PJM’s Never Never Land — PJM Winning, State PSCs (and Rate Payers) Losing

Recent developments with Dominion Virginia Power’s rebuild of the Mt. Storm to Doubs (MSD) 500 kV line show just how twisted PJM’s process has become.  These developments also indicate the steady removal of electric regulation from state PSCs.

First, let’s look at PJM’s recent inclusion of the MSD rebuild project in their 2010 Regional Transmission Expansion Plan (RTEP).  This decision means that the cost of the MSD rebuild project will not be paid by Dominion’s shareholders as normal repair and replacement, but will be paid by all the rate payers in PJM as another one of those “reliability” projects like PATH.  Never mind that a recent GAO report determined that there is no national consensus on the definition of electrical grid reliability and its measurement.  Never mind that last year, the federal Seventh Circuit Court of Appeals ruled that passing “reliability” costs on to all customers in a region was contrary to all prior federal law.

On November 24, Exelon, another major power company holding company like AEP and Allegheny, which owns utilities in PJM, filed this letter of protest with PJM.  In her letter, Susan Ivey, Vice President of Transmission Operations and Planning of Exelon Energy Delivery, describes the MSD rebuild as a repair and replacement project that should not be included in a PJM RTEP.  Ivey argues that under PJM rules and precedent, RTEP projects can only be “new” construction.  She warns that if Dominion is able to latch onto the RTEP gravy train for a repair project, then every power company in PJM will be wanting to recover the costs of their own repairs from all rate payers in PJM through PJM’s RTEP cost recovery process.

A recent memorandum by staff attorney John Auville in the MSD rebuild case before the WV PSC (Case 10-1588-E-P) seems to agree with Ms. Ivey’s assessment that the MSD rebuild is a repair and replacement project done in Dominion’s “ordinary course of business.”  Mr. Auville concluded in his memorandum that Staff recommends

the Commission enter such an order as soon as possible so VEPCO [WV’s Dominion subsidiary] can start the necessary preparatory work that will allow construction of this project to start as soon as the TrAIL line goes into service in the spring of 2011.

So here we have Dominion shareholders getting the best of both worlds.  To PJM, the MSD rebuild is a new “reliability” project that all PJM rate payers will pay for (not Dominion shareholders) and the project gets fast tracked in state PSCs because it is only a replacement of existing equipment.

We also have more odd behavior from PJM regarding the MSD rebuild, particularly as it affects the PATH project.  If you refer to the PATH application to the WV PSC, you will note that many of the problems that PJM claims PATH will solve are located on the current MSD transmission line.  Dominion has stated numerous times that it can complete the MSD rebuild by 2015.  In fact, PJM has removed most of the MSD transmission line capacity from its capacity auctions between 2011 and 2015, which seems to align with Dominion’s estimates.

At the December 8 Transmission Expansion Advisory Committee (TEAC) meeting, attended by members of StopPATHWV, PJM engineer (and PATH promoter) Steven Herling stated that PJM will not be including the impacts of the MSD rebuild in its calculations of the need for PATH until 2019.  Herling stated that PJM engineers do not agree with Dominion’s own projections and believe that 2019 is a more accurate date.

Really?

Or is 2019 the more convenient date for PJM, because if the impacts began to appear in 2015, the need for PATH in PJM’s “calculations” (in all of that word’s meanings) would disappear?

We already know the kind of deception that PJM is practicing to get its PATH project for AEP/Allegheny.  Now we see that contortion has joined deception as part of the PJM method.

Meanwhile, if Exelon’s Susan Ivey is right, we will see more and more repair projects appearing on the PJM RTEP lists as favors to PJM management’s chosen power companies.  That means that more and more projects, and control of electric rates, will slip out of the control of states into the grip of PJM.

So here is the current scoreboard in PJM’s Never Never Land:

Dominion:  MSD rebuild is a new “reliability” project in PJM eligible for cost recovery from all PJM rate payers, but is a “repair and replacement” project at the WV PSC and the East Virginia SCC.  Dominion has no public position on PATH, but says MSD rebuild will be completed in 2015, undercutting case for PATH.

PJM:  MSD rebuild is new “reliability” project eligible for cost recovery from all PJM rate payers.  Both PATH and the MSD rebuild are “needed” but the MSD rebuild will not be operating until 2019, although MSD is only removed from PJM capacity planning between 2011 and 2015.

WV PSC:  MSD rebuild is a “repair and replacement” project.  WV PSC has not protested PJM’s and Dominion’s claims in PJM that Dominion shareholders should not have to pay for repair and replacement of their own power lines.  WV CAD has joined in a protest letter to PJM complaining of PJM deception about PATH alternatives.  PATH decision is pending.

It’s a mess.  The federal government, through FERC, has given PJM a lot of new powers to raise electric rates and approve projects.  So far, it looks like PJM is winning.

Will state PSCs decide to fight back and stand up for their states’ citizens, or will they continue to knuckle under to PJM and federal control?  Stay tuned.