Commissioner Richard Glick Statement
November 19, 2020
Docket No. ER20-841-001
Order: 
E-7

I support the goal of mitigating the critical facilities identified pursuant to Reliability Standard CIP-014-2.  As the Department of Energy explained, protecting against physical and cyber threats to critical infrastructure is a national priority and the Commission itself has recognized that “[p]hysical attacks to the Bulk-Power System can adversely impact the reliable operation of the Bulk-Power System, resulting in instability, uncontrolled separation, or cascading failures.”[1]  CIP-014-2 critical transmission stations and substations are the most critical facilities on the bulk power system,[2] meaning that mitigating the risk posed by a threat to those facilities can have significant regional benefits by protecting against widespread instability, uncontrolled separation, and the successive loss of system elements.[3]

But that is also why I continue to dissent in part from the Commission’s conclusions in this proceeding.[4]  These projects, by definition, have the potential to benefit the region as a whole, which means that they should be planned by PJM—the entity that plans for the region’s needs—and that their costs should be allocated regionally to all entities that benefit.  Unfortunately, because the Commission wedges these projects into the Supplemental Projects category, they will neither be regionally planned nor will their costs be regionally allocated.[5]  Because the costs of these projects will be allocated only to customers in the zone in which each project is located, rather than in a manner roughly commensurate with their benefits, I do not believe that PJM and the Transmission Owners’ proposal is just and reasonable and not unduly discriminatory or preferential.[6]

As an initial matter, I have some sympathy for the pickle that PJM and the Transmission Owners find themselves in when trying to develop these projects in a manner that is consistent with the Commission’s rules and regulations governing transmission planning.  For example, the Commission has required that transmission planning processes be built on a foundation of openness, transparency, and coordination among interested parties.[7]  But those values lose some of their luster when it comes to planning transmission projects to mitigate the risk posed by stations and substations that are so critical to the system that they have the potential to cause cascading outages throughout the region.  Information about—and, indeed, the identity of—those facilities must be kept non-public to avoid serious risks to the public interest.  That makes the usual transmission planning processes a bad fit for these projects.

In addition, Order No. 1000 went to great lengths to ensure that the costs of projects that provide regional benefits are shared equitably by the beneficiaries throughout the region.  But one of the consequences of a project being regionally planned and having its costs regionally allocated is that the project must generally be open to competition.  Whatever you think of competition—and I recognize the widely differing views on that score—it seems a bad fit with projects designed to alleviate critical constraints whose identity most absolutely remain secret.

Presumably with those tensions in mind, the PJM Transmission Owners have proposed to develop these projects as Supplemental Projects, which are planned by an individual Transmission Owner, minimally reviewed by PJM, and allocated exclusively to that Transmission Owner’s zone.[8]  And while that may help to ensure that confidential information stays that way, it creates an irreconcilable tension with the cost-causation principle we must follow.  The United States Court of Appeals for the District of Columbia Circuit has explained that “the Commission generally may not single out a party for the full cost of a project, or even most of it, when the benefits of the project are diffuse.”[9]  And yet that seems to be the most likely outcome of today’s order.  Again, these projects provide regional benefits by eliminating critical stations and substations that, if compromised, have the potential to cause cascading outages and other widespread reliability concerns on PJM’s system.[10]  As a result, their costs must be allocated regionally to entities that stand to benefit from the elimination of that threat.  By making these projects Supplemental Projects, today’s order ensures that will not be the case because the costs of each project will be allocated entirely to the zone in which it is located.  Under those circumstances, we cannot find that the projects’ “burden is matched with [their] benefit.”[11]

In my view, the better course of action would have been to plan and allocate the costs of these projects regionally, but to create whatever procedural safeguards are appropriate in light of the need to keep these critical stations and substations confidential, possibly even including an exemption from competition.  I recognize that the Commission has a history of taking a rather doctrinaire approach to Order No. 1000’s requirements and that, as a result, PJM and/or the Transmission Owners may well have hesitated to seek an exemption from competition.  But, in my view, it would be far better to apply our transmission planning rules more flexibly than to take an approach so strict that we elicit proposals that, at least on their face, seem to violate the cost-causation principle.

