FERC on Tuesday rejected a filing by PJM in its Order 1000 compliance docket that would have updated the definition of “designated entity,” agreeing with a coalition of stakeholders that it infringed on their due process rights (ER13-198-008).

The commission not only disagreed with the RTO’s arguments for why the update was necessary; it also said that “PJM improperly filed revisions to its Operating Agreement as a compliance filing in response to an order that was final and required no compliance.”

In its September filing, PJM said the term “designated entity” was added to the OA at the time it submitted its Order 1000 compliance filing to refer to either an incumbent transmission owner or non-incumbent developer designated by the RTO to “construct, own, operate, maintain and finance immediate-need reliability projects, short-term projects, long-lead projects or economic-based enhancements to expansions projects that are selected through PJM’s competitive proposal window process.”

But the RTO said it identified “imprecise and inconsistent usage” of the term in Schedule 6, resulting in conflicting interpretations as to how the RTO should use the Designated Entity Agreement. It argued that the definition was too broad and was “intended to apply only to transmission projects sponsored by an incumbent transmission owner or non-incumbent transmission developer through the competitive proposal window process.”

While references to short-term projects, long-lead projects or economic-based enhancements to expansions “clearly applied to those projects submitted through PJM’s competitive proposal window process,” the RTO failed to differentiate between immediate-need reliability projects selected through the competitive proposal window process and those exempted from the competitive proposal process. It said the term “designated entity” was “not intended to apply to those unsponsored immediate-need reliability projects exempted from the competitive proposal process that are identified and selected by PJM and designated to the incumbent transmission owner in the zone in which the project will be located.”

PJM proposed revising the term to only apply to those immediate-need reliability projects, short-term projects, long-lead projects or economic-based enhancements selected in a competitive proposal window pursuant to the OA. The RTO said the “limited proposed updates” to the earlier Order 1000 compliance filing “will avoid potential confusion and eliminate any conflicting interpretations as to how PJM originally intended to use the Designated Entity Agreement.”

Stakeholder Protest

Several PJM stakeholders jointly protested the filing, including LS Power, American Municipal Power, the Public Power Association of New Jersey, the PJM Industrial Customer Coalition, the Indiana Office of Utility Consumer Counselor and the D.C. Office of the People’s Counsel.

The protesters argued that PJM violated the Federal Power Act by making the filing without approval from stakeholders, saying the RTO was taking an “unprecedented step” and that it was “attempting to avoid a vote from the Members Committee and meeting its burden under Section 206.” They argued that the term “designated entity” explicitly includes immediate-need reliability projects, short-term projects, long-lead projects and economic-based enhancements, and that PJM offered no proof of confusion about this definition.

They also argued that PJM’s “piecemeal, after-the-fact compliance filing approach” was inconsistent with due process principles that indicate parties should have the opportunity to protest the full compliance filing at the outset and that the commission should review the entire compliance filing “holistically.”

PJM countered that the protesters cited no precedent to support the claim that an updated compliance was prohibited or improper and that they “misstate the law” when claiming the commission lacks authority to consider the filing.

“When in 2015, the commission accepted PJM’s proposed tariff revisions implementing the requirements of Order 1000 in the PJM fourth compliance order with no further compliance directives, the accepted tariff revisions, including the definition of designated entity, became the rate in effect,” FERC said. “If PJM thinks that revisions to the definition of ‘designated entity’ and certain provisions of Schedule 6 would also be consistent with Order 1000, it should proceed by following its tariff procedures for submitting a Section 205 filing. Alternatively, if PJM believes its current tariff is unjust and unreasonable, it may file under Section 206.”