By Suzanne Herel

Delaware Gov. Jack Markell, the state’s congressional delegation and LS Power are among those asking FERC to revisit its April 22 ruling approving solution-based distribution factor (DFAX) cost allocation for the Artificial Island and Bergen-Linden Corridor projects.

A request for rehearing was filed by the public service commissions of Delaware and Maryland, whose electricity customers will pay for the bulk of the work to upgrade the New Jersey complex that houses the Salem and Hope Creek nuclear reactors. That’s because the Delmarva peninsula is the sink point for the new transmission line that will link Artificial Island with the Red Lion-Cartanza and Red Lion-Cedar Creek 230-kV lines in Delaware, and thus the target of the DFAX methodology.

In its 3-1 ruling, with Commissioner Cheryl LaFleur dissenting, FERC said it “found that where a cost allocation method is accurate in a very high percentage of circumstances to which it applies, then it is a strong indicator that the cost allocation method is just and reasonable” (EL15-95, ER15-2563). (See FERC Upholds Cost Allocation for Artificial Island, Bergen-Linden Projects.)

No Free Pass

The complainants said that’s not good enough.

“The Federal Power Act does not provide the commission with a free pass on its obligation to ensure just and reasonable rates for the ratepayers in Delaware and Maryland simply because the commission previously approved a cost allocation methodology that works for other projects and other ratepayers,” said LS Power, one of the developers of the Artificial Island stability fix.

“The presence of the facility ensures reliable delivery of power and alleviates future reliability concerns and violations that could have otherwise caused operational issues equally, or in fact more so, to a large segment of the grid beyond Delaware and Maryland, and those beneficiaries are not identified by solution-based DFAX and therefore are not paying their appropriate share for the reliability benefits received,” LS Power said.

Since FERC’s order, the estimated cost of the Artificial Island project has ballooned, with Public Service Electric and Gas nearly doubling the cost of its work from $137 million to $272 million. (See Cost Estimate of PSE&G Portion of Artificial Island Fix Doubles to $272M.) LS Power has stood by its cost cap of $146 million.

In looking for ways to reduce the cost, Artificial Island Cost Increase Could Lead to Rebid.)

Cancellation Sought

In addition to the requests for rehearing, the Delaware Division of the Public Advocate wrote to the PJM Board of Managers asking it to cancel the project.

“The DPA exhorts the PJM board to re-evaluate its approval of the project in light of the staggering increase in the cost of the PSE&G portion of the project,” wrote Public Advocate David Bonar. He said the updated cost estimates more than double the Delmarva zone’s share with an increase of $107.4 million.

Commercial electricity consumers could see their bills increase by $50,000 per month, he said, while residents would see about a $13 hike.

“The DPA is not asking PJM to do something it has never done before,” he said. “After reconsideration, PJM canceled the Mid-Atlantic Power Pathway and the Pennsylvania-Allegheny Transmission Highway projects.”

The PSCs’ filing was submitted also on behalf of the Delaware Division of Public Advocate, the Maryland Office of People’s Counsel, Old Dominion Electric Cooperative and the Delaware Municipal Electric Corp.

The parties challenged FERC’s factual findings and legal conclusions and said the DFAX cost allocation would violate precedent and produce unjust and unreasonable rates.

In a letter supporting the filing, Markell said, “The commission’s order will have a significant direct negative impact on customers in the Delmarva zone and on the economy of the region. Several manufacturing facilities have already expressed concerns about the impact the added costs will have on their operations.”

U.S. Sens. Tom Carper and Chris Coons and Rep. John Carney also wrote to FERC in support of a rehearing.

“The current cost allocation results in over 90% of project costs being borne by Delmarva zone customers in exchange for just a small portion of the project benefits,” they said. “This cost distribution is not sustainable for Delaware users and could seriously impact the state’s ability to recruit and retain industry.”

The issue of cost allocation for the Artificial Island stability fix and Bergen-Linden Corridor transmission project was the topic of a January FERC technical conference, called after the commission determined the DFAX method may be unjust and unreasonable in some cases. (See DFAX: ‘Poison Pill’ or ‘Best Method’ of Cost Allocation?)

Loss of PSEG ‘Wheel’

Hudson Transmission Partners and the New York Power Authority, which are concerned about the Bergen-Linden Corridor project, also filed rehearing requests.

As with the Artificial Island project, the factors surrounding the project have changed since FERC’s ruling.

Consolidated Edison, to which PJM assigned $629 million of the costs of PSEG’s $1.2 billion upgrade, recently decided to stop using the “wheel” by which PSEG takes 1,000 MW from Con Ed at the New York border and delivers it through New Jersey to Con Ed load in New York City. (See Con Ed-PSEG ‘Wheel’ Ending Next Spring.)

“The order states that the purpose of the Bergen-Linden Corridor project is to facilitate the Con Edison wheeling arrangement,” Hudson Transmission Partners wrote. “The Con Edison wheeling arrangement has been terminated. Moreover, Linden VFT, HTP and others brought this likelihood to the commission’s attention on the record in this proceeding, but the commission entirely ignored these facts.

“It is now a reality. Therefore, the very basis upon which the Bergen-Linden Corridor project was founded … and presumably the basis for allocating most of the project’s costs to Con Edison (as, presumably, the beneficiary), has fundamentally changed. Initial analyses by PJM, which were also presented to the commission, indicate that most of the costs previously allocated to Con Edison will now be shifted to HTP.”

The NYPA wrote that it expects its cost allocation associated with the BLC project to increase from about $100 million to more than $600 million.

“The BLC project costs that will be allocated to NYPA following termination of the Con Edison wheel are so grossly disproportionate to the total value of NYPA’s firm export rights on the HTP line that NYPA will be forced to pursue all of its options, which may include termination of the [firm transmission withdrawal rights] it has contractually acquired from HTP, if it cannot mitigate its exposure to [Regional Transmission Expansion Plan] costs in some other way,” it said.

“Given the significant cost of the BLC project, the economic stakes are high,” the NYPA said. “Further ramifications should be expected if rehearing is not granted.”