN PUBLIC POWER ASSOCIATION
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`Pursuant to the December 16, 2021, Notice of Inquiry (“NOI”) issued by the Federal
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`Energy Regulatory Commission (“Commission” or “FERC”) in the above-captioned
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`proceeding,1 the American Public Power Association (“APPA”) hereby submits comments on
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`certain of the issues raised in the NOI.
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`I.
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`INTRODUCTION
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`APPA appreciates the Commission’s efforts to assess its current regulations and policies
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`governing rate recovery of industry association dues, as well as donations for charitable, social,
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`or community welfare purposes. Many APPA members take transmission and other services
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`from public utilities at cost-based rates, including formula rates that can be highly dependent on
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`the accounts to which costs are assigned. Some APPA members also take service from interstate
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`natural gas pipelines at cost-based rates. APPA members thus have a strong interest in
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`Commission policies that ensure the rates they are charged include only expenses incurred for
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`their benefit. APPA supports, in particular, the Commission’s general policy of excluding
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`lobbying related expenses from jurisdictional rates, along with donations for charitable, social, or
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`community welfare purposes.
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`The ability for customers (and the Commission itself) to review and assess the expenses
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`1 Rate Recovery, Reporting, and Accounting Treatment of Industry Association Dues and Certain Civic, Political,
`and Related Expenses, 177 FERC ¶ 61,180 (2021).
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`included in public utility cost-based rates is important to ensuring that those rates are just and
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`reasonable. Accordingly, it is appropriate for the Commission to evaluate whether its current
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`rules and policies provide adequate transparency into industry association costs and utility
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`donations to allow stakeholders and the Commission to identify costs that should not be borne by
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`utility customers. With respect to industry association dues in particular, the Commission should
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`aim to strike a reasonable balance between customer transparency on the one hand, and avoiding
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`significant burdens on third-party industry associations on the other.
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`As to public power utilities, the concerns identified in the NOI with respect to recovery of
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`industry association dues do not warrant policy changes regarding recoverable expenses or
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`application of additional generic transparancy requirements on public power utilities or their
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`industry associations. While some public power utilities recover costs through rates that are
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`subject to the Commission’s jurisdiction, such as transmission revenue requirements included in
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`Regional Transmission Organization (“RTO”) and Indepenent System Operator (“ISO”) rates,
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`public power utilities do not have shareholders that can benefit from – or absorb – any industry
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`association dues currently included in such rates. Public power industry association dues are
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`incurred by utilities for the benefit of customers (to whom the utilities are answerable). And to
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`the extent that the transmission rates of some public power utilities include industry association
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`dues amounts that are passed on to other customers, such cost allocation does not alter the fact
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`that the dues expenses were incurred to benefit customers. In any event, public power industry
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`association expenses are very small as a portion of wholesale transmission costs, and do not
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`justify imposing additional requirements on public power utilities or their industry associations.
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`2
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`II.
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`DESCRIPTION OF APPA
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`APPA is the national service organization representing the interests of not-for-profit state,
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`municipal, and other locally owned electric utilities throughout the United States. More than
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`2,000 public power utilities provide over 15 percent of all kilowatt-hour sales to ultimate
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`customers and to businesses in every state except Hawaii. Collectively, public power utilities
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`serve over 49 million people. APPA utility members’ primary goal is providing customers in the
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`communities they serve with reliable electric power and energy at the lowest reasonable cost,
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`consistent with good environmental stewardship. This orientation aligns the interests of APPA
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`member electric utilities with the long-term interests of the residents and businesses in their
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`communities.
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`III. COMMENTS
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`A.
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`The Commission Should Strike a Reasonable Balance Between Cost
`Transparency and Avoiding Undue Burdens on Third-Party Industry
`Associations
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`As noted above, many APPA members take transmission and other services from public
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`utilities at cost-based rates, including formula rates that can be highly dependent on the accounts
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`to which costs are assigned.2 APPA members also hold capacity on interstate natural gas
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`pipelines or otherwise pay for gas transportation under the Commission’s cost-of-service
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`framework. Accordingly, APPA supports Commission policies designed to ensure that the cost-
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`based rates charged to customers only reflect expenses incurred for their benefit.
