PJM updated stakeholders on how it plans to act on a FERC order requiring it to rework how it determines transmission rates and recalculate rates going back to June 2015.
The March 6 order rejected a settlement between several transmission owners and PJM to resolve a complaint filed by Neptune Regional Transmission System and Long Island Power Authority (LIPA), which challenged the de minimis exception (EL15-18).
The decision instead requires the parties to revise PJM’s tariff to eliminate the exception and recalculate over a decade of rates within 90 days. The exception zeroes out the cost assignment for any zone responsible for less than 1% of the flow modeled on a transmission upgrade. The change is not applicable to costs allocated through the load-ratio share basis.
PJM Associate General Counsel Jessica Lynch said the RTO may request additional time to recalculate costs without the de minimis exception, as the order provides only 90 days to rerun over a decade of billing. The RTO is working to identify the baseline reliability projects affected by the order and what will be needed to recalculate their cost assignment.
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Solution-based distribution factors (DFAX) are used to determine the full cost for projects less than $5 million and under 500 kV, while for higher-cost and higher-voltage projects, the calculation is split evenly between the load-ratio share basis and solution-based DFAX. Different methods are used if a project is needed to resolve stability violations.
The order denied a second prong of the Neptune/LIPA complaint, which argued PJM’s practice of netting counterflows, paired with the de minimis exception, distorts how the benefits of a project are accounted for when setting cost allocation. The commission also established a paper hearing to explore whether solution-based DFAX should be used when a project is needed to resolve short circuit violations.
Paul Sotkiewicz, president of E-Cubed Policy Associates, ask what implications the rebilling might have on credit and default risk for PJM members.
PJM General Counsel Chris O’Hara said staff does not have a sense of the scale of the rebilling and that it would be inappropriate to speculate on default risk at this time.
