By Rory D. Sweeney
VALLEY FORGE, Pa. — PJM’s Planning Committee on Wednesday held its first special session on cost caps and other cost-containment provisions for competitive transmission bids. The RTO expects that any recommended procedure changes that are identified by the sessions will be incorporated in the new Manual 14F: Competitive Planning Process, which received its third “first” reading at the Markets and Reliability Committee meeting last week.
At the initial meeting, PJM provided several examples of cost-recovery and cost-containment mechanisms that have been proposed. Stakeholders indicated an interest in a standardized lexicon for cost-containment descriptions to aid in comparing project proposals.
Ruth Ann Price of the Delaware consumer advocate’s office urged keeping the process simple and argued for allowing very few exemptions to cost caps.
Sharon Segner of LS Power suggested that there’s a role in the discussion not only for FERC, whose Order 1000 opened up transmission development to competition, but also for the regional planning organizations to encourage cost containment proposals.
Following a technical conference in June reviewing the first five years under the order, the commission asked for comments in response to a series of questions on cost-containment provisions (AD16-18). (See FERC Calls for Post-Conference Comments on Order 1000.)
FERC asked for information on how transmission providers compare proposals with and without cost-containment provisions; whether it should provide guidance or requirements on the use of such provisions; suggestions for ensuring the transparency of evaluations; and whether there should be standardization of cost-containment provisions or exclusions of certain costs to facilitate comparison of proposals with differing containment provisions. The commission also asked what types of performance-based rates it could accept to reduce “asymmetrical risk.”
The next big question for PJM’s initiative is to determine if the focus should be on capital costs or annual revenue requirements. Stakeholders noted that PJM’s focus has historically been on capital costs.
Through PJM’s 13 competitive windows since 2013, about 18% of 650 proposals included cost-containment provisions. Of those, two projects were selected.
Cost caps have been more common in other regions. Of 12 competitive windows including CAISO, SPP and MISO, 54% of the 56 proposed projects and 55% of the selected projects included cost-containment provisions.
The committee’s next special session is scheduled for July 18.