On November 24, 2015, the Commission accepted and suspended proposed amendments to PJM Interconnection L.L.C.’s (“PJM”) Open Access Transmission Tariff (“OATT”) that allocated cost responsibility for two transmission upgrades: the Bergen-Linden Corridor Project, and the Artificial Island Project. In suspending the proposed amendments, the Commission ordered staff to convene a technical conference on whether the use of the solution-based distribution factor (“DFAX”) cost allocation methodology results in rates that are just and reasonable when applied to transmission enhancements and expansions that address reliability violations that are not related to flow on the planned transmission facility, as approved by the Commission in Schedule 12 of the PJM OATT for assigning the costs of transmission upgrades.
In PJM, cost responsibility assignments for transmission upgrades that are approved by the PJM Board of Directors as part of PJM’s Regional Transmission Expansion Plan (“RTEP”) are filed with the Commission as amendments to the PJM OATT. The RTEP provides for the construction of expansions and upgrades to PJM’s transmission system in order to comply with reliability criteria and to maintain and enhance the economic and operational efficiency of PJM’s wholesale electricity markets. There are three kinds of reliability projects selected in the RTEP for purposes of cost allocation: (i) Regional Facilities; (ii) Necessary Lower Voltage Facilities; and (iii) Lower Voltage Facilities. For Regional Facilities and Necessary Lower Voltage Facilities, 50 percent of a facility’s cost is allocated on a region-wide, postage stamp basis, and the other 50 percent is allocated pursuant to the DFAX methodology. For Lower Voltage Facilities, 100 percent of a facility’s cost is allocated pursuant to the DFAX methodology.
On August 28, 2015, PJM filed its proposed cost-allocations with the Commission for the Bergen-Linden Corridor Project and the Artificial Island Project.
In its November 24, 2015 order, the Commission noted that a number of parties (several of which had filed formal complaints in separate dockets) had raised concerns regarding the appropriateness of the DFAX methodology. According to the Commission, these parties argued that: (i) while the DFAX methodology may be an appropriate cost allocation method for some types of transmission projects, it does not lead to just and reasonable results when applied to projects addressing reliability violations that are not related to flow on the planned transmission facility; and (ii) the DFAX methodology may not appropriately identify the beneficiaries of transmission enhancements and expansions for the type of reliability violations that are not related to flow.
In deciding to accept and suspend PJM’s proposed OATT amendments for a period of five months, subject to refund, the Commission stated that the proposed amendments had “not been shown to be just and reasonable,” and therefore the Commission directed staff to convene a technical conference to explore: (i) whether there is a definable category of reliability projects within PJM for which the DFAX methodology may not be just and reasonable, such as projects addressing reliability violations that are not related to flow on the planned transmission facility; and (ii) whether an alternative just and reasonable ex ante cost allocation methodology could be established for any such category of projects.
A copy of the Commission’s November 24, 2015 order may be found here.