For these reasons, I respectfully dissent in part.

 

________________________

 


[1] Department of Energy, Comments, Docket No. ER20-841-000, at 1-2 (filed Mar. 13, 2020) (citing Reliability Standards for Physical Security Measures, Order Directing Filing of Standards, 146 FERC ¶ 61,166, at P 5 (2014)).

 

[2] PJM Transmission Owners, Filing, Docket No. ER20-841-000, at 8 (filed Jan. 17, 2020).

[3] PJM Interconnection, L.L.C., Comments, Docket No. ER20-841-000, at 2 (filed Feb. 5, 2020) (PJM Comments).

[4] Appalachian Power Co., 170 FERC ¶ 61,196 (2020) (March 2020 Order) (Glick, Comm’r, dissenting in part).

[5] Appalachian Power Co., 173 FERC ¶ 61,157, at P 8 (2020).

[6] See Joint Parties Request for Rehearing at 24-25 (“The cost causation principle requires that the cost of transmission facilities must be allocated in a manner that is at least roughly commensurate with estimated benefits. . . . The CIP-014 Mitigation Projects are high-voltage, regionally beneficial projects.”).  The Joint Parties include Old Dominion Electric Cooperative, American Municipal Power, Inc., LSP Transmission Holdings, II, LLC and Central Transmission, LLC, the New Jersey Board of Public Utilities, Delaware Division of the Public Advocate, Office of the People’s Counsel for the District of Columbia, New Jersey Division of Rate Counsel, Maryland Office of People’s Counsel, Citizens Utility Board, Pennsylvania Office of Consumer Advocate, and the PJM Industrial Customer Coalition.

[7] See Monongahela Power Co., 164 FERC ¶ 61,217, at P 5 (2018) (discussing Preventing Undue Discrimination & Preference in Transmission Serv., Order No. 890, 118 FERC ¶ 61,119 (2007), reh’g, Order No. 890-A, 121 FERC ¶ 61,297 (2007), reh’g, Order No. 890-B, 123 FERC ¶ 61,299 (2008), reh’g, Order No. 890-C, 126 FERC ¶ 61,228, order on clarification, Order No. 890-D, 129 FERC ¶ 61,126 (2009) (Order No. 890)); id. P 23 (explaining that the reforms in Transmission Planning & Cost Allocation by Transmission Owning & Operating Pub. Utils., Order No. 1000, 136 FERC ¶ 61,051 (2011), reh’g, Order No. 1000-A, 139 FERC ¶ 61,132, reh’g and clarification, Order No. 1000-B, 141 FERC ¶ 61,044 (2012), aff’d sub nom. S.C. Pub. Serv. Auth. v. FERC, 762 F.3d 41 (D.C. Cir. 2014) (Order No. 1000), were built on the foundation laid by Order No. 890).

[8] March 2020 Order, 170 FERC ¶ 61,196 at PP 3-4, 6, 10.

[9] BNP Paribas Energy Trading GP v. FERC, 743 F.3d 264, 268 (D.C. Cir. 2014); see id. at 268-69 (“[T]he cost causation principle itself manifests a kind of equity.  This is most obvious when we frame the principle (as we and the Commission often do) as a matter of making sure that burden is matched with benefit.” (citing Midwest ISO Transmission Owners v. FERC, 373 F.3d 1361, 1368 (D.C. Cir. 2004) and Se. Michigan Gas Co. v. FERC, 133 F.3d 34, 41 (D.C. Cir. 1998))).

[10] Cf. PJM Comments at 2 (contending that it “is in the public interest . . . to mitigate the risk associated with the extended loss of a significant amount of load in the event of a loss of the subject CIP-14 facilities”); Joint Parties Request for Rehearing at 24-25 (explaining that these projects are “high-voltage, regionally beneficial projects”).

[11] Old Dominion Elec. Coop. v. FERC, 898 F.3d 1254, 1255 (D.C. Cir. 2018) (quoting BNP Paribas, 743 F.3d at 268).

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