FERC Abandons Key Transmission Incentives Policy, Halting CWIP for New Projects

For nearly two decades, a specific regulatory mechanism known as the Construction Work in Progress (CWIP) incentive allowed developers to bill customers for the financing costs of high-voltage power lines long before those lines transmitted a single electron. That era of upfront ratepayer financing has now ended. The Federal Energy Regulatory Commission (FERC) has officially abandoned the CWIP incentive for new regional transmission projects, fundamentally altering how grid infrastructure is funded in the United States.[1][2]

The decision marks a decisive victory for consumer advocates and state regulators who have long argued that the policy unfairly shifted the financial risks of massive infrastructure projects onto ordinary households. Under the newly adopted framework, utilities and transmission developers will return to traditional ratemaking principles. They must wait until a power line is fully constructed, energized, and deemed 'used and useful' before they can begin recovering their capital investments through consumer electricity bills.[2][4]

Established in 2006 under FERC Order 679, the CWIP incentive was originally designed to spur a wave of investment in the nation's aging grid. By allowing utilities to include 100 percent of their construction costs in their rate base prior to commercial operation, the policy provided immediate cash flow and lowered the cost of borrowing. Over the past 18 years, FERC granted the incentive to more than 130 projects, representing over $30 billion in transmission infrastructure.[5]

However, as the scale and cost of regional transmission projects grew, so did scrutiny of the incentive structure. Critics, led prominently by FERC Commissioner Mark Christie, pointed out that the policy effectively turned captive ratepayers into an involuntary bank for private developers. Unlike a traditional bank, consumers received no interest on the money they advanced, and they bore the risk if a project was delayed, mismanaged, or ultimately abandoned.[1][4]

The abandonment of the CWIP policy forces a structural realignment in utility balance sheets. Without the guarantee of immediate cost recovery, transmission developers face higher upfront financing hurdles. Industry groups have warned that removing the incentive could increase the overall cost of capital, which might eventually trickle down to consumers in the form of higher long-term rates once projects do enter service.[3][5]

Despite these warnings, the regulatory consensus has shifted toward prioritizing immediate consumer protection and cost discipline. By removing the safety net of ongoing cost recovery, regulators anticipate that developers will be forced to exercise tighter control over project budgets and timelines. The shift eliminates the moral hazard of utilities earning a return on equity for projects that experience severe cost overruns during the construction phase.[2][3]

The policy change also restores a measure of authority to state-level utility commissions. In recent years, state regulators expressed frustration that federal incentives were being awarded to projects that had not yet received state certificates of public convenience and necessity. By halting CWIP, FERC ensures that developers must secure comprehensive state approvals and demonstrate clear project viability before they can expect to recoup their investments.[4][6]

Looking ahead, the transmission sector will need to adapt to a more rigorous financial environment. While the demand for new high-voltage lines remains acute due to electrification and the integration of renewable energy, the capital required to build them will now be subject to standard market risks. Utilities are expected to explore alternative financing structures and outcome-based incentives that reward operational efficiency rather than merely subsidizing the construction process.[2][3]