By Rich Heidorn Jr.

State regulators and PJM transmission owners will talk later this week in an attempt to narrow their differences over rules for approving and allocating the costs of “multi-driver” transmission projects.

Such projects would allow the expansion of reliability or market-efficiency upgrades to accommodate public policy initiatives.

The rules being drafted by the Transmission Owners Agreement Administrative Committee (TOs), however, differ from those proposed by PJM in the fall — and that has some state officials concerned.

“Last summer, PJM was prepared to let states come in with public policy [projects] and combine them with reliability projects that were approved but not started,” Walter Hall, of the Maryland Public Service Commission, told the Markets and Reliability Committee Thursday during a first read of proposed Tariff and Operating Agreement changes.

The transmission owners now “want to block that,” Hall said. “They want to prevent the states from coming in … once a project has been approved by the Board” of Managers.

“I don’t think it was quite that complete of an exclusion,” PJM Vice President for Planning Steve Herling responded. Herling said he would have to review the TOs’ language in detail before making a definitive conclusion.

Hall also said the transmission owners are seeking to increase the state cost allocation for multi-driver projects.

Hall said he and officials of several other states plan to talk with the TOs in a conference call later this week. If the conflict is not resolved, state officials could challenge the TOs’ proposal before the Federal Energy Regulatory Commission.

Two-track Process

In a survey last month, the Regional Planning Process Task Force (RPPTF) expressed overwhelming support for the Tariff and OA changes that will be brought to a formal vote at the MRC’s next meeting April 24.

PJM’s Fran Barrett told the MRC last week that the task force’s work on the Tariff and OA changes was being conducted in parallel with the TOs’ proposed cost allocation methodology. “Our job is to bring both of these trains into the station at the same time,” for filings with FERC, Barrett said.

A multi-driver project could mean replacing a 230 kV line planned to relieve congestion with a 500 kV line that also addresses public policy needs — such as the import of wind power to meet state renewable portfolio standards.

TOs’ Proposed Approval Process

A working group of the Transmission Owners Agreement Administrative Committee adopted a “principles” document March 7 outlining the TOs’ proposed rules for approving and paying for multi-driver projects.

It states that “PJM shall include only those projects that have been proposed to fulfill needs within a current cycle planning year as the basis for a new multi-driver project.” [Emphasis added.]

The principles also would bar modification of multi-driver projects “to consider transmission needs not previously considered within the planning cycle after the project has been submitted for board approval.”

It explained: “The TO Group believes this provision will prohibit `gaming’ of the process, where certain beneficiaries may seek to introduce out-of-planning-cycle projects, or modifications to other projects, to meet transmission needs in an attempt to pay only incremental costs for a specific need and thus reduce their cost allocation.”

The TOs would allow the following exception to the prohibition on modifying multi-driver projects: “During the subsequent planning cycle, or for out-of-cycle projects that specifically result from unanticipated reliability needs, a new transmission system need can be determined that is solved with an upgrade to an existing or proposed RTEP project.”

Such a proposal would “be reassessed as if it were a new project for purposes of cost allocation.”

Cost Allocation

In its Order 1000 compliance filing in October 2012, PJM told FERC it was committed to developing a multi-driver approach. Last fall the RTO proposed two methodologies for apportioning the costs of such projects.

The “incremental” method would be used when the multi-driver project was developed as a result of a single driver but was modified to satisfy one or more other goals and becomes a more cost effective solution to all of the drivers.

The “proportional” method would be used when the multi-driver project is developed in parallel with individual solutions to different drivers. It would allocate costs in using percentages based on the relative costs of the individual projects that would have been required to address each driver alone.

Increased Costs for States?

Hall said the TOs “dropped PJM’s language” and would increase the cost allocation assigned “to the state public policy bucket.”

Herling said although the TOs “may have dropped some of our language I think they are still generally following the same approach.”

The TOs are working to convert the principles into amendments to Schedule 12 of the PJM Tariff. The Schedule 12 changes — which require FERC approval but no stakeholder vote — are expected to be completed by mid-April, according to Randall Palmer of FirstEnergy. The RPPTF may discuss the provisions at its April 29 meeting.