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Transmission developers protest PJM plan for valuing new efficiency projects

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Transmission developers protest PJM plan for valuing new efficiency projects

The PJM Interconnection's recently proposed method for calculating the costs and benefits of competing transmission projects will bias development toward incumbent transmission owners and favor smaller, more incremental efficiency projects, two transmission developers told the Federal Energy Regulatory Commission.

FERC should therefore reject PJM's proposal as unjust, unreasonable and discriminatory, ITC Holdings Corp. subsidiary ITC Mid-Atlantic Development LLC and NextEra Energy Transmission LLC said in an Oct. 31 protest filed with the commission.

"The proposed reforms will serve only to further disadvantage non-incumbent transmission developers in PJM's planning process, and impede PJM in its ability to identify and select more efficient and cost-effective transmission solutions, particularly larger transmission projects which can deliver increased economies of scale and associated benefits to PJM customers," the companies said.

On Oct. 10, PJM proposed to cap the period for calculating the benefit-to-cost ratio of new projects to 15 years beyond the year the project is included in PJM's regional transmission expansion plan, or RTEP. In doing so, PJM hoped to level the playing field for evaluating project proposals with different in-service dates and ensure analysis of competing proposals aligns with PJM's 15-year planning horizon.

ITC and NextEra said the proposal would discriminate against projects with later in-service dates by not counting those projects' benefits during the RTEP years during which the project is not in service. The companies said a "truly comparable" methodology would be PJM's current one, which measures the benefits of each transmission project over the first 15 years of its useful life.

The companies also said PJM's proposal would discriminate against nonincumbent developers of larger, more complex projects. Under PJM's transmission planning processes, projects that improve, add to or replace an existing transmission facility are automatically assigned to the incumbent transmission owner. With nonincumbent developers shut out of such projects, they often propose bigger projects that cannot be completed within the same time frame as more modest transmission owner upgrades, the protest said.

"By imposing a separate and inequitable benefit analysis on projects with later in-service dates, PJM's proposal implicitly discriminates against the non-incumbent transmission developers who most often propose these types of more broadly-beneficial, larger-scale transmission solutions," ITC and NextEra said.

The companies lastly said PJM's rationale for the proposal was unsupported, including because the grid operator had not shown that benefit period "gaming" was pervasive and because no barrier exists to comparing cost-benefit ratios for different 15-year periods.

The protest against PJM's proposal coincides with complaints that FERC's Order 1000 to spur regional and interregional transmission planning may not do enough to encourage competition from nonincumbent developers. In a recent study, The Brattle Group found that projects by nonincumbent parties often cost substantially less than initial estimates, while incumbent utilities' projects averaged well above initial estimates. (FERC docket ER19-80)