By Rory D. Sweeney

WILMINGTON, Del. — A controversial proposal to bring cost-containment measures into PJM’s transmission planning cleared its final hurdle in the stakeholder process last week despite a late attempt to block it by CEO Andy Ott.

The proposed Operating Agreement changes have been among the most contentious in recent memory. Originally developed by LS Power, the proposal gained sponsorship from several consumer advocates and PJM’s Independent Market Monitor, withstanding strong opposition from transmission owners. (See Cost Containment Coming to PJM Transmission Bids.)

It was queued up for one final endorsement vote at last week’s Members Committee meeting when Ott took the unusual step of addressing the membership to seek a delay on the vote. “I think this might be the first time I’ve ever done this,” he said.

Ott used his platform to make one final plea to stakeholders that his staff can’t handle much more.

“I think it risks the [Regional Transmission Expansion Plan] getting so complex that it becomes even more burdensome than it is today,” he said. “If you all would just take a step back. My planning staff is not infinite. … We’ll deploy our resources and do the best we can. But I think it’s unreasonable to expect that the next day we should make the baseline process more transparent. … Certainly, we can do things over time, but if you’re saying do things quickly … we cannot do all of this in the same time frame.”

He argued there are other areas in which increased efficiency would provide greater savings than the transmission cost caps. He suggested the Liaison Committee consider the issue.

“I don’t think there has been constructive engagement from all stakeholders,” he said. “I think there’s room to have more constructive engagement.”

Several of the proposal’s supporters responded to Ott’s comments. American Municipal Power’s Ed Tatum said Ott made “good observations” about the need for transparency for end-of-life projects in the RTEP process — a discussion that has been ongoing in the Transmission Replacement Processes Senior Task Force since March 2016. But, he added, “we are not proposing that PJM do the impossible.” He asked that staff “facilitate those [task force] meetings.”

“We think we’re asking for things TOs have already done to justify these discretionary projects to their management; no more, no less,” he said.

“It’s precisely because PJM and CAISO are national leaders on Order 1000 that it’s extremely important to get this right,” said LS Power’s Sharon Segner, who has shepherded the proposal from the beginning.

Susan Bruce, representing the PJM Industrial Customer Coalition, said even a 1% improvement would be “tremendous” and that the comparisons of financial significance might change as more projects become competitively bid instead of awarded to incumbent TOs.

“This will not stop us from demanding improvement in all spheres,” she said. “If I went back to my members and said [the cost-containment proposal] was deferred, they would be very disappointed in that.”

If PJM needs more staff to complete the intent of the proposal, “that’s an investment they’re willing to pay,” she said of her members.

Dominion Energy and Exelon requested and received approval for a friendly amendment to forbid PJM from requiring bidders to include cost-containment measures in their bids. That was immediately followed by a point of order challenge from PPL’s Frank “Chip” Richardson, who noted a section in the OA that required input from the Board of Managers before the MC can vote. He noted that the board hasn’t responded to a letter TOs sent to it more than a month ago to block action on the proposal. Richardson’s motion initiated a parliamentary process requiring that MC Chair Mike Borgatti, of Gabel Associates, determine whether the vote could proceed.

Ott said the board has seen the letter but hasn’t deliberated on it. Because it was sent right after the board held one of its bimonthly meetings, Ott considered whether it was of enough consequence to reconvene the board to discuss it. He decided it was not, he said.

Chris O’Hara, PJM’s legal counsel for the MC, said the board has been briefed on the topic and provided comments to the RTO. Board members attending the MC meeting in addition to Ott were Mark Takahashi and Dean Oskvig. O’Hara said the OA provision noted by Richardson “should not provide a legal impediment to stop the vote today” given his interpretation of the OA language and PJM’s practice since its inception of holding MC votes without the board weighing in beforehand. However, he said the final call was up to Borgatti.

“Don’t worry; the bus tires don’t hurt at all,” Borgatti responded.

Greg Poulos, executive director of the Consumer Advocates of the PJM States, said he was “disappointed” that Richardson waited until the last second to unveil his challenge and suggested that TOs and PJM were playing a “game.”

“I don’t think the conversation is advanced by suggesting there was a surprise,” O’Hara said.

“What I can offer you is that [if you think] this was a backdoor dealing, it was not. This is a real-time issue,” Borgatti said. “I have been advised that Roberts Rules require me to render a decision before we continue the meeting.”

Bob O’Connell of Panda Power Funds announced he would challenge Borgatti’s ruling either way to force a membership vote on the issue and relieve Borgatti of the weight of the decision.

“I don’t believe I or any other MC chair should be asked to dictate when the MC can vote on an issue. This is a very uncomfortable position to be in,” Borgatti acknowledged, before siding with O’Hara’s opinion and allowing the vote to proceed.

O’Connell challenged the ruling as promised, and it went to a vote, requiring a simple majority. It was taken as a sector-weighted vote, which meant it had a 2.5 threshold out of 5. It passed easily with 4.5.

The subsequent vote on the proposal also received overwhelming support with 4.28 in favor. The total was later adjusted to 4.17 with votes that hadn’t been recorded at the time, but it was still well above the 3.33 threshold necessary for endorsement.

The RTO must now work with the Monitor to develop the comparative frameworks, the first of which on construction costs is expected to be introduced in September and endorsed at the Markets and Reliability Committee on Dec. 6. It would be effective for long-term transmission proposal submission window, which runs from November to March. The second framework comparing return on equity and capital structures is expected by May 1, 2019, to be effective for all submission windows going forward.