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FERC tosses NJ complaint seeking payout from New York for $1.2B project

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FERC tosses NJ complaint seeking payout from New York for $1.2B project

The Federal Energy Regulatory Commission shot down the New Jersey Board of Public Utilities' push to require that New Yorkers pay more for the $1.2 billion Bergen-Linden Corridor transmission project, finding the state regulator's arguments unpersuasive and denying its complaint.

Filed by the board, or NJBPU, in December 2017, the complaint at issue was one of the latest developments in an ongoing saga about who should pay for the Bergen-Linden Corridor, or BLC, project, which aims to remedy short circuit and thermal violations on Public Service Electric and Gas Co.'s, or PSEG's, system.

The PJM Interconnection originally spread the cost of the project among Consolidated Edison Co. of New York Inc., Linden VFT LLC, Hudson Transmission Partners LLC and PSEG. PSEG initially was slated to pay less than 6% of the project costs, according to the complaint. But one by one, the other parties got out of their obligations to pay for the project, leaving PSEG, and subsequently New Jersey ratepayers, to foot much more of the bill.

In its complaint, the NJBPU argued that the BLC project, though physically located in New Jersey, enables power flows on the PJM/New York ISO interface that provide benefits to New York. Yet NYISO has not compensated PJM, and more specifically New Jersey ratepayers, for these benefits, the complaint said.

The NJBPU contended that because the companies responsible for the power transfers to New York that drove the need for the BLC project terminated or amended their transmission contracts, they — and in turn New York ratepayers — have skirted their responsibilities to pay for a portion of the project in violation of the "beneficiary-pays" principle underlying FERC Order 1000. That aspect of the commission's transmission planning and cost allocation rule requires transmission project costs to be allocated in a manner that is at least roughly commensurate with benefits.

Cost allocation allowed solely within planning region

In rejecting the complaint, FERC explained that one of the regional cost allocation principles of Order 1000 stipulates that a project's costs must be confined to the planning region in which it was selected as part of a regional transmission plan and that costs cannot be assigned to another planning region unless that region voluntarily agrees to assume those costs.

Here, the BLC project was planned by PJM, and the NYISO did not make any voluntary commitments to share in the project's costs. Thus, "it is just and reasonable for the costs of the project to be allocated solely within" PJM, according to FERC's May 24 order.

FERC similarly rejected the NJBPU's argument that the joint operating agreement, or JOA, between PJM and the NYISO includes a mutual benefits provision that implies both regions should pay for their share of benefits from the BLC project. The JOA does not address mutual benefits derived from transmission projects approved by just one of the grid operators, but instead "explicitly preclude[s] involuntary interregional cost allocation of transmission projects not selected in both NYISO and PJM's regional transmission plans," FERC said.

The order added that "even if mutual benefits can be 'implied' as resulting from the [BLC] project (as the New Jersey Board argues), the JOA specifically states that 'PJM and NYISO shall not charge one another for such [mutual benefits].'"

FERC again backs PJM cost allocation practices

The NJBPU also challenged the cost allocation procedures in PJM's tariff that allowed ConEd and the merchant transmission facilities Linden and Hudson Transmission Partners to have their cost responsibility assignments zeroed out.

ConEd in April 2017 ended its 1,000-MW wheel across New Jersey, eliminating its responsibility to pay a share of the BLC project. The following December, Hudson Transmission Partners and Linden won FERC approval to downgrade their service from firm transmission withdrawal rights to less-valuable, nonfirm transmission withdrawal rights, a move that allows them to avoid paying their allocated share of the project as well.

FERC, reiterating its position in related proceedings, said that because PJM "no longer [has] to plan and develop its system to guarantee non-interruptible service over these lines," the grid operator's tariff "appropriately does not directly allocate transmission enhancement charges." (FERC docket EL18-54)

Jasmin Melvin is a reporter for S&P Global Platts, which, like S&P Global Market Intelligence, is owned by S&P Global Inc.