FERC on July 19 denied Primary Power’s complaint that PJM Interconnection (PJM) practiced discrimination in a de facto right of first refusal (ROFR) when it awarded one project each to FirstEnergy (NYSE:FE) and Dominion Resources (NYSE:D) (Docket No. EL12-69).
During PJM’s 2011 planning process, Primary Power proposed two static VAR compensator (SVC) upgrade solutions to voltage criteria violations in Dominion’s and FirstEnergy’s service zones. After discussions, PJM staff on Nov. 3, 2011, recommended the board approve and allow Primary Power to construct these solutions, for an accelerated in-service date of 2014.
However, because Primary Power had proposed and PJM staff had reviewed the SVC solutions in confidential communication, the advisory committee to the board argued that other possible projects were denied potential consideration. The board therefore initiated a stakeholder review process, during which Primary Power, Dominion and FirstEnergy all submitted proposals.
Under the operating agreement, PJM is required to have open meetings and consider alternative proposals that are put forward, FERC said in its order.
“The PJM Board reasonably determined to defer any final selection of projects until the provisions of the operating agreement were satisfied, including the ability to submit alternative projects,” FERC said. “The Dominion and FirstEnergy proposed alternative solutions were themselves likewise subject to review and comment. PJM staff evaluated all solutions under the criteria stated in Schedule 6 of the operating agreement and ultimately recommended the adoption of the alternative proposals as less expensive and more efficient. In response, the PJM Board adopted a regional plan that included the alternative projects.”
Dominion and FirstEnergy claimed they could implement solutions more cheaply than Primary Power, among other benefits, by altering the proposal slightly, which prompted PJM staff to change its recommendation and propose these incumbents’ solutions for board approval, which was ultimately granted on April 2.
In its complaint, Primary Power argued that PJM and the incumbent transmission owners created a de facto ROFR by moving the point of interconnection for the SVC projects to existing substations, where only the incumbent transmission owners have rights to build. The company also challenged the incumbents’ claims of lower cost as lacking technical analysis and development work.
“Primary Power claims that a change in the point of interconnection would not authorize PJM to reassign a proposed generation project to another developer or transmission owner, and that the change in location at issue here should likewise not permit reassignment of its project,” FERC said. “This contention is inapposite to this proceeding because the tariff interconnection procedures do not apply to review of Primary Power’s reliability project proposal.”
Dominion estimated that building an SVC at the Mt. Storm substation would cost $36m, compared to Primary Power’s $45m estimate. FirstEnergy said it could build an SVC at its Meadow Brook substation for $52m to $60m, compared to Primary Power’s original estimate of $100m, later potentially lowered to $75m if a simplified interconnection scheme could be employed, FERC noted.
FirstEnergy and Dominion also argued that their proposals would face less risk of delay because they did not need to acquire land or receive regulatory approvals.