By Michael Brooks

FERC on Thursday rejected requests for rehearing of its order directing PJM to allow two merchant transmission operators to convert some of their firm transmission withdrawal rights (TWRs) to non-firm.

The New Jersey Board of Public Utilities and Public Service Electric and Gas had challenged the commission’s December 2017 finding that the RTO and PSE&G’s interconnection service agreements (ISAs) with Hudson Transmission Partners (HTP) (EL17-84) and Linden VFT (EL17-90) were unjust because they did not permit the conversions. (See NJ Merchant Tx Operators Win Relief on Upgrade Costs.)

The transmission companies own facilities that carried power into New York City as part of the “Con Ed-PSEG wheel,” in which 1,000 MW were exported from upstate New York to PJM through PSE&G’s facilities in northern New Jersey, and then exported to the city. Consolidated Edison and PSE&G canceled the agreement in April 2017. HTP and Linden had sought the conversions to relieve themselves of cost allocations under PJM’s Regional Transmission Expansion Plan.

PSE&G argued that FERC erred in applying the just-and-reasonable standard of the Federal Power Act to the ISAs, rather than the public-interest standard of the Mobile-Sierra doctrine, which presumes the rates established through a negotiated contract are just and reasonable unless they’re found to harm the public interest. The commission had found the ISAs’ terms to be generally applicable to all PJM participants — and thus excluded from Mobile-Sierra — but the utility said the TWRs and provisions in the ISAs were unique, not pro forma.

In rejecting PSE&G’s argument, FERC pointed to the fact that Section 232.3 of PJM’s Tariff governs the conditions under which a transmission interconnection customer receives firm and non-firm TWRs. “Because PJM determined the TWRs available to HTP [and Linden] following [studies] conducted under terms and conditions that are generally applicable (even though the results of that study were specific to [the companies]), we regard those terms as generally applicable and therefore subject to the ‘just and reasonable’ standard, rather than the Mobile-Sierra presumption,” the commission said.

PSE&G also argued that the commission erred in finding no operational or reliability rationale preventing it from directing that PJM convert the TWRs and that it ignored the utility’s affidavit that raised concerns about the operational, reliability and LMP impacts from the conversions, rather relying on “one sentence written by an attorney in a PJM pleading, unsupported by any independent evidence or expert testimony.”

“We disagree with these PSEG arguments,” FERC said. It “reasonably relied on statements from PJM that reducing [the] TWRs from firm to non-firm presented no operational or reliability risks to PJM’s system.” The commission also noted that the utility’s affidavit relied on NYISO’s 2016 Reliability Needs Assessment, which made no reference to the TWRs in question.

The New Jersey BPU argued that FERC failed to consider whether the conversions would result in preferential rates to NYISO customers. But the commission said that argument was outside the scope of the proceeding, as Schedule 12 of the PJM Tariff calculates merchant transmission facilities’ cost responsibilities for RTEP projects based on their firm TWRs.