FERC ordered a paper hearing Friday to reconsider whether the 1% de minimis threshold and netting provisions of PJM’s solution-based distribution factor (DFAX) method result in fair transmission cost allocations (EL21-39).

Neptune Regional Transmission System and Long Island Power Authority (LIPA) filed a complaint last December alleging the assignment of costs of the regional cost allocation method included in the PJM tariff results in unjust and unreasonable rates.

In the complaint, Neptune and LIPA challenged PJM tariff provisions of the cost allocation method the commission previously accepted in Order 1000 for the portion of cost responsibility assigned to the solution-based DFAX method for transmission facilities selected in the RTO’s Regional Transmission Expansion Plan (RTEP) process.

The DFAX method allocates costs of new transmission facilities by modeling how each load zone contributes to the electricity flows over a new transmission facility. PJM simulates the incremental flow on the new transmission facility resulting from an increase in load of 1 MW in each load zone, FERC said, while holding load in all other load zones at a constant.

The result of PJM’s calculation is the DFAX value, the commission said, which represents incremental flows on the new transmission facility “per incremental increase in demand for a particular load zone.” PJM then applies a 1% de minimis threshold to the calculated DFAX values and replaces any DFAX value less than 0.01 with a DFAX value of zero.

As part of the procedure, PJM models the transfer of the net of energy flow in the positive and negative directions from generation to all load within an individual transmission zone.

The commission had rejected a 2015 complaint by Linden VFT that raised similar allegations (EL15-67), reiterating its position in rulings last year. (See FERC Rebuffs Challenges to PJM Tx Cost Allocation.)

But the commission said the new complaint, and filings by Exelon supporting it in part, persuaded it “to look anew at the question of whether the 1% de minimis threshold and netting provisions of PJM’s ex ante cost allocation method have become unjust and unreasonable.”

Complaints

Neptune owns the Neptune Line, a merchant transmission facility running from northern New Jersey in the Jersey Central Power and Light zone of PJM to New York. Neptune holds 685 MW of firm transmission withdrawal rights.

LIPA contractually holds long-term transmission rights over the Neptune Line through Dec. 31, 2027, and pays the transmission enhancement charges assessed to Neptune under Schedule 12 of the PJM tariff.

Neptune and LIPA said netting and 1% de minimis threshold provisions in the PJM tariff “materially distort the assignment of cost responsibility resulting from application of the solution-based DFAX method.” The companies said the netting of modeled energy flows in both directions across a transmission facility “produces an incorrect measure of total usage,” and the de minimis threshold “arbitrarily excludes zones from cost allocation.”

Neptune and LIPA also assert that the netting and 1% de minimis threshold provisions “result in cost responsibility assignments that are not roughly commensurate with derived benefits,” making them unjust and unreasonable. The companies said the DFAX method should be “implemented without netting, by measuring gross zonal usage of a transmission facility in the positive and negative directions and assigning cost responsibility based on each zone’s gross relative usage in both directions.”

Neptune and LIPA submitted examples showing a zone with the highest relative use of a transmission facility receiving no cost allocation for the facility.

Questions

FERC listed 14 questions for PJM and stakeholders to answer in the paper hearing.

The commission said it wants an explanation on whether cost responsibility under the DFAX method with a de minimis threshold value less than 1% “should be considered anomalous rather than an indication that there is a circuitous low-impedance path for a zone to serve its own load.”

FERC also said it wants to know why it’s appropriate to “exclude zones from cost allocation based on their solution-based DFAX values rather than their relative megawatt usage of the transmission facility in question” under a “beneficiary-pays approach to cost allocation for transmission facilities.”

Stakeholders interested in intervening were given 21 days to notify FERC of their intent. Responses to FERC’s questions are due within 60 days of the order, and comments on the responses are due 30 days after that.