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`APPA supports the Commission’s longstanding rule that public utility lobbying costs and
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`other “expenditures for the purpose of influencing public opinion with respect to the election or
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`appointment of public officials, referenda, legislation, or ordinances . . . or for the purpose of
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`2 See, e.g., Newman v. FERC, 22 F.4th 189 (D.C. Cir. 2021).
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`3
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`influencing the decisions of public officials” are presumptively unrecoverable in rates.3 APPA
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`likewise supports the Commission’s policy that utilities should not be able to recover donations
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`for charitable, social, or community welfare purposes.4
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`APPA agrees that, in order for such policies to be effectively implemented, it is important
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`that customers, the Commission, and other interested stakeholders have the opportunity to review
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`public utility expenses included in cost-based rates. The Commission has appropriately required,
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`for example, that transmission formula rates include protocols that include processes for
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`customers to inquire as to costs included in the rates produced by the formula.5 Natural gas
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`pipeline rate case proceedings are typically set for hearing, with the opportunity for customers,
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`Commission Staff, and other interested stakeholders to conduct detailed discovery on proposed
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`costs. APPA recognizes, however, that such processes may not always provide the intended
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`transparency for customers.6 Accordingly, it is appropriate for the Commission to evaluate its
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`current rules and policies to determine if they provide adequate transparency into industry
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`association costs and utility donations.
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`As to industry association dues expenses, the NOI explains that the Commission has
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`traditionally allowed utilities to recover these expenses in cost-based rates as relating to
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`furnishing regulated utility service, provided such costs are incurred for the benefit of
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`3 See 18 C.F.R. pt. 101, Account 426.4; NOI at P 6; see also Newman, 22 F.4th 189, 2021 U.S. App. LEXIS 38373,
`at *16 (D.C. Cir. Dec. 28, 2021) (holding that Account 426.4 includes expenditures for the purpose of indirectly as
`well as directly influencing the decisions of public officials).
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`4 See, e.g., NOI at P 10 n.18.
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`5 See, e.g., Midwest Indep. Sys. Operator, 143 FERC ¶ 61,149 (2013).
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`6 See, e.g., NOI at P 10 n.18 (citing Ameren Illinois Co., 169 FERC ¶ 61,147, at P 81 (2019)). In Ameren Illinois,
`the Commission concluded that donations for charitable, civic, or community welfare purposes should not be
`included as an input into the formula rate, and directed Ameren to submit a compliance filing addressing its
`improper recording of such donations because Ameren’s original filing included “general descriptions” and the
`Commission was “unable to discern whether Ameren Illinois appropriately recorded only transmission-related
`expenses [ ] and not donations for charitable, social, or community welfare purposes.” Ameren Illinois, 169 FERC ¶
`61,147, at P 81.
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`4
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`customers.7 The NOI seeks additional information about “the delineation of recoverable and
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`nonrecoverable industry association dues for rate purposes,”8 and asks whether greater
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`transparency for industry association costs might be warranted to “improve public knowledge
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`into industry association dues and therefore ensure the just and reasonable recovery of industry
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`association dues.”9
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`In considering any additional transparency requirements for industry association dues
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`expense, the Commission should aim to strike a reasonable balance between providing
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`transparency into industry association costs incurred by public utilities and avoiding unnecessary
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`burdens on third-party industry associations. While improved processes for customers to obtain
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`information on industry association expenditures may be warranted in some circumstances, the
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`Commission should be cognizant of the impacts that significant new record-keeping and cost-
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`tracking obligations could have on third-party industry associations.
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`As the Commission notes in the NOI, industry associations are not subject to FERC
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`jurisdiction,10 yet generic new transparency requirements could effectively impose on third-party
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`industry associations new obligations to track, categorize, and publicize their activities and
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`associated costs in a manner that conforms to Commission rules.11 Such obligations potentially
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`could be inconsistent, moreover, with industry associations’ existing accounting and compliance
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`frameworks, including their practices for complying with the Lobbying Disclosure Act
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`7 See NOI at PP 4-6. In implementing this policy, the Commission has generally not permitted utilities to recover
`the portion of industry association dues expenses associated with lobbying and related costs, classifying these
`expenditures as below-the-line expenses that are presumptively unrecoverable. Id. at P 5.
