By Suzanne Herel

PJM acknowledged last week that the cost allocation for its Artificial Island stability fix may “appear disproportionate” but said its hands are tied by cost allocation rules proposed by transmission owners and approved by FERC.

Because the project is considered a lower-voltage facility, the cost of LS Power’s plan to run a new 230-kV circuit from Salem, N.J., under the Delaware River to a new substation near the 230-kV corridor in Delaware is being allocated entirely using the solution-based distribution factor (DFAX) methodology.

As a result, virtually all of the project’s $146 million cost would be billed to Delaware and Maryland customers. (See Officials Urge PJM to Reject Artificial Island Proposal.)

In a filing Friday in response to complaints from the public service commissions of Delaware and Maryland, PJM acknowledged that the DFAX methodology, “although producing reasonable results in the overwhelming number of applications involving typical reliability upgrades, may result in cost allocations that appear disproportionate depending upon the projects evaluated and their unique attributes” (EL15-95).

If the project relied more heavily on regional facilities — for example, if PJM had instead chosen a 500-kV transmission line — “the cost allocation impact to the Delmarva transmission zone would have been significantly less,” PJM said.

“PJM does not take a position with respect to the ultimate propriety of the solution-based DFAX methodology as applied to this case,” PJM said, adding that the cost allocation methodology is part of the transmission rate design, which is “within the sole province of the PJM transmission owners.”

The TOs will be filing their own response to the complaint, PJM said.

In most cases where the DFAX methodology is applied, it reasonably identifies the beneficiaries judging by power flows, PJM said. “For example, a project which fixes a transmission overload in a given region will allow greater flows into that constrained region,” it said.

But the Artificial Island project isn’t a typical reliability-based upgrade. It’s a stability issue that affects the ability to perform maintenance on the connected transmission system from the Salem and Hope Creek nuclear plants. Therefore, system stability, not power flow, was the derived benefit.

PJM said violations requiring such work are rare.

“As a result, in analyzing this matter, the commission should take into account the unique ‘as applied’ nature of the complaint and not lose sight of all of those instances where solution-based DFAX, for more typical reliability-based violations, renders a result which is ‘roughly commensurate’ with the intended beneficiaries,” PJM said in the filing.

PJM said that regardless of cost allocation, it stood by its selection of the winning proposal, which was “based upon sound engineering judgment which analyzed the submitted projects on the basis of system performance, constructability and cost evaluations.” (See PJM Staff Picks LS Power for Artificial Island Stability Fix; Dominion Loses Out.)