On May 24, 2018, FERC denied a complaint filed by the New Jersey Board of Public Utilities (“NJBPU”) alleging unjust and unreasonable cost allocations for the Bergen-Linden Corridor transmission project (“the Project”) within the PJM Interconnection L.L.C. (“PJM”) footprint. FERC rejected NJBPU’s claims that, among other alleged problems, PJM’s implementation of certain provisions in its tariff and the Joint Operating Agreement (“JOA”) with the New York Independent System Operator, Inc. (“NYISO”) unfairly insulated New York ratepayers from costs associated with the Project, at the expense of New Jersey ratepayers and in violation of FERC’s Order No. 1000.
To help address short circuit issues in New Jersey, PJM selected the Project in 2013 through its Regional Transmission Expansion Planning (“RTEP”) process. Several years later, in 2017, Consolidated Edison Company of New York, Inc. (“ConEd”), terminated various transmission service agreements that had allowed that company to wheel power through facilities owned by Public Service Electric and Gas Company (“PSEG”) located in northern New Jersey (within the PJM footprint) for delivery to New York City in NYISO. Following these terminations, ConEd’s own PJM-based transmission cost responsibilities, which included partial responsibility for the Project, were reallocated to other parties, including to two developers and PJM transmission owners, Hudson Transmission Partners, LLC (“Hudson”) and Linden VFT, LLC (“Linden”). Shortly thereafter, Hudson and Linden converted their Firm Transmission Withdrawal Rights on the Project—i.e. the rights to receive firm service from PJM—to Non-Firm Transmission Withdrawal Rights, thereby eliminating their cost responsibility for the Project under the terms of PJM’s tariff. FERC approved this elimination in 2018 (see March 12, 2018 edition of the WER), resulting in the subsequent transfer of the remaining Project costs primarily to PSEG.
Separately, in anticipation of ConEd’s wheeling terminations, PJM and NYISO had developed an Operational Base Flow (“OBF”) to provide 400 MW into and out of New York along the same transmission lines formerly used for the ConEd wheeling. As PJM characterized, the OBF was developed as a “transitional mechanism” to reliably manage flows across the PJM and NYISO seam—a “mutual benefit” for which neither PJM nor NYISO is charged, under the terms of the JOA.
On December 22, 2017, NJBPU filed a complaint against PJM, NYISO, ConEd, Linden, Hudson, and the New York Power Authority (in its capacity as Hudson’s customer) (collectively, “Respondents”), alleging that the Respondents were impermissibly avoiding transmission cost allocation responsibility while retaining the benefit of service from PJM’s system. In particular, NJBPU argued that NYISO was receiving uncompensated benefits from the OBF and non-firm flows across Hudson and Linden facilities in violation of the “beneficiary-pays” principle underlying FERC’s Order No. 1000, resulting in unjust, unreasonable, and unduly discriminatory rates to PJM ratepayers, particularly New Jersey ratepayers.
In return, the Respondents argued that NJBPU’s complaint was an impermissible collateral attack on several previous FERC determinations, including Order No. 1000 itself, the JOA acceptance, and the ConEd wheeling arrangement. The Respondents noted also that the OBF and the Project are driven by different needs and are unrelated, and that, moreover, the Project is located entirely within PJM and was not selected as an interregional transmission project for purposes of cost allocation sharing with NYISO.
In its May 24, 2018 order, FERC agreed with Respondents. Specifically, in denying NJBPU’s complaint, FERC reiterated that the cost sharing requirements of Order No. 1000 are voluntary and NYISO had never voluntarily assumed such responsibilities. FERC also found no reason to disturb the “mutual benefits” provision of the JOA for purposes of the OBF payments or for the Project (even assuming that it even benefited NYISO, FERC noted). FERC also declined to find that the PJM tariff general cost allocation provisions were unjust and unreasonable in so far as they eliminated Project cost responsibilities for Linden and Hudson following their Firm Withdrawal Rights conversion. As FERC explained, because PJM plans its system to provide firm transmission service, the conversion to Non-Firm Withdrawal Rights meant that Linden and Hudson’s service was subject to curtailments to accommodate firm customers, making it appropriate, in FERC’s view, to eliminate their responsibility to pay for rights associated with firm service.
A copy of FERC’s order, issued in Docket No. EL18-54-000, can be found here.
A version of this article first appeared on the Washington Energy Report, hosted by Troutman Sanders, LLP.