By Rich Heidorn Jr.

PJM must amend interconnection service agreements (ISAs) to allow two merchant transmission facilities to convert from firm to non-firm service, FERC ruled Friday, the latest reverberation resulting from the cancellation of the Con Ed-PSEG “wheel.”

The commission’s orders could relieve Hudson Transmission Partners (HTP) (EL17-84) and Linden VFT (EL17-90) from hundreds of millions in cost allocations under PJM’s Regional Transmission Expansion Plan.

The commission said the companies’ ISAs, signed with PJM and transmission owner Public Service Electric and Gas, were unjust and unreasonable because they did not allow the merchants to convert firm transmission withdrawal rights (TWRs) to non-firm TWRs that are subject to curtailment.

HTP owns a 660-MW, 345-kV underwater HVDC line that connects PJM in northern New Jersey and NYISO in New York City. FERC issued a show cause order after PSE&G rejected its request to convert 320 MW of firm TWRs to non-firm. (See Rejecting PJM ‘Wheel’-related Requests, FERC Sets Inquiry.)

Linden VFT, which operates three 105-MW variable frequency transformers between the PSE&G system and Consolidated Edison, filed a complaint after PSE&G rejected its request to convert 330 MW of firm TWRs to non-firm.

The two merchant projects were part of a decades-old service agreement between PSE&G and Con Ed that the latter terminated in April. The service “wheeled” 1,000 MW from Upstate New York through PSE&G’s facilities in northern New Jersey and into New York City.

Following termination of the wheel, PJM asked FERC to reassign $533 million in costs related to the Bergen-Linden Corridor project to HTP, which the commission approved on April 25.

Under PJM’s Tariff, merchant transmission facilities are assigned the costs of the network upgrades that would not have been incurred “but for” their interconnection request. Merchant facilities also are responsible to pay annually for the costs of any post-interconnection network upgrades needed to support the merchant’s firm TWRs.

“We see no reasonable basis for barring HTP from converting from higher quality firm TWRs to lower quality non-firm TWRs by amending the existing ISA,” FERC said. “HTP already has satisfied the interconnection requirements, and we find that requiring it to maintain such firm TWRs for the life of the merchant transmission facility is unjust and unreasonable in the absence of any operational or reliability basis for doing so.”

The commission dismissed PSE&G’s allegation that reducing the service level would harm reliability.

“Under the existing ISA and PJM’s Tariff, PJM must guarantee that its transmission system is robust enough to permit HTP to use its firm TWRs to export 320 MW of power from its source in PJM across the river to New York at all times. Converting those firm TWRs to non-firm TWRs imposes no additional obligation on PJM and, in fact, is less burdensome in that PJM will no longer have to guarantee that its transmission system can support such use,” the commission said. “In any case, HTP’s line is fully controllable by PJM so that PJM can shut off flows if those flows jeopardize reliability or cause operational problems in New Jersey or elsewhere on the PJM system.”

FERC also rejected PSE&G’s contention that allowing the change would undermine the interconnection process. The commission said PSE&G’s argument that it relied upon the long-term duration of the existing ISAs was “unpersuasive,” noting that the merchants had unilateral rights to terminate the ISAs at any time.

The commission rejected as beyond the scope of the cases a request by PJM’s Independent Market Monitor to change Schedule 12 of the Tariff. The Monitor said the changes were needed to address what it called a discrepancy in the cost responsibility assignments for RTEP projects for merchant transmission providers that hold firm point-to-point transmission service and those that hold firm TWRs.

“Those general concerns with Schedule 12 do not address whether [the merchants] should be permitted to convert” their firm TWRs, FERC said.

The commission ordered PJM to file the revised ISAs in seven days from the Dec. 15 orders. Chairman Kevin McIntyre, who was sworn in Dec. 7, did not participate in the order.