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`8 Id. at P 16.
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`9 Id. at P 17.
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`10 Id. at P 7 n.13.
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`11 See, e.g., id. at P 17, Q13 (identifying a number of potential methods to improve transparency, all of which would
`involve third-party industry associations providing detailed information on the nature of their activities and the
`associated costs).
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`(“LDA”)12 and other legal requirements.13 And though customers should certainly have the right
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`to question the recoverability of industry association dues expenses in individual cases, generic
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`requirements for industry associations to provide highly detailed cost data for use in Commission
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`rate proceedings as a precondition of dues recovery could entangle those industry associations
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`themselves in contentious Commission litigation.14 APPA urges the Commission to carefully
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`weigh such considerations in developing any policy changes to provide additional transparency
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`of public utilities in this proceeding.
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`B.
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`The Concerns Underlying the NOI Do Not Warrant Policy Changes or
`Additional Generic Transparency Requirements for Public Power Utilities’
`Expenditures on Industry Association Dues
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`The NOI is focused on utilities that are subject to the Commission’s general rate
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`jurisdiction,15 a category that excludes public power utilities.16 APPA notes, however, that some
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`public power utilities recover expenses through cost-based rates that are subject to the
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`Commission’s jurisdiction, particularly revenue requirements included in RTO/ISO transmission
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`rates.17 It is APPA’s understanding that at least some of these rates include costs of industry
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`association memberships, including APPA dues and the dues of state public power associations.
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`APPA respectfully submits that no policy changes are necessary for industry association
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`expenses incurred by public power utilities. In particular, the recovery of these expenses does
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`12 2 U.S.C. §§ 1601, et seq.
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`13 These new obligations could also have the effect of increasing industry association costs, which could result in
`higher dues.
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`14 Cf., NOI, Comm’r Danly Dissent at PP 14-15.
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`15 Id. at P 3 n.3.
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`16 See 16 U.S.C. § 824(f).
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`17 The Commission generally has reviewed the revenue requirements of public power utilities included in RTO/ISO
`rates under the just and reasonable standard applicable to public utility rate filings. See, e.g., Southwest Power Pool,
`177 FERC ¶ 61,230, at PP 18-20 (2021).
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`not warrant additional transparency requirements, and, in response to the NOI’s specific inquiry
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`on this point, public power utilities should be excluded from consideration of any new
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`requirements in this proceeding.18
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`Lacking shareholders or a profit motive, public power utilities have no reason to incur
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`industry association dues expenses other than for the ultimate benefit of their customers; they
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`have no incentive to pay industry association dues to promote shareholder profits, as
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`distinguished from customer benefits.19 If customers object to their public power utility paying
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`industry association dues, moreover, they have avenues to raise these concerns with the utility’s
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`local and (in a few instances) state regulators. As a general matter, public power utilities’ rates
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`and services are regulated by city councils or county commissioners, or a utility board whose
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`members may be elected or appointed by local officials. These regulators are answerable to the
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`communities served by public power utilities. In the case of public power utilities, the
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`community literally owns the utility, and, therefore, controls the utility’s priorities. Thus, in
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`incurring the costs of industry association dues, public power utilities should be presumed to act
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`in the best interest of customers.20
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`18 NOI at P 17, Q11 (asking, “[s]pecific to the electric industry, should any transparency requirements for industry
`association costs be limited to investor-owned utilities or should they also apply to municipal utilities and rural
`electric cooperatives who recover costs for Commission-jurisdictional service?”).
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`19 See, e.g., Springfield Gas & Elec. Co. v. Springfield, 257 U.S. 66, 70 (1921) (observing that “[t]he municipal
`corporation is allowed to go into the business only on the theory that thereby the public welfare will be subserved.
`So far as gain is an object it is a gain to a public body and must be used for public ends.”). The Commission has
`indicated that the lack of shareholders is a relevant factor in evaluating the intended use and reason behind utility
`expenditures. See also ISO New England, Inc., 117 FERC ¶ 61,070, at P 47 (2006), order on reh’g, 118 FERC
`¶ 61,105 (2007), order rejecting reh’g, 120 FERC ¶ 61,122, aff’d sub nom., Braintree Elec. Light Dept. v. FERC,
`550 F.3d 6 (D.C. Cir. 2008) (explaining that “[i]n the absence of disparate ratepayer/shareholder interests that may
`exist for investor owned utilities, it is easier to see that the ISO/RTO is pursuing activities that benefit its
`ratepayers.”).
