By Suzanne Herel
FERC on Thursday approved an incentive filing by PJM that will allow Public Service Electric and Gas to recoup all of its costs if the Artificial Island reliability project is canceled due to reasons beyond the company’s control.
“PSE&G contends that the permitting, construction, coordination and procurement risks greatly increase the chance of delay and cost increases, thereby increasing the chance that the A.I. project could be canceled after PSE&G has invested time and money,” the order said (ER16-619).
The project’s crossing of the Delaware River alone will necessitate nearly 50 federal, state and local permits, it said.
PSE&G called the proposed work “unique,” requiring it to design and order materials and equipment that could not be used readily if the project is canceled.
The project consists of building a 230-kV transmission line from the New Jersey nuclear complex housing the Hope Creek and Salem reactors to Delaware to resolve stability issues. PSE&G competed to win the full project, but the bulk of the work was awarded to LS Power, with PSE&G and Pepco Holdings Inc. assigned the necessary connection facilities. (See PJM Staff Picks LS Power for Artificial Island Stability Fix; Dominion Loses Out.)
PSE&G’s portion of the project involves expanding the Salem substation and building a static VAR compensator (SVC) upgrade at New Freedom, estimated to cost $31 million to $38 million at the time PJM recommended the project.
The FERC order quotes a $126 million estimate from PSE&G.
American Municipal Power asked FERC to require PSE&G to submit a filing detailing any costs sought to be recovered in customers’ rates in the event the A.I. project is scuttled. FERC included the requirement in its ruling that PSE&G be able to fully recover “prudently incurred” expenses.
The Delaware Public Service Commission submitted comments saying PSE&G had not adequately justified the need for an abandonment incentive.
Separately, Delaware and Maryland regulators and consumer advocates have opposed the allocation of the project’s cost, nearly all of which has been designated to customers on the Delmarva Peninsula. FERC accepted but suspended PJM’s Tariff changes involving the project’s cost assignment pending additional review (EL15-95).
At a Jan. 12 technical conference ordered by the commission, stakeholders debated cost allocation based on the solution-based distribution factor (DFAX) method. (See DFAX: ‘Poison Pill or ‘Best Method’ of Cost Allocation?)
FERC last week set a March 9 deadline for filing post-technical conference comments.