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FERC OKs certain cost allocations for PJM transmission project

Over objections from merchant transmission facilities, the Federal Energy Regulatory Commission upheld its staff's March decision approving cost responsibilities for the Bergen-Linden Corridor regional transmission upgrade project for the first four months of 2017.

In a December 2016 rate filing (ER17-725), the PJM Interconnection proposed adjustments to the load-ratio share allocations for several transmission projects as well as changes to the solution-based distribution factor, or DFAX, cost allocation for three completed components of Public Service Enterprise Group Inc. subsidiary Public Service Electric and Gas Co.'s Bergen-Linden project in New Jersey.

These updated annual cost responsibility assignments for 2017 were overtaken, in part, by a February rate filing that made further adjustments to PJM's cost assignments, effective May 1. But the earlier filing holds for January through April.

In line with a March 29 decision by FERC staff, the commission on November 22 accepted the December 2016 filing, effective Jan. 1, 2017, subject to the outcome of a pending rehearing request tied to a complaint (EL15-67) challenging PJM's solution-based DFAX cost allocation methodology.

The order also denies requests for clarification or rehearing of staff's March order made by Linden VFT and the New York Power Authority.

As the anchor customer of Hudson Transmission Partners' 345-kV undersea line connecting the PJM and New York ISO power markets, NYPA is on the hook for any regional transmission expansion plan charges assessed based on HTP's holdings of firm transmission withdrawal rights.

The December 2016 rate filing included an increase in DFAX cost responsibilities for NYPA of $10.17 million, bringing NYPA's share of the costs for the three Bergen-Linden subprojects to $10.7 million.

NYPA argued that "PJM's filing fails to explain how modeled flows on the system could have changed so significantly since PJM last performed its solution-based DFAX method analysis," and contended that the cost increase was "inconsistent with cost causation principles."

Linden, which owns and operates a transmission line between NYISO and PJM and holds firm transmission withdrawal rights, made similar objections and attacked PJM's use of the solution-based DFAX method to allocate costs. The Bergen-Linden project, it said, "addresses fundamental short circuit issues inherent in the PSEG service territory to which Hudson and Linden are tangentially connected, not an expansion of the grid to increase power flows, which may be more appropriately measured by that methodology."

Arguments beyond scope of proceeding

FERC, however, found these protests to be beyond the scope of the December 2016 rate filing proceeding.

"The protests challenge the cost allocation method in PJM's tariff rather than whether PJM properly applied its tariff," the commission said in the order. "As previously noted, we find that PJM has correctly applied its tariff, and the question of whether the tariff provision regarding cost allocation is just and reasonable is pending before the commission in other proceedings."

FERC in 2016 concluded that the cost allocation methodology used by PJM was just and reasonable, citing the very high percentage of situations where the method proved accurate. Commissioner Cheryl LaFleur dissented, saying she would have initiated a paper hearing to establish an alternative cost-allocation method for projects not suited for solution-based DFAX.

LaFleur issued a separate statement Nov. 22 concurring with FERC's order accepting the updated cost allocations as compliant with the cost allocation methodology PJM has on file but noting her dissent to FERC's order denying the complaint challenging the use of that cost allocation method for the Bergen-Linden project. "As [the Nov. 22] order notes, rehearing of that order is pending before the commission and provides a forum for the commission to address the objections raised in this proceeding," she said.

Of note, both Hudson Transmission and Linden have sought to relinquish their firm transmission withdrawal rights through a service downgrade to free themselves from paying RTEP charges in PJM. Those efforts hit a procedural snag but remain pending before the commission.

PJM's February rate filing (ER17-950), which FERC staff accepted April 25, increased Linden's share of the costs for the Bergen-Linden project to $131.6 million from $9.6 million, a 1,271% jump. Similarly, costs allocated to Hudson Transmission rose 514%, to $634 million from $103.2 million.

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