By Rich Heidorn Jr.

FERC on Friday approved PJM’s proposed rules on how the RTO will evaluate voluntary cost commitment proposals on competitive transmission projects (ER19-2915).

The Operating Agreement changes, which resulted from stakeholder-drafted motions at the Markets and Reliability Committee, require PJM to evaluate projects submitted in competitive proposal windows on multiple criteria, including “cost effectiveness.” (See PJM TOs Wary of Cost Containment Rules.)

The revisions clarify that PJM may not require developers to submit cost containments and that those that are voluntarily proposed are binding.

PJM would evaluate “the quality and effectiveness” of provisions that limit project construction costs, total return on equity (ROE) including incentive adders or capital structure.

The RTO will submit to the Transmission Expansion Advisory Committee (TEAC) an analysis comparing the risks to be borne by ratepayers as a result of developers’ binding cost commitments or non-binding cost estimates.

In approving the rules, the commission rejected the objections of transmission owners, which argued the revisions did not provide enough details on how PJM will conduct its comparative analysis.

“We find that PJM’s filing is just and reasonable because it may assist PJM in its selection of the more efficient or cost-effective transmission solution and provides additional transparency of PJM’s evaluation of competing proposals,” the commission said. It noted that PJM is developing implementation details for the comparative analysis in Manual 14F.

“The proposed revisions provide reasonable flexibility both for developers to decide how to craft their voluntary cost commitment proposals and for PJM to evaluate and select the more efficient or cost-effective transmission solution. Moreover, the proposal provides for transparency, allowing stakeholders the opportunity to review any particular analysis conducted by PJM and raise any concerns via the TEAC process.”

FERC disagreed with arguments that the filing infringed on the rights of PJM transmission owners and nonincumbent transmission developers to exclusively make Federal Power Act Section 205 filings concerning transmission rates, revenue requirements and cost recovery.

It also rejected contentions that PJM will be determining whether the rate design elements under a proposal will result in just and reasonable rates. “PJM is proposing for the commission to determine, in reviewing the nonconforming DEA [designated entity agreement between PJM and a selected developer] with the cost commitment provision, whether any rate design component included in that provision is just and reasonable.”