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`20 Moreover, public power utilities’ lack of shareholders means that the costs of industry association dues are likely
`to be recovered from a public power utility’s customers regardless of whether they are collected through
`Commission-jurisdictional rates. Thus, while the Commission has an obligation to ensure that all jurisdictional rates
`are just and reasonable, any practical impact of excluding certain costs from recovery and/or imposing new
`transparency requirements on public power utilities would be diminished by the fact that public power utilities
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`As to APPA in particular, it provides numerous programs to support member interests
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`beyond advocacy. One important APPA role is coordinating mutual aid responses. A national
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`mutual aid agreement signed by more than 2,000 public power utilities and rural electric
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`cooperatives links utilities so they can help each other in times of need. Public power utilities
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`may also have other local, state, and regional contracts and agreements in place to render mutual
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`aid. In 2013, APPA formed a Mutual Aid Working Group (“MAWG”) to formalize the existing
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`mutual aid network for the nation’s public power utilities. The MAWG developed the Public
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`Power Mutual Aid Playbook to outline the step-by-step plan for public power utilities, network
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`coordinators, and APPA to refer to before and during a disaster to ensure an expeditious and
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`organized response.21
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`As the national trade association for public power utilities, APPA also plays an
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`instrumental role in the Electricity Subsector Coordinating Council (“ESCC”), the liaison
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`between the federal government and the electric power industry on efforts to prepare for, and
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`respond to, national-level disasters or threats to critical infrastructure. APPA also sponsors a
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`number of industry-leading safety and reliability programs and resources to support public power
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`utilities, including the APPA Safety Manual,22 the eReliability Tracker,23 and the Reliable Public
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`would need to recover industry association costs from their customers even if these costs were excluded from
`Commission-jurisdictional rates.
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`21 The Public Power Mutual Aid Playbook provides a protocol to coordinate dialogue and actions across a three-
`tiered national communications network, without impinging on one-on-one mutual aid agreements between utilities.
`Utility coordinators communicate with local and county partners; designated state coordinators correspond with state
`and regional partners; and the national coordinator collaborates with the Edison Electric Institute, National Rural
`Electric Cooperative Association, and emergency management agencies.
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`22 The manual is the premier source for safety compliance information for utilities. APPA updates the manual every
`4 to 5 years to reflect the National Electrical Safety Code, Occupational Safety and Health Administration standards,
`and important changes in the industry. The latest edition of the Safety Manual was released in May 2017.
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`23 The tracker is an affordable, easy-to-use, mobile-friendly, web-based service that provides public power utilities
`with an effective way to collect, categorize, and summarize outage information. Users can run in-system reports to
`view a monthly snapshot of their utility’s reliability performance, identify problem areas and common outage
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`Power Provider (RP3) program.24
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`Further, APPA provides educational resources to help electric industry employees keep
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`up with rapidly evolving technologies, regulations, and customer needs. APPA provides
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`members and the industry with news and analysis of the latest trends, best practices, and
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`technologies as well as APPA member accomplishments. APPA also advances research and
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`development through its Demonstration of Energy and Efficiency Developments (“DEED”)
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`program, which offers scholarships and project grants to help members innovate and develop a
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`robust future workforce.
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`APPA respectfully submits that public power utilities must find that these and other
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`resources provided by APPA and other public power industry associations provide benefits to
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`their customers that justify the costs of association dues. Indeed, the work of tracking and
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`communicating information about the rapidly evolving electric industry strengthens public power
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`utilities and grid security while likely still resulting in overall savings to member utilities by
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`avoiding the need for individual utilities to add staff or contract with private consultants and law
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`firms to perform these functions (or, even worse, go without the information, to their detriment).
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`APPA recognizes that, as a result of RTO/ISO rate design, cost allocation rules, joint
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`ownership arrangements, or other rate mechanisms, some portion of industry association dues
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`incurred by public power utilities may be paid by customers outside the communities the public
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`power utilities serve. But such cost allocation does not alter the customer benefit purposes for
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`causes, and calculate IEEE 1366 reliability indices. The eReliability Tracker also allows a public power utility to
`benchmark its performance against other public power utilities that use the service.
