FERC has rejected revisions to PJM’s transmission planning process that critics argued would have impinged upon the RTO’s independence in favor of its transmission owners (ER24-2336, et al). 

The Dec. 6 order involves three separate filings, one of which is a complaint that moves the regional transmission expansion process (RTEP) procedures from the operating agreement to the tariff and others that would reform the Consolidated Transmission Owners’ Agreement (CTOA). (See PJM Members Vote Against Granting PJM Filing Rights Over Planning.) 

Transmission owners supported the rules. They were opposed by other stakeholders, including the Organization of PJM States, consumer advocates, municipal utilities, LS Power and environmentalists. PJM had to file the complaint because stakeholders rejected the proposal in an earlier vote.  

“We reject the CTOA amendments because we find that certain CTOA amendments contravene Order No. 2000’s requirement that RTOs be independent of control by any market participant or class of participants in both reality and perception,” FERC said. 

The proposed Article 7, Section 7.9, violates the independence principles of Order 2000 by providing transmission owners with an exclusive opportunity to affect what filings PJM submits under Section 205 of the Federal Power Act. Order 2000 requires organized markets to have a decision-making process that is independent of control of any market participant or class or participants, with which Section 7.9 conflicts. 

Section 205 filings could affect changes to the PJM tariff, Operating Agreement, Reliability Assurance Agreement Among Load Serving Entities in the PJM Region, or any document containing PJM’s rates and charges, or rules and regulations affecting or pertaining to such rules and changes. 

“While the basis of a dispute may be limited to disagreements over contractual obligations, the language of proposed Section 7.9 would allow PJM TOs to dispute any FPA Section 205 filing, not just a filing related to transmission planning, as long as PJM TOs contend that the FPA Section 205 filing could contravene Articles 2, 4, 5, 6 [and] 7 of Attachment B of the CTOA,” FERC said. 

The rules affecting the RTEP process also could affect the RTO’s independence requirements by giving transmission owners too much of a role. 

“While PJM TOs could not unilaterally (i.e., without PJM’s consent) amend the CTOA to include new transmission planning constraints or new substantive provisions that PJM must follow over commission regulations, such that they encumber PJM’s ability to maintain its status as an RTO, these provisions may provide a unique and exclusive opportunity in reality or in perception to unduly influence how PJM operates,” FERC said. “We find that it is inappropriate for PJM TOs to have a process for making potentially binding challenges to PJM’s FPA Section 205 filings that have not yet been filed with the commission.” 

One set of rule changes, called the Overlap Provisions, would have required PJM to consult with transmission owners when regional lines in the RTEP would address the same needs as a local line that is being proposed by a transmission owner. Those local lines still would be able to go forward if the transmission owner determined the RTEP line would not solve the need addressed by their project. 

Protesters argued such debates should be under FERC’s review, with the Harvard Electricity Law Initiative saying the commission previously rejected proposals to include substantive planning provisions in transmission owner agreements because they make more sense in the tariff that is subject to stakeholder participation and the rules give too much control to transmission owners. 

“We find that the Overlap Provisions do not predominantly affect PJM TOs’ rights and responsibilities; rather, they set out substantive transmission planning procedures related to the interaction between RTEP Projects and individually planned PJM TO projects, including when and how PJM and PJM TOs must consult regarding whether regional transmission solutions could more efficiently or cost-effectively address local transmission needs,” FERC said. “Because the Overlap Provisions address a substantive aspect of transmission planning in the PJM region and affect PJM’s regional transmission planning process, they should not be included in the CTOA.” 

The CTOA is meant to contain provisions that affect the rights and responsibilities of transmission owners and RTOs. The right to plan for local transmission is established clearly in other provisions of the CTOA. 

“The Overlap Provisions instead predominantly affect the substantive local transmission planning process, particularly in relation to how it might interact with PJM’s regional transmission planning process,” FERC said. “Although we recognize that the filing rights for Attachment M-3 are held by the PJM TOs, we find that it is not just and reasonable for the Overlap Provisions to be maintained in the CTOA.” 

Commissioner Mark Christie filed a concurrence with the majority, saying he agreed with the rejection of two Section 205 filings to amend the CTOA, and the result of rejecting the complaint that would have shifted the RTEP procedures from the Operating Agreement to the tariff. But he would support shifting the RTEP process to the tariff, without the other provisions infringing on the RTO’s independence, which is the position OPSI took. 

“The practical effect of moving the RTEP Protocol from the OA to the OATT is to transfer the authority over the RTEP’s development from the members of PJM to the PJM Board of Managers,” Christie said. “There is nothing intrinsically wrong in doing so; on the contrary, I agree in principle with OPSI that it should be done. The details of this move, however, are critically important.” 

Christie’s dissent argued that ISO/RTOs should not be treated as “quasi-governmental” agencies whose decisions are decided by rent-seeking participants with little role for state regulators as just another stakeholder. Giving PJM’s board full authority over RTEP would make sense, but not doing so while also giving special interest groups more influence over its decision-making authority. 

“So I see nothing inherently unjust and unreasonable in moving the RTEP Protocol from this unwieldy and special-interest driven process under the OA to the OATT, where the PJM Board can and should take full responsibility for development of the RTEP,” Christie said. “PJM would be free to provide for — and certainly should provide — ample opportunity for its members, as well as stakeholders and other interests, to comment on proposed amendments to the RTEP Protocol, but it should be the exclusive responsibility of PJM to develop and approve any changes to the rules by which the RTEP is developed and approved for submission to the commission.” 

While that change would make sense, it is vital to get the “replacement rate right,” and PJM’s filings fail on that, he added. The rules as proposed could have led to RTEP projects and local projects going forward that address the same needs, potentially wasting billions of dollars.