PJM’s New Transmission Cost Recovery System Approved by FERC

FERC is getting regional transmission organizations ready for mega-transmission projects by issuing Order 1000 to set up rules governing transmission lines that cross two or more RTOs.  As part of this process (and because the US 7th Circuit shot down FERC’s old cost recovery system), Order 1000 is generating an overhaul of RTO’s cost recovery systems for passing transmission line costs along to rate payers.

PJM Interconnection has revised its old “postage stamp” cost recovery system that divides the cost of new transmission projects equally among all rate payers in PJM to a new hybrid system that passes along 50% of new projects in the old “postage stamp” method, but also requires the other 50% of the costs to be paid by the rate payers who actually benefit from the project, using what is called a flexible DFAX method.

If this hybrid postage stamp/DFAX system had been used to pay for PATH and TrAIL, rate payers in NJ and MD and DE would have been forced to pay for half of PATH.  You can bet those states would have been even less enthusiastic than they were about PATH, if they had been forced to pay for even half of their fair share.

PJM also refused to go along with what they call “public policy drivers” to justify new power line projects.  This is jargon for using new transmission lines to move renewable power from Midwest wind farms and southwestern solar farms thousands of miles across the US to meet state renewable portfolio standards in NJ or MD.

PJM and FERC both rejected this justification, and rightly so.  Why should WV rate payers be forced to pay for new power lines to meet NJ’s RPS?  States should be developing their own renewable power sources, not importing power from across the US.  NJ has plenty of renewable power resources right off its Atlantic coast.

Keryn has been following events at FERC very closely and has a great post here about PJM’s new cost recovery system.  It is not great, but it is better than it was.

2 thoughts on “PJM’s New Transmission Cost Recovery System Approved by FERC

  1. The problem here is that AWC (Atlantic Wind Connection) also wanted to broadly socialize the cost of its merchant public policy project. Do you think the mid-Atlantic coastal states are going to agree to pay the entire cost of a $5B offshore backbone? Or will they continue to bicker and sit on their hands while the cost of $300B of grid upgrades to import midwest “wind” ends up in everyone’s electric bill? Are east coast states willing to sacrifice the economic benefits of a robust offshore wind industry in exchange for broad socialization of renewables?

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