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Stakeholders to FERC: Put to rest long-running dispute over allocation of loop-flow fix costs

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Stakeholders to FERC: Put to rest long-running dispute over allocation of loop-flow fix costs

Thetime has come for FERC to issue a final ruling on an administrative law judge'smore than three-year-old initial decision finding that the cannot assign the costs of phase angle regulators, or PARs, installed on itsown system to the New York ISOand the PJM Interconnection LLCwithout their consent, stakeholders recently told the commission.

Accordingto the New York Department of Public Service, consumers in that state have paidalmost $15 million for upgrades physically located in MISO even though FERCJudge Steven Sterner in December 2012 found that allocating the cost of PARsinstalled on the transmission system of MISO member and subsidiaryInternational Transmission Co.to NYISO and PJM is unjust, unreasonable and unduly discriminatory.

"Itis in the interest of all parties to the ITC PARs proceedings for thecommission to act on the initial decision," the New York Public ServiceCommission said. "Regardlessof how the commission decides, it is likely that an appeal will be taken. Theongoing delay thus deprives all affected parties of a final resolution andcertainty concerning this controversy."

ThePARs at the Bunce Creek station on the Michigan-Ontario border are designed toensure that power flows around Lake Erie over its scheduled route rather thanover the path of least resistance. In October 2010, MISO and ITC proposed toallocate 30.9% and 19.5% of the PARs revenue requirement to NYISO and PJM,respectively, based on the contention that those grid operators contribute topersistent loop flow — the difference between scheduled and actual flow on apath or interface — around Lake Erie and would benefit from its mitigation.

Thatproposal set off a firestormof controversy, with many protesters arguing that it raised broad policy issuesby seeking to impose costs on entities in other regions unilaterally andwithout the support of any contract or agreement. In a December 2010 order,FERC accepted theproposal, subject to refund, and set the matter for a trial-type evidentiaryhearing.

Almosttwo years later, Sterner in a 374-page initial decision that the cost of the PARscannot be passed on to PJM or NYISO because MISO does not have a customer orcontractual relationship with either grid operator that would allow it to doso. Moreover, the judge found that the cost allocation proposal "offeredno evidence of multi-regional benefits of the ITC PARs" and "violatespostage stamp rate and sunken cost recovery policies" because the recordshows that the PARs were constructed to benefit local ITC customers.

Nevertheless,PJM told FERC in an April 27 filing that it continues to bill its market participantsapproximately $200,000 each month — a total of more than $9 million since 2012— to pay for the PARs "pending final commission decision" on thematter. Like the NYPSC, PJM asked the commission to quickly confirm that MISOcannot unilaterally allocate PARs costs to other regions and order that thePARs payments made to date be refunded in full.

TheNew York transmission owners similarly pressed FERC to affirm Sterner'sfindings, arguing that this "should be an easy case for the commission torule upon."

FERC'sfailure to decide a rate case even though the record has been complete for morethan three years is inconsistent with the agency's duty under the Federal PowerAct to rule "as speedily as possible," the New York transmissionowners said. Moreover, they argued that requiring consumers to pay unjust,unreasonable and unduly discriminatory rates for over five years isinconsistent with the agency's statutory obligation under the AdministrativeProcedure Act to correct the problem "within a reasonable time."

"Tothe contrary, courts measure the timeliness of agency decision-making undertheir statutory mandates 'in weeks or months, not years,' and have found asix-year delay by this commission to be 'nothing less than egregious,'"the New York transmission owners said. "The commission's delay of morethan five years to resolve this case is at the outer bounds of any reasonabletimeline, and is the kind of delay that courts have criticized because it 'sapsthe public confidence in an agency's ability to discharge its responsibilitiesand creates uncertainty for the parties.'" (ER11-1844)