By Suzanne Herel

FERC ruled Tuesday that PJM’s cost allocation schemes for the Artificial Island and Bergen-Linden Corridor transmission projects may be unjust and unreasonable, ordering a technical conference to probe the issue.

The technical conference will “explore both whether there is a definable category of reliability projects within PJM for which the solution-based DFAX [distribution factor] cost allocation method may not be just and reasonable, such as projects addressing reliability violations that are not related to flow on the planned transmission facility, and whether an alternative just and reasonable ex ante cost allocation method could be established for any such category of projects,” FERC said in its order (EL15-95).

Those wishing to participate may submit their requests by Dec. 18.

FERC accepted PJM’s Tariff changes involving the cost allocations but suspended them pending the outcome of the technical conference.

Under PJM’s rules, the cost of lower voltage facilities such as the Artificial Island and Bergen-Linden projects is computed up using the solution-based DFAX method. For regional facilities or “necessary lower voltage facilities,” only half of the cost is allocated by DFAX, with the remaining expense distributed on a region-wide, postage-stamp basis.

In the case of the Bergen-Linden project, Consolidated Edison of New York and Linden VFT had complained to FERC that the DFAX method was inappropriate and assigned a disproportionate percentage of the cost to Linden, which would receive “negligible benefits.” (See Con Ed Rebuffed Again on NJ Cost Allocation Dispute.)

Similarly, state agencies representing consumers in Maryland and Delaware, along with Easton Utilities Commission, Old Dominion Electric Cooperative and Linden VFT, argued that it was unfair to bill those states’ customers for virtually all of the $146 million price tag of the Artificial Island project, designed to fix a stability issue at the Salem and Hope Creek nuclear plants in New Jersey.

In response to the complaint, PJM conceded that the cost allocation may “appear disproportionate” but said its hands were tied by rules proposed by transmission owners and approved by FERC. (See PJM: Artificial Island Cost Allocation Appears ‘Disproportionate.’)

The DFAX methodology generally identifies reasonable beneficiaries of reliability projects based on power flows, it said. The Artificial Island project, however, is a stability fix, in which power flow is not the derived benefit.

The $1.2 billion Bergen-Linden project intends to upgrade a short-circuit problem in the Public Service Electric and Gas transmission zone outside New York City.  PJM assigned $629 million of the cost to Con Ed and $52 million to PSE&G.

Responding to the ruling, PJM said, “FERC has determined that overall, the current method of allocating the costs of transmission projects is just and reasonable. However, in certain instances, the allocations led to complaints that individual results were unjust and unreasonable.

“Therefore, PJM will be pleased to support the FERC’s process to explore alternative cost allocation methods for projects that may not fit into the current process.”

FERC’s order was welcomed by Delaware Gov. Jack Markell.

“This FERC decision is an important first step to protect Delawareans from a significant electric rate increase,” he said in a statement. “I want to thank the FERC for its review and very sensible conclusion that the costs of a project designed to maximize power production and improve reliability in New Jersey should not fall entirely on Delaware and Maryland consumers.”