On July 15, 2022, a FERC Administrative Law Judge (“Presiding Judge”) issued an initial decision in a proceeding involving the “threshold” issue of whether four solar generating facilities (collectively, “Facilities”) interconnected at the distribution level are eligible to receive reactive power compensation under Schedule 2 of the PJM Interconnection, L.L.C. (“PJM”) Open Access Transmission Tariff (“Tariff”). The Presiding Judge concluded that the Facilities are ineligible to receive reactive power rates because the facilities in question did not satisfy the so-called capability requirement, as explained further below.
The decision rules on four applications seeking to implement reactive power rates for generating facilities located in Franklin County, Pennsylvania and interconnected to the electric grid at distribution-level voltages of 34.5 kV or less. FERC initially accepted the proposed rates for filing subject to refund, and set the matters for hearing and settlement procedures. Although one proceeding settled, the other three reached an impasse on the issue of the facilities’ compensation eligibility. Following the impasse in the other cases, however, the settlement agreement in the other proceeding was withdrawn. FERC’s Chief Judge subsequently consolidated the proceedings and set the “threshold eligibility issue” for hearing procedures.
At hearing, the applicants argued that Schedule 2 contains two eligibility criteria. First, the generator must be under PJM’s operational control, meaning that the facility is legally obligated to respond to PJM’s reactive power directives. Second, they argued that the generator must have “the capability to provide reactive support to PJM” as confirmed by capability testing. Commission Trial Staff (“Trial Staff”) and Monitoring Analytics, LLC, in its capacity as the Independent Market Monitor for PJM (“IMM”), both opposed the applicants’ interpretation of Schedule 2, arguing that the Facilities are ineligible to receive reactive power rates.
The Presiding Judge interpreted Schedule 2 as containing two eligibility criteria for generation facilities: (1) the facility must be under the control of PJM (“Control Requirement”), and (2) the facility must be operationally capable of providing voltage support to PJM’s transmission facilities such that PJM can rely on that generation facility to maintain transmission voltages (“Capability Requirement”). In regard to the Control Requirement, the Presiding Judge noted that the parties’ undisputed interpretation comports with the plain language of Schedule 2 to the extent that Schedule 2 applies to both generation and non-generation resources located within PJM’s control area. As for the Capability Requirement, the Presiding Judge found that to satisfy the Capability Requirement, a generation facility must (a) be capable of producing or absorbing reactive power to provide the Reactive Supply and Voltage Control Service described in Schedule 2, and (b) the reactive power supplied by a generation facility must enable PJM to maintain transmission voltages within acceptable limits.
The Presiding Judge next considered whether the Facilities do, in fact, satisfy the Capability Requirement. The Presiding Judge concluded that they do not.
The Presiding Judge based his decision on four considerations. First, the Presiding Judge relied on PJM’s uncontested statements that PJM “cannot rely on the Facilities for voltage support because they are not directly connected to the transmission system.” Second, the Presiding Judge determined that distribution-level voltage conflicts may interfere with any voltage support the Facilities do provide because PJM does not control the distribution buses to which the Facilities interconnect, and systems on said buses may counteract any voltage provided by the Facilities. Third, the Presiding Judge found that the electrical distance between the Facilities and the transmission system may dissipate any voltage support provided by the Facilities. The Presiding Judge reasoned that, “[w]hile ‘some electrical distance’ may not be enough, on its own, to prevent PJM from relying on these facilities,” the record contained “sufficient evidence to conclude that the electrical distance may impair the Facilities’ capability to provide voltage support to PJM.” Finally, the Presiding Judge discounted the applicants’ power flow modeling because it failed to address PJM’s concerns regarding voltage conflicts and contained multiple errors.
While the Presiding Judge’s conclusions were based on the particular facts and circumstances of this proceeding, this ruling could have dramatic implications for other generating facilities that interconnect to the electric grid at distribution-level voltages in PJM. But, before the Presiding Judge’s conclusions on the “threshold eligibility issue” become final, the Commission will take up the issue after further briefing and provide its own perspective on the compensation eligibility requirements of Schedule 2.
A copy of the order can be found here.