PJM: Clarity anticipated from FERC on cost allocation compliance

The electric transmission industry is hoping for FERC to offer some guidance on cost allocation during a meeting scheduled for March 15, according to an official with the PJM Interconnection.

“We’re all anxiously waiting for something from FERC tomorrow that I think should help advance the cost allocation discussion,” Steve Herling, PJM’s vice president of planning, told TransmissionHub March 14.

FERC Order 1000, issued in July 2011, requires the development of a cost allocation methodology and regional and interregional planning for transmission projects. It also requires public utility transmission providers to consider public policy goals in their local and regional transmission planning processes, and eradicates the right of first refusal (ROFR) for incumbent transmission owners from any FERC-jurisdictional document.

“If we get some guidance and break the logjam of cost allocation, then the rest of it might start to come together pretty quickly,” Herling said.

PJM has made a fair amount of progress on ROFR and public policy issues, Herling said.

“The ROFR issues we’ve been discussing extensively with our stakeholders and we’re starting to get to the point of getting a concrete proposal together as to how to manage parties that want to propose projects, and who should be entitled to construct, own, maintain and operate transmission facilities on the grid,” Herling said.

PJM does not have a ROFR in its transmission tariff provisions, Herling noted.

“The question really then boils down to who should be entitled to build, own and operate any given transmission facility,” he said. “We need to be assured that competent organizations build and own the transmission system. It is the foundation of our reliability and that’s really our primary concern.”

Herling offered that transmission owners are likewise concerned about the effect on the reliability of their systems of integrating “nontraditional” transmission entities onto their grids. He added, though, that stakeholders from all sides have been engaged in trying to develop options that PJM can use to frame the issues for discussion.

With respect to renewable energy and public policy goals, PJM is doing “pretty well,” but there is more work to be done, Herling said. “We’re starting to get a pretty good handle on how to deal with generation,” he said, noting that there have been a “significant number” of announcements of pending generation retirements in the last couple of months. “We’re actually having to address that as a real issue now, as opposed to just dealing with how we might do it on a prospective basis going forward,” he said.

Part of public policy and renewable compliance is figuring out how to identify the value and benefits associated with renewable energy deliveries and how to link those back to a cost allocation structure, he said. 

PJM has been coordinating with its neighbors, the New York ISO, ISO New England, the Midwest ISO and entities to the south, to address interregional coordination, but has put other FERC Order 1000 compliance efforts first, Herling said.

“We’re starting to get our thoughts organized and we’ll be bringing that to our stakeholders soon, but we do have a little bit more time [for compliance filings], so we’ve deferred that a little bit,” Herling said.

The deadline for filing a proposal to meet all Order 1000 requirements except those involving interregional planning and cost allocation is October 2012. Compliance filings for interregional planning and cost allocation are due April 2013.

About Rosy Lum 525 Articles
Rosy Lum, Analyst for TransmissionHub, has been covering the U.S. energy industry since 2007. She began her career in energy journalism at SNL Financial, for which she established a New York news desk. She covered topics ranging from energy finance and renewable policies and incentives, to master limited partnerships and ETFs. Thereafter, she honed her energy and utility focus at the Financial Times' dealReporter, where she covered and broke oil and gas and utility mergers and acquisitions.