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Commissioner Cheryl A. LaFleur Statement
February 12, 2016
Docket No. ER15-1387-001 PDF
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PJM’s Rehearing Request and Proposed Tariff Revisions

Today’s order grants rehearing of the Commission’s denial of the PJM Transmission Owners’ proposal to allocate 100 percent of the costs of transmission projects included in the PJM Regional Transmission Expansion Plan solely to address Form 715 local transmission owner planning criteria to the zone in which the criteria apply. I generally agree with today’s decision to grant rehearing, based on the expanded record developed through the technical conference and additional briefing. However, I would condition acceptance of the PJM Transmission Owners’ filing on the preservation of the current regional cost allocation method for certain high voltage projects, even if those projects are selected solely to address local planning criteria.

“Cost allocation for high-voltage transmission projects in PJM has been a contentious issue for years1 and the subject of two of my prior dissents.2 In 2012, as part of their Order No. 1000 regional compliance proposal, the PJM Transmission Owners proposed, and the Commission approved, a cost allocation methodology for double-circuit 345 kilovolt (kV) and 500 kV and above transmission projects that allocates 50 percent of the projects’ costs on a postage stamp basis, and 50 percent through a solution-based DFAX analysis.3 In approving the PJM Transmission Owners’ proposal, the Commission found that these “high-voltage transmission facilities have significant regional benefits that accrue to all members of the PJM transmission system,”4 a finding that was not limited by the type of transmission need (e.g., local planning criteria) underlying the project.

“In this case, the PJM Transmission Owners provide data demonstrating that the overwhelming majority of projects approved to address local planning criteria are already allocated solely to the zone in which they are located through the DFAX methodology, and therefore propose to automatically allocate the costs of all such projects to a particular zone, without the potential for regional cost allocation. However, by their own admission, the overwhelming majority of these projects are also lower voltage facilities.5 They therefore fail to demonstrate that this dataset is representative of high-voltage projects that the PJM Transmission Owners previously argued, and the Commission previously found, confer regional benefits justifying the application of the 50/50 regional cost allocation methodology.

“I continue to believe that these high-voltage projects in PJM, even if developed solely to address local planning criteria, provide regional benefits that warrant some regional cost allocation. I also believe the currently-effective 50/50 methodology reasonably balances the near-term benefits identified through the DFAX analysis with a recognition of the high-voltage projects’ broader regional benefits.6 Without a more targeted record, I am not persuaded that the PJM Transmission Owners have rebutted the Commission’s prior findings regarding the per se regional benefits of these high-voltage transmission projects to the PJM region. I therefore would condition approval of their filing on the preservation of the Commission-approved, bright-line thresholds for regional cost allocation for high-voltage projects, even if those projects are included in the regional transmission plan solely to address local planning criteria. 7

“More generally, Order No. 1000 was intended to ensure just and reasonable transmission rates through the improvement and expansion of regional planning and the introduction of competition. Even if crafted within the letter of Order No. 1000 and the Commission's compliance orders, proposals to limit access to existing regional cost allocation and competitive bidding processes are, in my view, inconsistent with the rule’s underlying goals. As we continue to monitor Order No. 1000 implementation, we should be open to directing regulatory changes to align the application of the rule with its goals. I will continue to review proposals to revise regions’ Order No. 1000 planning processes to ensure that, where possible and consistent with its letter, the spirit of Order No. 1000 is also upheld.

“Accordingly, I respectfully dissent in part.”




                                               

    1 See, e.g., PJM Interconnection, L.L.C., Opinion No. 494, 119 FERC ¶ 61,063 (2007), order on reh’g, Opinion No. 494-A, 122 FERC ¶ 61,082 (2008), aff’d in part and remanded in part, Illinois Commerce Comm’n v. FERC, 576 F.3d 470 (7th Cir. 2009), order on remand, 138 FERC ¶ 61,230 (2012) (First Order on Remand), order on reh’g, 142 FERC ¶ 61,216 (2013) (Rehearing Order on Remand), remanded, Illinois Commerce Comm’n, et al. v. FERC, 756 F.3d 556 (7th Cir. 2014), order establishing hearing and settlement judge procedures, 149 FERC ¶ 61,233 (2014).
    2 First Order on Remand, 138 FERC ¶ 61,230 (LaFleur, Comm’r, dissenting); Rehearing Order on Remand, 142 FERC ¶ 61,216 (LaFleur, Comm’r, dissenting).
    3PJM Interconnection, L.L.C., 142 FERC ¶ 61,214, at PP 412-426 (2013).
    4Id. P 413; see also id. P 414 (“In supporting the postage-stamp component, the PJM Transmission Owners state, and we agree, that an advantage of this method is that it captures the full spectrum of benefits associated with high-voltage facilities, including difficult to quantify regional benefits, such as improved reliability, reduced congestion, reduced power losses, greater carrying capacity, reduced operating reserve requirements, and improved access to generation. The PJM Transmission Owners also note, and we also agree, that this postage stamp method accounts for changes in system use over the lifetime of a high-voltage facility.”).
    5 E.g., PJM Transmission Owners March 26, 2015 Transmittal Letter at 2 (“Historically, such Local Reliability Projects have been almost exclusively Lower Voltage Transmission Projects as defined by the PJM Tariff. . .”).
    6See, e.g., PJM Interconnection, L.L.C., 142 FERC ¶ 61,214 at P 420.
    7While I dissent in part, I do not believe that the decision in this case is simple, in no small part due to the Midcontinent Independent System Operator, Inc. precedent relied upon by the PJM Transmission Owners to justify their proposal. I also recognize that the design of Order No. 1000 planning processes in varying regions, with widely divergent planning structures, has resulted in a complex landscape that can sometimes appear difficult to reconcile.