Stakeholders last week approved new rules designed to ease the way for public policy transmission projects, but Maryland regulators said the “multi-driver” approach may be irrelevant because of parallel cost allocation rules proposed by PJM Transmission Owners.

The Markets and Reliability Committee Thursday approved Operating Agreement and Tariff revisions that envision two types of multi-driver projects:

• The “incremental” method would be used when the multi-driver project was developed as a result of a single driver, such as reliability or market efficiency, but is modified to satisfy one or more other goals and becomes a more cost-effective solution to all of the drivers. Under the TOs’ proposal, the original driver would have its cost allocation reduced by “an amount equal to the ratio of the estimated incremental cost of the new driver(s) to the estimated new total cost of the project multiplied by the estimated cost of the original driver.”
• The “proportional” method would be used when the multi-driver project is developed in parallel with individual solutions to different drivers and then combined. The TOs would allocate costs based on the relative costs of the individual projects that would have been required to address each driver alone.

Stakeholders won’t get a vote on the TOs’ proposal, although the TOs are accepting comments on the plan through June 6. The opportunity for opponents to challenge the proposal will come after the TOs make a Section 205 filing seeking Federal Energy Regulatory Commission approval.

Although the TOs have made some changes in response to feedback from other stakeholders, state officials said they remain unhappy. (See Conflict Ahead for States, TOs over ‘Multi-Driver’?)

“We are one of those who are very concerned with the TOs’ cost allocation” proposal, Walter Hall of the Maryland Public Service Commission told the MRC. Hall said the OA and Tariff changes approved Thursday “may become much ado about nothing” because the TOs’ cost allocation may make public policy projects too expensive to pursue.

John Farber of the Delaware Public Service Commission said that PJM, which will administer the cost allocation process, should use a case-by-case approach for evaluating the relative benefits rather than the “formulaic, rigid approach” envisioned under the TOs’ plan.

Steve Herling, vice president of planning, said Farber’s proposal was unworkable. Cost allocation “has to be formulaic,” Herling said. If the RTO did evaluations project by project, “we’d spend all our time doing cost allocation,” he said.

The states say the rules being drafted by the TOs differ from those outlined by PJM last year.

In a presentation to the Regional Planning Process Task Force (RRPTF) in August, the incremental approach envisioned public policy projects being allocated only the costs added to the proposal to accommodate the public policy needs. For example, if a $250 million project originally designed for reliability and market efficiency grew to $600 million as a result of the public policy needs, public policy would be apportioned only the $350 million additional cost.

Under the current TO proposal, however, the original drivers would receive a credit for some of their costs, with public policy paying more than just its incremental increase.

For example, if a $300 million reliability project expanded to $400 million to accommodate public policy, the public policy would be allocated $175 million — the incremental $100 million plus an additional $75 million based on the ratio of the incremental cost to the total cost. The costs allocated to the reliability portion would be reduced from $300 million to $225 million. (See chart)