PJM has failed to comply with FERC’s conditions for exempting “immediate need” transmission projects from competition under Order 1000 and must increase the transparency of its practices, the commission ruled Thursday (EL19-91).

Separately, the commission terminated Section 206 investigations into ISO-NE (EL19-90) and SPP (EL19-92), concluding they were in compliance with the exemption rules.

FERC opened investigations into the three RTOs’ practices in October 2018, questioning whether they were thwarting Order 1000’s competition mandate by abusing the immediate need exemption. (See FERC to Probe Order 1000 Competition Exemptions.)

Order 1000 required RTOs to eliminate any federal right of first refusal (ROFR) from commission-jurisdictional tariffs and agreements but allowed a ROFR for reliability projects whose needs are so urgent that there is insufficient time to hold a competitive proposal window.

Five Criteria

Saying the exemption should be used only in “certain limited circumstances,” the commission set five criteria to limit the RTOs’ discretion for applying it.

In Thursday’s order, FERC concluded PJM was complying with only two of the criteria, ordering it to make Operating Agreement changes regarding the other three within 60 days.

The commission said PJM complied with the first criterion that projects exempted from competition must be needed in three years or less to solve reliability criteria violations. PJM also complied with a requirement to post annually a list of immediate need reliability projects to be built by incumbent transmission owners.

But FERC said it agreed with stakeholders’ comments that PJM’s explanations “do not provide sufficient detail” of the reliability violations and system conditions for which there are time-sensitive needs. “Similarly, we find that PJM generally fails to include any discussion about system conditions related to the reliability violations in its TEAC [Transmission Expansion Advisory Committee] presentation materials. For example, we find one-line labels (e.g., ‘short circuit,’ ‘end-of-life,’ ‘overstressed’) identifying the reliability violation driving the immediate need reliability project insufficient to comply.”

FERC said it was not requiring “an exhaustive description” but said PJM “may provide details regarding the specifics of the violation; why the violation arose; when it first occurred; the implications of the violation in terms of generation, load, congestion, etc.; the severity of the problem; and expectations for the violation’s severity in the future (i.e., will the problem get worse or have a cascading effect at a later point in time).”

The commission also cited PJM for failing to post a “full and supported written description” on any decision to award a project to an incumbent transmission owner, including an explanation of other transmission or non-transmission options that the RTO considered and the cause of the need and why it was not identified earlier.

‘Little Insight’

“The TEAC presentation materials provide little insight as to PJM’s reasoning,” the commission said. ” … In addition, we find that PJM does not provide in its presentation materials an explanation for its determination that there was insufficient time to open a full or shortened proposal window.”

Going forward, FERC said, PJM must “expound on its description to support the designation of its immediate need reliability projects, specifically addressing the time-sensitive nature of the need, why the incumbent transmission owner was selected, alternatives considered and why the need was not identified earlier. … PJM could also explain the urgency of the violation and compare it to the typical timeline of a standard or shortened competitive proposal window, explaining how the proposal window would delay the solution further.”

Although its prior order did not specify how much time PJM should allow stakeholders to comment on project descriptions, FERC said the RTO’s practice of posting materials three days before meetings at which the projects are to be discussed “is not sufficient.” It noted that the RTO gives stakeholders 10 days to review materials for supplemental transmission projects under its Attachment M-3 process.

“As a result, we direct PJM to submit a compliance filing to designate a specific time period greater than three days for stakeholders to provide comments in response to the project description,” it said.

PJM also failed to provide transparency in addressing stakeholder questions about immediate need projects, FERC said, ordering the RTO to post on its website all stakeholder comments and PJM answers, “whether provided in writing or submitted verbally at TEAC meetings.”

The commission also said PJM must make it easier for stakeholders to locate information on immediate need projects, noting that the RTO has put such information in more than 60 locations on its website. “While we do not find that PJM must post all immediate need reliability project information to a single webpage to meet the transparency requirements … we direct PJM to post all information regarding immediate need reliability projects in a manner that is more easily accessible to stakeholders than the current approach.”

‘Reasonable Balance’

The commission rejected other requested relief, including LS Power’s request to eliminate the immediate need exemption and the New Jersey Board of Public Utilities’ request that the commission hold a technical conference to determine whether it should continue to allow other exemptions from competition such as those for lower voltage projects and substation equipment.

The commission noted PJM’s statement that it is working to reduce the use of immediate need designations by improving the efficacy of its five-year model. PJM said improved modeling and testing has already begun to reduce the use of immediate need designations. In 2019, PJM said that it reported only eight immediate need reliability projects — totaling 11 baseline upgrades.

FERC also declined a request to shorten the three-year time threshold for immediate need projects, saying it “continues to strike a reasonable balance” between reliability and competition.

In addition, it rejected LS Power’s request to exclude “end-of-life” projects from the immediate need category. LS Power said EOL projects represent a large portion of immediate need designations.

The commission also refused LS Power’s request to require transmission owners to provide PJM with information on EOL projects seven years in advance and American Municipal Power’s call for more frequent and timely submission of information by TOs on load changes to aid system modeling.

“We make this determination because such a requirement is outside the scope of the proceeding. We expect that, as PJM has committed to do, PJM will continue to improve its processes, to both timely receive the relevant system information from transmission owners and timely incorporate this information into its planning models, to potentially reduce reliance on the immediate need reliability project exemption,” FERC said. (See related story, PJM Stakeholders Pass End-of-Life Proposal.)

SPP, ISO-NE Cleared

FERC terminated the Section 206 investigations into SPP and ISO-NE, saying they had not produced evidence that the RTOs were implementing the exemption “in a manner that is inconsistent with or more expansive than the commission directed.” It noted that no stakeholders had accused either RTO of violating their tariffs.

SPP said that it had designated only five transmission projects as “short-term reliability projects” out of 144 projects identified in its Integrated Transmission Planning studies since study year 2016.

The Public Utilities Regulatory Authority had argued that ISO-NE’s need-by dates are artificially early because the RTO performs its needs assessments under assumptions more conservative than those used by day-to-day operations. But FERC said ISO-NE had “sufficiently justified” its approach. The RTO explained that its operators do not have to respect certain contingencies if they don’t have impacts outside of the local area where they occur. It also said the operators have access to a wider range of equipment ratings and system operating conditions than are allowed in transmission planning.

Several New England state agencies, including the attorneys general for Massachusetts and Connecticut and the Maine Public Advocate, said FERC should find ISO-NE’s exemption unjust and unreasonable because the region was the only RTO that had not completed a competitive transmission procurement. “Although ISO-NE’s lack of a competitive solicitation was one reason the commission instituted this proceeding, this outcome is not a sufficient reason to find the relevant Tariff provisions unjust and unreasonable,” FERC said. (On June 8, the RTO announced that it would recommend a project by incumbent utilities National Grid and Eversource Energy as the lone finalist in its first competitive solicitation.)

The commission also rejected arguments regarding the efficiency of New England’s transmission spending, its accommodation of non-transmission solutions and its “reactive” planning process as beyond the scope of the proceeding.