On April 26, 2019, PPL Electric Utilities Corporation (“PPL Electric”) petitioned the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) for review of two FERC rehearing orders that replaced the cost allocation method by which PJM Interconnection, L.L.C. (“PJM”) assigns responsibility for a portion of costs for certain facilities that address stability-related reliability issues.  Specifically, FERC’s rehearing orders changed the cost allocation method used for certain facilities, including the Artificial Island Project (“Artificial Island”), that are located in the PJM region.

Pursuant to PJM’s Open Access Transmission Tariff and Amended and Restated Operating Agreement, PJM files cost responsibility for a portion of the costs of certain transmission projects that were approved through the PJM Regional Transmission Expansion Planning (“RTEP”) process.  For RTEP transmission facilities, PJM applies two cost allocation methods:  (1) a hybrid cost allocation for Regional Facilities (i.e., 500 kV or double-circuit 345 kV and above) and Necessary Lower Voltage Facilities that address stability-related reliability issues, where 50 percent of the costs are allocated on a load-ratio share basis and the other 50 percent are allocated using a solution-based distribution factor (“DFAX”) method; and (2) for Lower Voltage Facilities that address stability-related reliability issues, all of the costs are allocated using the DFAX method (collectively, “Facilities”).

On August 28, 2015, PJM filed cost responsibility assignments using the solution-based DFAX method for transmission enhancements and expansions for Artificial Island, which involves Regional Facilities and Lower Voltage Facilities.  The Maryland Public Service Commission and the Delaware Public Service Commission (collectively, “State Commissions”) filed a complaint with FERC, arguing that the use of a solution-based DFAX method to assign responsibility for a portion of the Artificial Island costs is unjust and unreasonable because the solution-based DFAX method, as applied to Artificial Island, does not produce an allocation of RTEP project costs that is proportional to Artificial Island’s benefits.  The Artificial Island encompasses a number of separate sub-projects to address stability limits on generation at the Salem and Hope Creek Nuclear Generating Stations in southern New Jersey.  On April 22, 2016, FERC denied the Complaint finding that the State Commissions did not meet their burden under section 206 of the Federal Power Act (“April 2016 Order”).  The State Commissions sought rehearing of the April 2016 Order.

In its first rehearing order, issued on July 19, 2018 (“July 2018 Order”), FERC granted rehearing of the April 2016 Order and found that it is unjust and unreasonable to apply PJM’s solution-based DFAX cost allocation method to the Facilities.  FERC established paper hearing procedures on whether to apply particular alternatives, i.e., the Stability Deviation Method or a Stability Interface DFAX method (both introduced in a PJM white paper), to measure project benefits moving forward.  The Stability Deviation Method identifies the beneficiaries of transmission projects as the transmission zones whose loads are affected by the stability-related reliability issues being addressed.  In contrast, the Stability Interface DFAX method identifies the beneficiaries of transmission projects by determining power flows over the collection of lines that connect the generator(s) that is experiencing the stability-related reliability issue being addressed.

On February 28, 2019, FERC denied rehearing of the July 2018 Order and established the Stability Deviation Method as the just and reasonable replacement rate for the solution-based DFAX method.  FERC found that the allocation of costs of transmission facilities to address stability-related reliability issues are roughly commensurate with the benefits identified by the Stability Deviation Method.

PPL Electric’s petition is available here.