PJM is taking a reactive stance in addressing the evolving grid, impacting ratepayers and reliability in a way that could be addressed by closer coordination with member states, the Organization of PJM States Inc. (OPSI) has told the RTO’s Board of Managers. 

OPSI leveled its contention in a Nov. 28 letter that said increases in both load and generation retirements are leading to reliability risks that require major “immediate need” transmission expansions with little time for exploration of alternatives.  

The group said the $5 billion Regional Transmission Expansion Plan (RTEP) project PJM presented its Transmission Expansion Advisory Committee (TEAC) on Oct. 31 highlights the “negative impact of siloed, reactive planning” that states have been concerned about for years. The TEAC is scheduled to discuss the proposal again on Nov. 5, and the board may consider approval in the coming weeks. (See PJM Recommends $5B in RTEP Transmission Projects.) 

“The reliability challenges that have recently presented themselves, coupled with the significant cost impact on customers associated with addressing these challenges, have amplified our concern that factors outside the transmission planning process may contribute to the high cost of transmission upgrades and warrant attention to ensure these costs do not become an undue burden to retail consumers,” the letter said. “As such, the OPSI board requests your support in working hand-in-hand, with the help of our respective staffs, to better understand the issues and explore solutions, tools and reforms that may more timely and cost effectively ensure grid reliability.” 

In addition to its concerns with the transmission planning process, OPSI said the need for reliability-must-run (RMR) contracts to keep generators online past their deactivation date threatens to saddle ratepayers with a second round of expenses on top of transmission needed to accommodate the retirement. 

“These concerns range from transmission projects designated as ‘immediate need,’ even though many of them have remained uncompleted past their required in-service dates, to multiyear reliability-must-run agreements that can cost customers hundreds of millions of dollars per year, all while the region waits for even costlier transmission upgrades,” OPSI wrote. “What’s more, the costs of these RMR agreements are not factored in selecting the most overall cost-effective reliability solutions. As such, the PJM board should not read this letter as a reaction to a single set of RTEP projects, but rather a culmination of concerns that is only growing and that has resulted in our resolve to timely seek solutions through our boards working together.” 

The letter was signed by 13 of the 14 OPSI member commissions, with only the Virginia State Corporation Commission voting in opposition. The Virginia agency did not respond to a request for comment on the letter. 

The letter notes that PJM has undertaken efforts to address the reliability concerns it has identified over the past year, including an overhaul of the capacity market through the critical issue fast path process and a long-term transmission planning working group, but OPSI said more work is needed to explore holistic solutions to grid reliability. 

‘Eye-popping’ Transmission Needs

Maryland Public Service Commissioner Michael Richard, who also serves as OPSI treasurer, said state policies have a central role to play in promoting the clean energy transition while maintaining reliability in the most cost-effective manner.  

Richard said if the states were brought on board with planning the response to data center growth in Northern Virginia and the retirement of the Brandon Shores generator outside Baltimore, both of which contributed to the $5 billion RTEP project, recent Maryland legislation requiring the development of 3 GW of storage could have provided a non-transmission solution at a lower cost for ratepayers. (See Maryland Legislature Ends Session with Big Wins for Clean Energy.) 

“There are things that we can do at the state level, at the distribution level, to help address and take action regarding demand and some of the distributed energy resources that we’re working to bring on,” he said. “We have a lot of storage projects in the queue and if we just had more visibility into where the reliability concerns are, it’s very possible we could tap some of those storage resources to address some of the concerns PJM has.” 

While Richard said the scale of the transmission PJM has proposed was “eye-popping,” he thinks it reflects longstanding issues the states have had with PJM’s planning processes. He said the move to a cluster approach to studying generator interconnection requests marks a significant improvement, but work remains to improve PJM’s governance and create opportunities for collaboration with the states. 

“We do have good dialogue between OPSI and PJM and the states. I think we have good discussions, so I’m hopeful and again this letter is presented as an invitation, a request to work collaboratively with PJM. I know they tell us they take OPSI dialogue very seriously and so I expect they will do so with this letter,” he said. 

Morris Schreim, senior advisor to the Maryland Public Service Commission, said transmission is looked at as the last solution for meeting demand when the market signals don’t produce an adequate supply of generation. He said PJM should be seeking innovative ways to improve the interconnection process to ensure new resources aren’t held up, consider how federal policy around electrification and generation development can be incorporated, and work with states to find solutions on the distribution side of the grid. He said the discussions in PJM’s Deactivation Enhancements Senior Task Force to streamline the process for transferring capacity interconnection rights (CIRs) from a retiring resource to a replacement is a promising pathway. 

“They have an opportunity to come up with creative and innovative ways of making the parts work together,” he said. 

Kentucky Public Service Commissioner Kent Chandler, who also serves as OPSI president, said he hopes the letter can open avenues for his commission to work closer with PJM to find new ways of maximizing reliability at lower costs. 

“My overarching concern is that the PJM region is engaging in too much reactive engineering, and are just calling it planning,” Chandler said in an email. “At the same time, the region is too siloed at addressing needs, such as the chasm between supplemental and baseline planning. Customers can’t afford siloed, reactionary investments in the [bulk electric system], and doing so likely results in a more expensive and less reliable system. I look forward to working with PJM on how we can address this.” 

‘A Real Frustration’

Greg Poulos, executive director of the Consumer Advocates of the PJM States, said there’s widespread agreement among advocates on many of the issues raised in the letter. He said the advocates are concerned about the “extremely significant” costs ratepayers will face should the RTEP projects be approved and are frustrated with the short timeline between when PJM selects projects and seeks board approval. 

“There’s not many things that happen in such a short time period as this $5 billion project with this little input from stakeholders,” Poulos said. 

One of the chief reasons generator retirements such as Brandon Shores require extensive transmission development is the compressed Base Residual Auction schedule, which causes generators to receive the price signals to retire much closer to the start of the delivery year, Poulos said.  

PJM’s markets were designed to have generators seek deactivation three years in advance, but when that period is shortened, the amount of time to plan and construct solutions is likewise limited, increasing the odds of needing a costly RMR contract. Poulos anticipates the next major generation retirements also likely will provide little to no warning and come with even larger costs. 

“These decisions about when resources retire, you would think would be made three years and 90 days in advance of auctions. … You’ve cut that time down and put the pressure [on consumers] to address the situations and consumers to pay for situations,” he said. “One of the consequences is having these $5 billion retirement issues that are immediate needs, so we get less competition. It reduces the solutions when these things come on so fast. We need to really be thinking comprehensive long-term planning.” 

Poulos said consumer advocates also are frustrated about the lack of discussions around increasing the scope of PJM’s long-term planning. The Long-Term Regional Transmission Planning Workshop started this year addresses projects only of 345 kV or higher, which Poulos said limits its scope to a small fraction of the projects PJM might consider. 

“That long-term regional process is not aimed at the entire picture of how we go forward and that’s a real frustration,” he said.