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FERC signs off on plan to integrate Ohio Valley Electric into PJM

Despite stakeholders' worries about how potential upgrade costs for Ohio Valley Electric Corp.'s assets will be allocated if the utility is allowed to join the PJM Interconnection, the Federal Energy Regulatory Commission recently approved the move.

"We note that PJM's studies did not identify any upgrades as necessary at this time; thus, protesters' concerns are speculative," FERC said.

The Ohio Valley Electric Corp.'s, or OVEC's, decision to transfer operational control of its transmission assets to PJM met with protests stemming largely from the fact that the utility serves less than 45 MW of load and owns two coal-fired plants that have been operating since 1955. The OVEC transmission system comprises a network of 705 circuit miles of 345-kV transmission lines.

The majority of the output from both of OVEC's generating facilities — the 1,300-MW Clifty Creek Generating Station along the Ohio River in Jefferson County, Ind., and the 1,086-MW Kyger Creek Generating Station on the Ohio River in Gallia County, Ohio — is pseudo-tied into PJM, and the utility is an affiliate member of that regional transmission organization. OVEC sells the power output of those facilities at cost to its eight electric utility and cooperative owners, the largest of which are American Electric Power Co. Inc., Buckeye Power Inc. and Duke Energy Corp. subsidiary Duke Energy Ohio Inc., with roughly 40%, 18% and 9% respective equity interests.

In October 2017, PJM and OVEC entered into an agreement to expand the grid operator's footprint to include that utility, and together they asked FERC the following December to approve certain tariff changes aimed at facilitating the move. That prompted protests from certain stakeholders insisting that the filing was deficient because it failed to address cost allocation for needed upgrades or demonstrate that the benefits of OVEC's integration into PJM outweigh the associated costs to wholesale transmission customers or consumers.

In its Feb. 13 order approving the integration plan effective March 1, FERC disagreed that a cost-benefit analysis was needed.

"In previous orders addressing proposed integrations, the commission has not required a cost-benefit test as a prerequisite for integrating into PJM, except in the very limited circumstance when the applicant proposed to switch the regional transmission organization to which the applicant belonged," FERC said.

The commission also reiterated its earlier findings that the benefits consumers reap from a utility's RTO membership outweigh any associated integration costs. "These benefits include, but are not limited to: increased efficiency for transmission planning and generation investment; reduced transaction costs; improved grid reliability; limited discriminatory transmission practices; and improved market operations," FERC said.

As for the issue of who will pay for any upgrades needed to maintain reliability on OVEC's system in the future, FERC said any transmission projects that are deemed necessary in the OVEC zone will be evaluated and any associated cost allocated, in accordance with the methodologies set out in an existing intercompany power agreement and PJM's commission-approved tariff. If any costs subsequently are assigned to the OVEC zone, they will continue to be borne by OVEC's owners based on their percentage ownership share of the utility, consistent with the terms of the intercompany agreement. (FERC docket ER18-459, ER18-460)