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`24 This program recognizes utilities that demonstrate high proficiency in reliability, safety, workforce development,
`and system improvement. Recognition by the RP3 program demonstrates to community leaders, governing board
`members, suppliers, and service providers a utility’s commitment to its employees, customers, and community.
`While not originally intended for this purpose, public power utilities that have attained the RP3 designation have
`found bond rating agencies regard it as an indicator of sound management and governance practices.
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`which the expenses were incurred by these public power utilities. In any case, public power
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`industry association dues expenses in Commission-jurisdictional rates amounts are small, and,
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`APPA submits, would not justify the burdens that could be imposed on public power utilities and
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`their industry associations from any requirements for additional transparency concerning these
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`expenses. For a public power utility collecting industry association dues through transmission
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`formula rates, for example, only the portion of the association dues classified to the transmission
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`function are likely to be included in rates, and only a portion of that amount would be allocated
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`to customers other than the public power utility’s own customers.
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`As to APPA dues in particular, any impact on rates is likely to be vanishingly small.
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`APPA’s annual dues for even its very largest individual members do not exceed $300,000,25 and
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`the average dues for APPA’s 1,336 regular utility members is $11,277, with a median level of
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`$3,864.26 Moreover, the legal framework under the LDA requires APPA to track and disclose
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`lobbying activity and expenses, which the Commission already treats as presumptively
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`unrecoverable in utility rates. To comply with LDA requirements, APPA tracks staff time and
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`expenses (including an allocation of overhead) devoted to lobbying and lobbying-related
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`activities. The LDA requires APPA to report these amounts to federal regulators, and APPA’s
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`compliance is subject to audit by the government, as well as by APPA’s independent auditors.
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`APPA reports to its members the percentage of dues expenses attributable to lobbying activities.
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`Again, APPA respectfully submits that the level of association dues expense likely to be incurred
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`by public power utilities and included in Commission-jurisdictional rates does not justify
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`25 Public power joint action agencies may pay APPA dues on behalf of their members, which collectively may
`exceed this amount.
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`26 APPA dues are set using a formula based on revenue and kilowatt-hour sales figures and customer data provided
`by the Department of Energy, Energy Information Administration (EIA). The EIA compiles these data from Form
`EIA-861 completed annually by all electric utilities.
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`imposing additional requirements on public power utilities.27
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`Finally, it bears observing that the number of public power utilities that recover expenses
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`through rates subject to the Commission’s jurisdiction is small relative to the total number of
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`public power utilities, which weighs against adopting policies that could necessitate generic
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`changes for public power industry associations.
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`IV. CONCLUSION
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`APPA appreciates the opportunity to submit these comments on the NOI. It is
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`appropriate for the Commission to evaluate its current rules and policies to determine if they
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`provide adequate transparency into industry association costs and utility donations. As to
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`industry association dues in particular, the Commission should aim to strike a reasonable balance
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`between customer transparency on the one hand, and avoiding significant burdens on third-party
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`industry associations on the other. APPA also submits that the concerns identified in the NOI
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`with respect to recovery of industry association dues do not warrant policy changes as to
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`recoverable expenses for public power utilities or application of additional transparency
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`requirements on public power industry association costs.
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`[Signature block appears on the next page]
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`27 APPA also notes that, as a tax-exempt trade association under section 501(c)(6) of the Internal Revenue Code, it
`must file a Form 990 (Return of Organization Exempt from Income Tax), which is publicly available, and which
`provides detailed information on APPA’s finances.
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`Respectfully submitted,
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`AMERICAN PUBLIC POWER ASSOCIATION
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`/s/ John E. McCaffrey
`Delia Patterson
`Senior Vice President, Advocacy &
` Communications and General Counsel
`John E. McCaffrey
`Senior Regulatory Counsel
`2451 Crystal Drive
`Suite 1000
`Arlington, VA 22202
`(202) 467-2900
`dpatterson@publicpower.org
`jmccaffrey@publicpower.org
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`DATED: February 22, 2022
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