PJM estimates it may need to rebill over $1 billion in transmission charges under a FERC order requiring the RTO to eliminate the de minimis exception from the process it uses to determine transmission rates.

The order, issued March 6, affects transmission rates going back to June 2015. (See PJM Eyeing Tight Deadline to Eliminate De Minimis Exception, Rebill Decade of Tx Rates.)

The exception exempted from the cost allocation formula any zone responsible for less than 1% of the flow modeled on a transmission upgrade, unless the upgrade occurred within that zone. FERC’s order rejected a settlement between PJM and several transmission owners that would have resolved a complaint by Long Island Power Authority (LIPA) and Neptune Regional Transmission System challenging the exception (EL15-18, et al.).

In response to the order, PJM filed a request asking the commission to reconsider requiring resettlement or to exempt the rebilling from the typical interest charged. It also asked for an additional 270 days — on top of the 90 days the order allowed — to conduct the rebilling and included a list of clarifications to how it should calculate the resettlement amounts.

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“The order on remand directed the largest ever resettlement the commission has ever required of PJM in scope, complexity and reach,” PJM wrote in its request. “Resettlements will affect all customers across the PJM region and may require resettling costs associated with over 1,200 transmission projects. While the exact amount of transmission charges that will need to be resettled is not yet known, PJM anticipates that complying with the order on remand will result in the need to resettle an estimated amount between $1.5 [billion] and $2 billion (plus interest).”

PJM proposed a three-step process for determining which projects will be subject to resettlement and how billing and credits will be allocated. It would first recalculate the cost responsibility assignments, transmission owners would submit new revenue requirement information and PJM would calculate refunds and surcharges, including interest. The filing stated PJM will need 270 days for the first step and two to three years for the remaining work.

The clarifications PJM sought include whether:

• • it can surcharge entities facing increased transmission rates under the recalculated rates;
  • it is responsible for paying refunds not collected through surcharges; and
  • the costs of reliability-must-run agreements are subject to resettlement.

It also asked how to address instances in which entities that were assessed transmission rates affected by the order have gone out of business since 2015.

PJM Associate General Counsel Jessica Lynch on April 7 told the RTO’s Planning Committee the resettlements could cause significant bill shocks for utilities and their customers, as well as liquidity challenges. The RTO’s preference is to recalculate billing for each of the 11 years affected by the order one at a time and send out refund and surcharge amounts when they are complete, which is expected on a roughly monthly cadence.