By Suzanne Herel

WASHINGTON — Stakeholders from Maryland, Delaware and New York urged FERC last week to allocate the costs of the Artificial Island and Bergen-Linden Corridor transmission projects more broadly across PJM, while utilities in New Jersey and Pennsylvania called for continued use of the solution-based distribution factor (DFAX) method.

The two sides squared off at a Jan. 12 technical conference ordered by the commission, which said the use of the DFAX method for such projects might be unjust and unreasonable (EL15-95). (See FERC Questions Fairness of Artificial Island Cost Allocation.)

Two Questions

The forum focused on two questions: Is there a definable category of projects for which the DFAX cost allocation method might not be appropriate, and could a fair approach be developed prospectively for those occasions?

PJM Vice President of Planning Steve Herling told the commission staff that the RTO could devise an alternative to DFAX for certain fixes, but the scheme would be tricky to develop and wouldn’t be used very often.

PJM presented a matrix of project categories, showing that they could be defined as thermal violations, voltage/reactive, stability, short circuit, storm hardening, end of life/aging infrastructure or real-time operation concerns.

Since 2000, when PJM inaugurated its Regional Transmission Expansion Plan, there has been only one project each for the stability, short circuit and storm hardening categories. Artificial Island is the stability project; the Bergen-Linden Corridor is the short circuit project.

Regarding stability projects, Herling said, “I honestly don’t think we’re going to see many of those going forward. We might see one more next year and not another in 20 years.”

Solution-based DFAX works well for most of the project categories, Herling said, because in most cases those who caused the problem are the same ones who will benefit from it being repaired. The flow of electricity that the projects are designed to enhance can be measured. But flow is not the driver of stability or short circuit fixes.

“With stability and short circuit, that’s a trickier proposition,” Herling said.

Thirty years from now, for example, the stability benefits of the Artificial Island project probably won’t exist because one or more of the Hope Creek and Salem nuclear reactors might be retired.

“The point is that the initial benefit of solving the problem fades over time. So is there a way to calculate the benefits of solving the problem? There very well may be,” he said.

“The big benefit of going to DFAX is that you don’t have to divvy up all the problems and all the beneficiaries. You have one solution. Then you look at who’s using the fix. And that can be looked at year by year,” he said.

Status Quo

Testifying at the conference in favor of keeping the status quo for all projects were Frank Richardson of PPL and Takis Laios of Transource Energy, representing the PJM Transmission Owners, and Esam Khadr of Public Service Electric and Gas.

New Jersey’s Board of Public Utilities and Division of Rate Counsel also submitted comments recommending that the commission not distinguish among projects for cost allocation. “All projects to ensure the reliability of the bulk transmission system are related to flow,” the filing said.

It also noted that if the cost of the Artificial Island project is figured differently, it would allocate more costs to New Jersey ratepayers.

DFAX Unfair

Advocates for customers on the Delmarva Peninsula protested the DFAX methodology, which charged them the bulk of the Artificial Island fix.

Arguing that the DFAX method is inappropriate to be applied to projects unrelated to flow were Mayer Sasson of Consolidated Edison; Amy Fisher of Linden VFT; attorney Robert Weishaar, of McNees Wallace & Nurick, and John Farber of the Delaware Public Service Commission, representing Delaware and Maryland commissions and agencies; Jeff Wood of Hudson and Neptune Transmission; and Mark Ringhausen of Old Dominion Electric Cooperative.

Also objecting to the DFAX method in filed comments were the New York Power Authority and the Easton Utilities Commission.

“For non-overload projects, there is no rational relationship between flows and intended benefits,” Sasson said. “This makes the use of distribution factors as part of the DFAX analysis a ‘poison pill.’”

Short circuits, for example, are system disturbances, not the result of customer demand, he said, and the intended beneficiary is the transmission zone where the problem exists. The typical solution is to upgrade the breaker, not build a transmission line.

“The Bergen-Linden Corridor Project is intended to fix short circuits in PSE&G’s service territory. And as PJM recently informed its stakeholders, it remains necessary with or without the flow from Con Edison’s transmission contracts. Clearly, PSE&G is its intended beneficiary,” he said.

Laios, of the PJM TOs, argued that all projects involve flow.

“Why are circuit breakers there? They’re at a facility to carry flows. You could figure out who tripped it, but you’re back to a one-time violation calculation.”

He was referring to the violation-based DFAX method, a predecessor to the solution-based model, which went into effect in 2013.

Sasson said Con Ed is not proposing the violations-based method. “Our position is that, for non-overload projects, no DFAX analysis can apply because there is no rational or technical relationship between flows and intended beneficiaries.”

Ringhausen agreed. Representing 20% of the load in the Delmarva zone, ODEC stands to pick up a significant portion of the Artificial Island project cost. The primary component of the project is a 230-kV line that is not required to resolve any thermal or voltage reliability issues caused by load growth in the Delmarva zone, he said.

“The results of solution-based DFAX, then, do not signify any significant benefit to the Delmarva zone from the new line that could justify the proposed cost allocation.”

Allocation Based on Economic Benefits

“For a generator stability problem like Artificial Island, one potential alternative would be to allocate costs based on the relative proportion of economic benefits that result from a stability upgrade since a primary benefit of such a project is to increase the availability of a generator’s output to provide capacity and energy to the PJM region,” Ringhausen said.

PSE&G’s Khadr, however, pointed out that the project gives the Delmarva area, which has been subject to transmission constraint, another high capacity line. He also noted that about 30% of the zone’s generation is more than 40 years old and at high risk of retirement.

Laios cautioned creating “carve-outs” for certain projects.

“You’re inviting another driver where someone doesn’t like the cost allocation to argue they should be included in that carve-out,” he said. “Once you start a carve-out, where do you stop?”

PPL’s Richardson said that any attempt to categorize some reliability projects differently would be “fraught with problems.”

“Some results may look strange,” he conceded of the DFAX methodology. But, he said, “It is not arbitrary. It is defensible, and it is the best method that we have.”

Weishaar, counsel to the Delaware Public Service Commission, suggested that a cost allocation method based on economic benefits would be the best option to address stability issues.

“The process would be objective and neutral,” he said. “A narrow exception to the DFAX rule need not swallow the rule. It may be appropriate for the overwhelming number of projects.”

Ringhausen also backed an economic-based allocation.

“We would have PJM run their market efficiency models and allocate the cost based on that,” he said. “Solution-based DFAX is better for most, but for certain projects, it is not matching cost and beneficiaries appropriately.”

Laios objected to the idea of an economic solution.

“Why would you use economics for reliability projects?” he said. “If you did, wouldn’t you feel compelled to do it for all the projects? It’s still a one-time calculation. It’s not updateable each year.”

FERC staff said they would regroup to see if they had any more questions for the participants. Meanwhile, FERC on Thursday granted a rehearing for further consideration of PJM’s Tariff changes involving the cost allocations.