FERC denies requests for rehearing of July 2018 order concerning Artificial Island Project

FERC, in a Feb. 28 order, denied requests for rehearing of a July 2018 FERC order involving the Artificial Island Project, and established a just and reasonable rate to allocate the cost responsibility for regional facilities, necessary lower voltage facilities, and lower voltage facilities that address stability related reliability issues, to be effective as of the date of a FERC order issued in April 2016.

As noted in the order, FERC in July 2018 granted rehearing of the April 2016 order, finding that it is unjust and unreasonable to apply PJM Interconnection’s solution-based distribution factor (DFAX) method to regional facilities, necessary lower voltage facilities, and lower voltage facilities that address stability related reliability issues, such as the Artificial Island Project.

In that April 2016 order, FERC denied a complaint filed by the Maryland Public Service Commission and the Delaware Public Service Commission – together referred to as the state commissions – contending that the use of the solution-based DFAX method to assign cost responsibility for a portion of the costs of certain transmission projects that were approved through the PJM Regional Transmission Expansion Plan (RTEP) process is unjust, unreasonable, and unduly discriminatory and preferential.

FERC also noted that the PJM Transmission Owners, as well as the New Jersey Board of Public Utilities and Division of Rate Counsel – together referred to as the New Jersey State Agencies – requested rehearing of the July 2018 order.

FERC noted that PJM files cost responsibility assignments for transmission projects that the PJM Board of Managers approves as part of PJM’s RTEP in accordance with Schedule 12 of PJM’s Open Access Transmission Tariff and Schedule 6 of the Amended and Restated Operating Agreement of PJM.

In developing the RTEP, PJM identifies transmission projects to address different criteria, including PJM planning procedures. FERC added that types of reliability projects identified in the RTEP include:

  • Regional facilities, which are defined as required transmission enhancements included in the RTEP that are transmission facilities that are (a) AC facilities that operate at or above 500 kV; (b) double-circuit AC facilities that operate at or above 345 kV; (c) AC or DC shunt reactive resources connected to a facility from (a) or (b); or (d) DC facilities that meet certain necessary criteria
  • Necessary lower voltage facilities, which are defined as required transmission enhancements included in the RTEP that are lower voltage facilities that must be built or reinforced to support new regional facilities
  • Lower voltage facilities, which are defined as required transmission enhancements that are not regional facilities or necessary lower voltage facilities

FERC noted that PJM utilizes a hybrid cost allocation method, which FERC found complies with FERC Order No. 1000 for regional facilities and necessary lower voltage facilities that address a reliability need. Under that method, PJM allocates 50% of the costs of regional facilities or necessary lower voltage facilities on a load-ratio share basis and the other 50% based on the solution-based DFAX method. FERC added that PJM allocates all of the costs of lower voltage facilities using the solution-based DFAX method.

The Artificial Island Project encompasses separate sub-projects to address stability limits on generation at the Salem and Hope Creek nuclear generating stations in southern New Jersey, as well as the transmission constraints that are preventing those generators from exporting power at their full capacity under certain circumstances, FERC said.

PJM in August 2015 filed cost responsibility assignments for transmission enhancements and expansions for the Artificial Island Project, which includes regional facilities and lower voltage facilities, but does not include any necessary lower voltage facilities.

FERC also noted that in April 2016, it denied the complaint filed by the state commissions, and in August of that year, PJM suspended the Artificial Island Project to review its configuration in light of concerns over increased project cost estimates, and to outline potential means to identify beneficiaries of transmission projects that address stability issues that could be considered in addition to the beneficiaries identified through the currently effective solution-based DFAX method.

FERC added that PJM in April 2017 submitted revisions to its tariff to incorporate the cost responsibility assignments for the reconfigured Artificial Island Project. In its filing of revisions to the PJM Tariff to incorporate the cost responsibility assignments for the reconfigured Artificial Island Project, PJM acknowledged that “application of the [solution-based] DFAX methodology can result in cost allocations that seem anomalous where the engineering rationale or need for a project is not one driven by power flow.”

FERC also said that in a white paper, PJM identified two alternative approaches for identifying the beneficiaries of transmission projects that address stability related reliability issues:

  • The Stability Deviation Method, which identifies beneficiaries of transmission projects that address stability related reliability issues by modeling the transient voltage – angle – deviations at each PJM substation to assess the stability performance of a generator or cluster of generators to critical faults, and allocates costs based on a load-weighted deviation for each zone
  • The Stability Interface DFAX Method, which identifies the beneficiaries of transmission projects that address stability related reliability issues by analyzing the power flows over the collection of lines that connect the generator(s) that is experiencing the stability related reliability issue being addressed

Rehearing requests concerning July 2018 order

Noting that the PJM Transmission Owners – and the New Jersey State Agencies – requested rehearing of the July 2018 order, FERC said that the PJM Transmission Owners, for instance, contend that FERC failed to justify its departure from FERC precedent accepting the solution-based DFAX method, and failed to identify sufficient evidence that the solution-based DFAX method is unjust and unreasonable when applied to the Artificial Island Project.

FERC said that as it explained in its July 2018 order, it is unjust and unreasonable for PJM to rely solely on the solution-based DFAX method to allocate all of the costs of lower voltage facilities that address stability related reliability issues, and 50% of the costs of regional facilities and necessary lower voltage facilities that address stability related reliability issues, including the costs of the Artificial Island Project.

As PJM explained, FERC said, in “the overwhelming majority of cases where the solution-based DFAX methodology is applied to assess cost allocation relating to a specified reliability violation, the change in power flows are consistent with the intended solution and the beneficiaries of that solution are readily identified based upon those power flows.”

For instance, when PJM experiences a thermal flow based overload on a transmission facility, that transmission facility cannot transmit power into the constrained area to satisfy the load in that area. The load in the constrained area therefore creates the need for the transmission project and benefits from the increased flow when the transmission project is built, FERC added.

As the PJM Transmission Owners maintain, due to the interconnected nature of the system, Delmarva Parties will use the Artificial Island Project as measured by the solution-based DFAX method. However, FERC added, the Delmarva Parties neither caused the need for the line, nor does it benefit from those flows sufficiently because its transmission system already was adequate to serve its load without the Artificial Island Project. Unlike a thermal overload, for instance, the parties whose load made the Artificial Island Project necessary are not the same parties that have flows on the transmission facility identified by PJM to address the stability related reliability issue, FERC said.

While Delaware load will receive some increase in reliability from having a more robust transmission system, FERC said that it finds that the costs that would be allocated to the Delmarva Parties under the solution-based DFAX method would not be at least roughly commensurate with the benefits received.

Among other things, FERC said that based on the record developed through the additional hearing procedures, it finds that the Stability Deviation Method is a just and reasonable replacement rate for PJM to apply to all of the costs of lower voltage facilities that address stability related reliability issues, and 50% of the costs of regional facilities and necessary lower voltage facilities that address stability related reliability issues, including the Artificial Island Project.

“[W]e find that the Stability Deviation Method provides an analytical measurement of voltage angle deviation at the impacted substations to identify the load that would benefit from improved stability performance created by the transmission facility, for example, the Artificial Island Project,” FERC said. “We are not required to find an allocation of costs with exacting precision.”

Among other things, FERC said that PJM is required to make a compliance filing, within 30 days of the order’s date, to include the provisions implementing the Stability Deviation Method to be effective as of April 22, 2016, the date of the April 2016 order.

About Corina Rivera-Linares 2807 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 13 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 corinar@pennwell.com.