The Federal Energy Regulatory Commission on Monday approved the PJM Interconnection’s plan to allocate the costs from about $5.1 billion in planned transmission projects set to be built by Dominion Energy, FirstEnergy, Exelon, PPL, NextEra Energy, Transource and PSEG Renewable Transmission.
FERC rejected calls from the Maryland ratepayer advocate and individual citizens to allocate Virginia a larger share of the costs, which they argued are driven in large part by that state’s policy to encourage data center growth.
The transmission projects related to Virginia’s incentives for data centers should be paid for by Virginia ratepayers under PJM’s “multi-driver” cost allocation formula, according to the Maryland Office of People’s Counsel.
FERC disagreed, saying PJM followed its cost allocation rules for its regional transmission expansion plan process. Challenges to those provisions should be made as complaints, not through protests to PJM’s cost allocation reports, the agency said.
However, even if complaints had been filed, FERC said it would have rejected them. To qualify as a multi-driver project with a state public policy requirement component, a project must fall under PJM’s “state agreement approach,” such as New Jersey’s offshore wind-related transmission projects, according to the agency. But the data center-related power line projects aren’t covered by the state agreement approach.
“Thus, these projects do not qualify as multi-driver projects with a state public policy requirement component under the PJM operating agreement,” FERC said.
The dispute over who should pay for the transmission lines shows the dangers of taking a “myopic” approach to allocating transmission costs in a multi-state regional transmission organization, according to FERC Commissioner Allison Clements, who noted that ratepayers in Northern Virginia will pay about half the costs of the transmission project portfolio.
“Seeking to isolate any infrastructure affected by state public policy and require the state enacting such policy to shoulder the infrastructure’s costs absent voluntary agreement to do so, as Maryland People’s Counsel appears to suggest, ignores the regional nature of PJM’s transmission system and the full distribution of benefits of regional infrastructure,” Clements said in a concurring statement.
Also, making transmission upgrades contingent on a state’s assumption of their costs would allow a state, such as Maryland, “to free ride, receiving reliability benefits of new infrastructure without paying for them,” Clements said.
But FERC Commissioner Mark Christie said arguments made by Maryland’s ratepayer advocate and others deserve “serious consideration.” The cost allocation issues they raised affects all multi-state RTOs, and FERC should launch a proceeding to help resolve how projects driven by state policies should be paid for, he said.
“The states themselves need to be at the forefront of deciding these questions, as it is their own state policies that are largely making these questions unavoidable,” he said.
