By Christen Smith

FERC encouraged PJM’s transmission owners to settle disputes over the sector’s proposed Tariff attachment that revises outdated border and non-zone service rates using a methodology that several members find flawed and unreasonable.

The filing, sent to FERC in June, updates the yearly border charge to prevent network integrated transmission service (NITS) customers — network load located outside PJM’s boundaries but served from within the RTO — from subsidizing border and non-zone service rate customers who use transmission service through and out of PJM (ER19-2105). In the filing, TOs said under existing rates, last updated in 2004, it’s unclear if border rate customers “have been consistently charged transmission enhancement charges (TECs)” because of the ambiguity around which specific TECs apply to border service.

“The PJM TOs argue that the proposed revisions will end the cross subsidy that zonal NITS customers in PJM have been providing to border rate and non-zone service rate customers because revenue from customers taking service under each of these rates is either directly or eventually credited back to zonal NITS customers,” the commission noted in its order.

The proposal would not increase the total cost of providing transmission service in PJM because the increases to border and non-zone service rates will be offset by a decrease for zonal NITS customers, the TOs said in their filing.

FERC accepted the TOs’ filing Nov. 5, subject to refund, with an implementation date of Jan. 1, 2020, but also set a paper hearing and settlement procedures for involved parties to work out their differences over the proposed methodology behind the rates.

Contentions Raised

In proposing the rate revision, TOs wanted to clarify that PJM’s border service includes service to a point of delivery at a merchant transmission facility (MTF) that provides service to a neighboring transmission system — an unnecessary explanation, according to some of the protesters in the proceeding.

The New York Power Authority suggested the clarifying language “is an attempt to create a separate and unjustified classification of customers for purposes of extracting a higher point-to-point transmission service rate from such customers.”

Linden VFT, a New Jersey-based MTF, said the new methodology would increase its border rate charges from $6 million annually to roughly $16 million, potentially forcing the company into insolvency because of “fundamental changes” to its business model. It also objected to a formula that it insists charges the company for lower-voltage transmission facilities “it does not use.”

The TOs offered a solution for double charging of MTFs with firm transmission withdrawal rights (FTWRs): create a credit that would remove the cost of those TECs paid in connection to a facility’s FTWRs from the cost of border rate service.

The Long Island Power Authority argued the crediting mechanism will not work, and the Neptune Regional Transmission Authority supported the claim, noting that the TOs “crediting mechanism is structurally flawed and would result in MTFs with FTWRs and their customers being charged twice for the same allocation of [Regional Transmission Expansion Plan] charges.”

FERC Weighs in

FERC dismissed Linden’s argument that the proposed border rate would charge the company for lower-voltage transmission facilities it does not use, saying “the border rate reflects the fact that a transmission customer may take border rate service from any point within PJM, and that the entire PJM transmission system, including lower-voltage transmission facilities, supports the export transactions.”

“The border rate service, therefore, permits the exporter to access generation anywhere in PJM and such transmission may utilize any of the PJM facilities, including lower-voltage lines,” the commission concluded.

FERC also allayed concerns over the TOs clarifying language on the definition of border service, saying that it is just and reasonable and aligns with commission precedent on the definition of “through and out service.”

Other concerns over whether the proposal meets the standards for formula rate protocols were also dismissed. FERC said because the stakeholders can contest PJM TOs formula rates, there is no need for additional protocols regarding the proposed composite rate. The commission did agree, however, that the TOs’ filing “lacks clarity regarding the process by which parties can challenge or confirm PJM’s calculation of the border rate from the PJM TO’s formulas.”

FERC said a settlement judge will be assigned within 15 days of the filing. The appointed judge will report to the commission within 30 days concerning the status of settlement discussions. At that time, the judge can recommend additional time for settlement negotiations or commence a paper hearing.

The commission granted late-filed motions to intervene from Exelon, PPL and Helix Ravenswood.