PJM told the Federal Energy Regulatory Commission last week that it should reject an attempt by Consolidated Edison Co. to avoid paying for more than half of a $1.2 billion transmission upgrade to address a short circuit problem in the PSE&G transmission zone outside New York City.

The project, part of PJM’s Regional Transmission Expansion Plan (RTEP), will convert Public Service Electric and Gas Co.’s Bergen-to-Linden 138 and 230 kV transmission line to 345 kV and add a second 345 kV transmission line between those points. (See Planners Choose $1.2B PSEG Short Circuit Fix.)

$629 Million Allocation

Con Edison says PJM’s cost allocation unfairly assigns $629 million of the cost to it as a result of the Con Ed-PSEG “wheel,” in which PSEG takes 1,000 MW from Con Ed at the New York border and delivers it to Con Ed load in New York City. Its protest was joined by the New York Public Service Commission and New York City (ER14-972).

PJM told FERC in an answer filed Friday that Con Ed’s protest is a challenge to the distribution factor (DFAX) cost allocation method outlined in Schedule 12 of PJM’s Open Access Transmission Tariff and approved by FERC in Order 1000 proceedings.

If Con Ed’s challenge prevailed, PJM said, “Every project would be open to project-by-project subjective ad hoc determinations of `beneficiaries,’ which the [Order 1000] cost allocation process is designed to avoid.”

Regional Benefits or Local Reliability Fix?

The dispute could turn on whether the commission agrees with PJM that the PSE&G upgrade has regional benefits, as PJM insists, or whether it primarily addresses a local reliability problem, as the protestors contend.

Under rules approved by FERC last year (142 FERC ¶ 61,214), PJM will allocate the cost of regional projects — defined as double 345kV and those 500kV and above — under a hybrid formula: Half of the cost is socialized based on load share and the other half based on identified beneficiaries. PJM previously allocated the cost of regional upgrades solely on load share. (See PJM TOs’ ROFR Bid Rejected; “Hybrid” Cost Allocation Plan Approved.)

For reliability projects, the beneficiaries are identified based on post-upgrade load flow, as determined by a DFAX analysis.

In approving the use of DFAX, the commission ordered PJM and its transmission owners to provide more detail regarding how the formula would be implemented. “While PJM has adequately shown how the DFAX values and usage of transmission facilities will be calculated, there is no detail regarding how these values will be utilized to calculate assignments of cost responsibility,” the commission said.

The PJM Transmission Owners responded with a compliance filing in July. The commission has not ruled on the filing.

Jan. 10 Filing

On Jan. 10, PJM submitted to FERC amendments to Schedule 12 of its Tariff reflecting cost responsibility for 111 baseline RTEP upgrades approved by the Board of Managers in December.

The filing said the “PSEG Northern NJ 345 kV Project” (project b2436) is intended to relieve overdutied breakers at Essex, Kearny, and NJ Meadowlands 230kV.

In the Transmission Expansion Advisory Committee’s recommendation to the Board, PJM said the $1.2 billion project would also allow cancellation of previously approved RTEP projects totaling $1.04 billion. Thus, the additional work had an incremental cost of only $160 million, PJM said.

The hybrid formula was applied to 15 of the 26 subprojects that comprise the PSE&G upgrade. Of the remaining 11 subprojects, one is fully allocated to PSE&G and the remaining 10 are allocated based on DFAX, according to Con Ed.

According to Con Ed’s calculations, almost $763 million of the project cost will be assigned based on DFAX calculations, with the remaining $418 million allocated based on load ratio shares.

Con Ed-PSEG Wheel

The Con Ed-PSEG wheel began in the 1970s as a grandfathered service by PSE&G, and was converted in 2012 to the PJM Tariff.

Con Edison says RTEP charges currently represent about $9 million of the wheel’s $40 million annual cost. The $600 million allocation for the short circuit fix would quadruple the cost of the wheel to $160 million annually, Con Ed says. “While Con Edison continues to find value in the service that the Commission approved as important to regional reliability, irrational increases in costs could ultimately undermine this arrangement,” it said.

Con Ed says it was unfairly assessed almost 83% of the $762.6 million assigned through DFAX for its 1,000 MW wheel while PSE&G was assessed only 7%, despite load of 11,000 MW. Con Ed said the cost distribution for the project — which contends the upgrade would be needed without its wheel — is “grossly disproportionate to the relative loads” of the two companies.

Linden Challenge

After Con Ed filed its challenge, Linden VFT LLC, a subsidiary of General Electric Capital Corp., filed a protest of its own. Linden VFT, which owns a 315 MW merchant transmission facility which interconnects both PJM and NYISO, said it learned from the Con Ed challenge that it would be billed an additional $2.5 million in RTEP charges annually, more than doubling its current RTEP tab.

“It is simply inaccurate to allocate to Linden VFT these costs based on likely power flows over the PSE&G Upgrade when the PSE&G Upgrade will be built to resolve short circuit fault currents, not to accommodate additional power flows,” Linden said.

“PJM has chosen to apply the rules applicable to double circuit 345 kV transmission lines versus those for circuit breakers that would more appropriately reflect what is happening,” Linden said. “As a result, rather than bearing the entire cost of the PSE&G Upgrade, the PSE&G zone would avoid almost 94% of the portion of the project cost that is allocated using DFAX.”

In addition, Linden complains, the allocation makes no adjustment for the benefits received by customers who would have been assessed the costs of the previously approved RTEP projects that were cancelled as a result of the PSE&G upgrade.

Linden filed its protest Feb. 27, 17 days after comments were due. Linden said it should be permitted the late filing because the Con Ed protest “identified new issues that should have been identified in PJM’s January 10 filing.”

PJM responded that “the PSE&G Upgrade solves more than local short circuit issues and is properly treated as a Regional Facility.”

“Linden VFT’s objections are challenges to the justness and reasonableness of the cost allocation process set forth in the PJM Tariff, which are beyond the scope of this proceeding,” it added.