The Federal Energy Regulatory Commission has agreed to Connecticut's request to conduct an unprecedented hearing on the proposed budget increase for ISO New England, which operates New England's regional transmission grid and electricity markets, the state Department of Energy and Environmental Protection announced Thursday.

Attorney General George Jepsen, Consumer Counsel Elin Swanson Katz and the Public Utilities Regulatory Authority, led by Chairman Arthur House, filed a protest in November against the nearly 10 percent budget increase and requested a hearing before the federal regulators, DEEP said in a news release. In a decision issued Monday, FERC ordered a public hearing to review the justness and reasonableness of the budget because more information was needed to make that determination.

"At issue in this proceeding is whether the ISO-NE's budget request is just and reasonable. Frankly, based on the information and the record and the comments of the various parties, it is hard to tell whether sufficient information in some areas has been provided to allow an informed and reasoned decision," two FERC commissioners wrote, concurring in the decision. "When material issues of fact exist, such as here, the Commission will institute such settlement and hearing procedures as a matter of course to better explore, understand and resolve the contested issues."

However, the FERC commissioners cautioned that while ISO-NE must be transparent and held accountable for its budget, "we are also mindful that an increase in one's budget, even a substantial increase is not per se unreasonable if conditions warrant an increase."

Arthur House, PURA Chairman, said "FERC's decision granting a hearing on this matter is a welcome first step toward giving us a meaningful role in the ISO-New England budget process and the opportunity to bring fiscal discipline and cost control to it."

He added: "The budgets of the six New England public utility regulatory authorities are subject to careful review and scrutiny - and there is no reason the same should not be true of ISO's budget."

Currently, no New England public utility commission has any formal oversight role regarding ISO-NE's budget, even though ISO-NE is funded by New England ratepayers. The Connecticut agencies, who were joined in their petition to FERC by state agencies from Maine, New Hampshire and Rhode Island, also asked FERC to require ISO-NE to file its budget with New England state utility commissions 60 days prior to filing with FERC.

While FERC rejected the states' proposed reforms to ISO-NE's budget-making process as beyond the scope of the budget hearing, the regulators said that ISO-NE has committed to scheduling a meeting with all interested state agencies on the budgets at least 60 days in advance of its annual budget filings and to include the state feedback as part of its future budget filings.

The FERC is expected to schedule proceedings shortly. While these proceedings are pending, FERC has allowed the budget increases to take effect on Jan. 1, subject to refund if the increases are found to be unreasonable. The FERC also asked the parties to meet with a settlement judge to try to resolve their differences prior to hearing.

Attorney General Jepsen said this is a significant step. "It is important that the states have won this opportunity for meaningful review of the ISO-NE budget," he said. "ISO-NE must prove that its request is just and reasonable. The growth of ISO-NE's budget over the past decade has been extraordinary and cannot be sustained. Electric customers in Connecticut and across New England deserve this scrutiny and the right to be heard."

ISO-NE's budget has increased 34 percent over the past four years to approximately $165 million this year, according to the DEEP neww release. The number of full-time employees also has increased from 180 in 1997 to 563 proposed for 2013. If approved, ISO-NE will have added 100 full-time positions just in the past five years. ISO-NE already employs 40 percent more employees than all of the public utility commissions in New England combined, Katz said.

Review of the budget shows that more than 80 percent of ISO-NE's budget goes to staff and outside professional services.