Maryland, Delaware governors request FERC adopt alternative methodology for Artificial Island cost allocation

Maryland Gov. Larry Hogan and Delaware Gov. John Carney, in a Nov. 27 letter to FERC, requested that the commission act expeditiously and schedule the rehearing that it previously granted, on the matter of cost allocation for the Artificial Island transmission project.

“We know the commission is likely in the process of prioritizing its schedule to address the backlog of cases that materialized in the weeks leading up to the restoration of a quorum,” the governors said. “On behalf of ratepayers in our states, we request that the commission prioritize our request and reject the application of the solution-based distribution factor (DFAX) method to the Artificial Island Project in favor of a fairer alternative cost allocation methodology.”

As TransmissionHub reported, PJM Interconnection on April 6 said that its board has approved lifting the suspension on the Artificial Island project, which PJM said will strengthen the reliability and transmission of high-voltage power from two nuclear generating stations in southern New Jersey.

The board initially approved the project in 2015 as a result of a competitive solicitation process, and called for construction of a 230-kV transmission line under the Delaware River, PJM said. The board designated LS Power to build the line, as well as Public Service Enterprise Group’s (NYSE:PEG) (PSEG) Public Service Electric & Gas (PSE&G) and Delmarva Power, an Exelon (NYSE:EXC) company, for other portions of the project, including electric substation work, PJM said.

The board last August suspended the project, and directed PJM to perform a comprehensive analysis to support a future course of action, PJM said.

PJM noted that it reviewed its analysis with a stakeholder advisory committee.

The board reinforced support for building the 230-kV line from the area where the Salem and Hope Creek nuclear facilities operate to a new substation to be built in northern Delaware, PJM said.

Among the modifications to the original solution, the line will now be connected at the Hope Creek substation instead of the Salem substation, PJM said, noting that the project is expected to cost about $280m.

In a June 9 document, “Alternative approaches to identification of Artificial Island project beneficiaries,” PJM noted that the board also directed PJM to provide information to states and stakeholders that they could consider in addressing issues concerning cost allocation of the project.

Specifically, PJM noted, since cost allocation disputes often center on identification of the beneficiaries of a given project, the board asked PJM staff to outline potential means to identify beneficiaries of projects performed for stability reasons that could be considered in addition to the strict application of the solution-based distribution factor method, or DFAX.

As noted in the document, the DFAX methodology includes such analysis components as zonal netting and nesting, the treatment of phase angle regulators, and a threshold for projects included in the Regional Transmission Expansion Plan (RTEP).

In their letter, the governors said, “We are not opposed to the Artificial Island project itself, but object to unfair and unreasonable costs for ratepayers in the Delmarva Zone.”

According to the governors – who cited the most recent projections presented by PJM to the Transmission Expansion Advisory Committee in March – the project’s estimated in-service cost will be $278m.

Under the current cost allocation methodology, the solution-based DFAX, more than 90% of the cost – or $250m – of the project will be borne by ratepayers in the Delmarva Zone, who will receive just 10% of the project’s benefits, the governors claimed.

PJM in June published a report that was later filed with FERC, detailing two alternative methodologies for identifying the project’s beneficiaries – the Stability Interface Distribution Factor Method and the Stability Deviation Method, the governors said, adding that those methods produce a result that better represents the regional benefits to be obtained from the project.

“Accordingly, either would serve as a more suitable system for allocating the costs of the project,” the governors said. “We request that the commission adopt one of these alternative methodologies as a more appropriate cost allocation mechanism for the project.”

As TransmissionHub reported, according to PJM, the stability interface DFAX method determines the DFAX for each transmission facility that comprises the interface in the same manner as the existing solution-based DFAX cost allocation methodology. According to PJM, the solution-based DFAX calculation quantifies the percent usage of flow on a facility by each load zone, and that percentage is then used to formulate a cost allocation to each load zone.

In response to the governors’ letter, a FERC spokesperson told TransmissionHub that as the case is pending on rehearing, FERC cannot comment on the matter.

A PJM spokesperson told TransmissionHub: “PJM appreciates the recognition from the governors in their letter regarding the analysis PJM performed on alternative methodologies to allocate costs for Artificial Island. PJM understands concerns about cost allocation for this project.”

The PJM spokesperson continued: “Transmission owners and the Federal Energy Regulatory Commission [(or FERC)] are responsible for cost allocation. We then apply the standards approved by the FERC.”

A Delmarva Power spokesperson told TransmissionHub that the company is reviewing the letter.

Representatives for LS Power and PSE&G could not be immediately reached for comment.

About Corina Rivera-Linares 3058 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 15 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines. She can be reached at clinares@endeavorb2b.com.