CFTP reiterates its support for beneficiary pays in light of FERC’s PJM Transmission order

The Coalition for Fair Transmission Policy emphasized its support for broadly spreading costs to improve the reliability of regional transmission lines but emphasized its concern that adopting a similar approach to finance expensive, long-distance interstate power lines could force consumers to pay for power lines from which they derive no benefits.

The coalition was responding the Federal Energy Regulatory Commission’s March 30 order addressing large transmission projects in the PJM service territory.

“We expressed exactly these same concerns in response to FERC Order 1000, especially when the benefits of a public policy project were speculative,” the coalition said.

For lines that do not address reliability needs, beneficiaries should pay in proportion to the benefits received.  The Commission cannot assume that interstate lines over a certain voltage threshold, or a portfolio of projects, will provide economic benefits to all customers as its basis for socializing costs. Instead, FERC must make determinations based on a clear definition of what constitutes a real benefit and a record demonstrating the anticipated distribution of benefits.

The cost allocation issue arose when the FERC issued its Order responding to a Seventh Circuit Court of Appeals remand of the FERC’s previous decision approving regional postage stamp allocation of costs for transmission facilities above 500kV in the PJM region. The Coalition was not a participant in the case and does not formally comment on FERC cost-allocation decisions in any specific region.

However, there are several aspects of this most recent decision that will be perceived as being important to the national policy debate with respect to cost allocation. The case brought to the Seventh Circuit involved cost allocation for new facilities, which were all designed to resolve reliability problems identified in PJM planning studies.

It has always been the Coalition’s position that where transmission upgrades are required to meet the reliability needs of an area, it is appropriate to allocate the costs of such facilities to that area.

In this particular case, PJM found – and the FERC  concurred in its March 30th Order on Remand – that transmission lines over 500 kV needed for reliability had regional reliability benefits and therefore cost allocation across the region was appropriate.  We therefore believe that FERC ‘s decision is consistent with the Coalition’s principles in this regard.

As the FERC recognized, cost allocation for new projects going forward will be addressed in the Order 1000 Compliance filings of PJM and other regions. The Coalition hopes that the Commission will ensure that its principle of beneficiary pays holds true in practice as well as in theory.