Hudson Transmission Partners LLC and Linden VFT LLC scored a big win after federal regulators backed their requests for service downgrades that free them from paying regional transmission expansion plan charges in the PJM Interconnection.
HTP and Linden argued that the portion of costs allocated to them for the Bergen-Linden Corridor transmission project in New Jersey was excessive, jeopardized the viability of their transmission assets and could push them into insolvency.
The BLC project aims to remedy short circuit and thermal violations on the Public Service Electric and Gas Co. system. Under PJM's solution-based distribution factor methodology, PSEG was allocated $127.9 million of the project's costs. Linden is responsible for $131.6 million of the project's costs, and HTP was assigned $634 million.
The merchant transmission facilities sought to relinquish their firm transmission withdrawal rights through a downgrade to less valuable nonfirm TWRs in an effort to avoid paying their allocated share of the $1.2 billion project.
Firm TWRs carry with them transmission upgrade cost responsibilities because they require PJM to plan its system to accommodate those firm withdrawals. Efforts to convert the firm TWRs to nonfirm TWRs hit a roadblock when PSEG, the transmission owner to which HTP's and Linden's facilities connect, refused to sign off on the service downgrades.
As a result, the Federal Energy Regulatory Commission in a Sept. 8 order rejected PJM's filing (FERC docket ER17-2073), submitted on HTP's behalf, of an unexecuted agreement to amend the interconnection service agreement, or ISA, in place since 2010 among PJM, HTP and PSEG to reflect the change in service. However, the agency launched a Federal Power Act Section 206 proceeding (EL17-84) to examine the issue further.
Similarly, FERC on Oct. 5 rejected an amended ISA (ER17-2267) between PJM, Linden and PSEG, saying it would instead address the issue when acting on a separate complaint (EL17-90) filed by Linden.
In Dec. 15 orders addressing the previously denied amended ISAs, FERC found the existing ISAs to be unjust and unreasonable insofar as they did not allow HTP and Linden to convert their firm TWRs to nonfirm TWRs.
The commission directed PJM to submit compliance filings amending the ISAs to reflect the service downgrades, effective Dec. 15 for HTP and on a future date to be specified by Linden upon it providing written notice of its conversion request.
PSEG, along with the New Jersey Board of Public Utilities, had argued that neither HTP nor Linden should be permitted to relinquish their firm TWRs and subsequently be freed from paying for RTEP projects as those projects were caused by the firm TWRs at issue and benefit both companies.
But FERC, in near-identical language in separate orders pertaining to Linden's and HTP's downgrade requests, said PSEG and the BPU failed to argue that the provisions of PJM's tariff "that provide that a merchant transmission owner that does not own firm TWRs does not receive cost responsibility assignments for RTEP projects" was unjust and unreasonable.
"Accordingly, we find that their cost allocation argument does not provide a basis for precluding [HTP or Linden] from terminating its firm TWRs under the existing ISA," FERC said.
The commission noted annual updates to cost responsibility assignments for RTEP projects to reflect shifts "over time as usage by transmission customers of a RTEP project changes over its lifespan." It specifically cited the cost increases Linden and HTP saw "as a direct result of the termination of Con Edison's transmission service agreements."
"Contrary to PSEG's assertion, the PJM tariff does not require a merchant transmission facility, like HTP [or Linden], to be allocated costs for an RTEP project over the life of that project based on the MWs of firm TWRs the merchant transmission facility held at the time that the RTEP project was approved by PJM," FERC said.
FERC also rejected PSEG's argument that Linden's complaint was a collateral attack on PJM's cost allocation method. Recognizing that Linden's cost responsibilities for RTEP projects could change due to the service downgrade, FERC said "this potential simply reflects the operation of the cost allocation method in the tariff, not a collateral attack of it."
Further, "we are not persuaded by PSEG's arguments that the commission should dismiss the complaint because PSEG reasonably relied upon the long-term duration of the existing ISA, and Linden maintaining its firm TWRs, as providing for long-term cost responsibility assignments for RTEP projects to Linden," the commission said. "As PSEG itself acknowledged, Linden has the right unilaterally to terminate the existing ISA, including its firm TWRs, at any time."
Who will be allocated the costs previously assigned to Linden and HTP for the BLC project going forward is unclear. With FERC's orders, the grid operator "will have to recalculate the flows to determine beneficiaries," PJM spokesman Ray Dotter said in an email.
PSEG did not respond to a request for comment.
Jasmin Melvin is a reporter for S&P Global Platts, which, like S&P Global Market Intelligence, is owned by S&P Global Inc.
