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On February 15, 2018, the Federal Energy Regulatory Commission (“FERC”) issued an order[i] finding that the transmission planning practices employed by PJM Interconnection, LLC (“PJM”) Transmission Owners (“TOs”) for developing a specific category of transmission projects (called “Supplemental Projects”)[ii] are inconsistent with Order No. 890’s transmission planning principles. The PJM Order is accessible here.

In particular, based on the record of evidence in the Show Cause proceeding it had initiated in August 2016 under section 206 of the Federal Power Act (“FPA”),[iii] FERC found that the PJM TOs’ practices for planning Supplemental Projects violate Order No. 890’s coordination and transparency principles. FERC thus found that the associated provisions of the PJM Operating Agreement and the PJM Open Access Transmission Tariff (“OATT”) are not just and reasonable and are unduly discriminatory and preferential.

As to Order No. 890’s coordination principle, FERC found the PJM TOs and the PJM Participating Agreement are failing to provide appropriate lines of communication to allow stakeholders the ability to provide timely and meaningful input and participate in the development of the Supplemental Projects. In this regard, FERC found that the PJM TOs are not consistently providing stakeholders with sufficient opportunity early in the process to provide feedback on the models, criteria, and assumptions that underlie each PJM TO’s transmission planning process for Supplemental Projects before the transmission needs are identified or before the proposed solutions to those needs are proposed by the PJM TO. FERC also found that the PJM Operating Agreement fails to provide sufficient clarity regarding the opportunities for stakeholder involvement in the three different stages of the Supplemental Project planning process: (1) the model, criteria, and assumptions development stage; (2) the transmission needs identification stage; and (3) the proposed solutions stage.

As to Order No. 890’s transparency principle, FERC found that PJM TOs are providing transmission planning information, including models, criteria, and assumptions, that is inadequate to allow stakeholders to replicate their planning studies as Order No. 890 requires. FERC also found that this information is usually provided at the same time as the PJM TOs are proposing specific Supplemental Projects to meet their identified needs thereby impairing the stakeholders’ ability to advocate effectively for alternative solutions, which undermines Order No. 890’s goals of preventing undue discrimination. FERC did not find persuasive the PJM TOs’ contention that the types of needs that Supplemental Projects address make it appropriate to identify proposed solutions when they present their analysis of the needs underlying those solutions. FERC explained even if there are multiple criteria and considerations underlying the need for a Supplemental Project that should not prevent the PJM TOs from timely posting that information before identifying a particular Supplemental Project.

PJM TOs refuted the need to identify needs separately from proposed solutions by stating that “the most obvious solution” for the types of projects at issue “is typically replacement of the facility at risk.” FERC rejected that argument finding that the most obvious solution may not be the best solution. FERC explained that many of the Supplemental Projects address facilities built decades ago, and that rebuilding a facility that was the most obvious solution many years ago may no longer be the best solution due to topography and technology changes since the original facility was built.

FERC also found that certain of the PJM TOs’ revisions to Attachment M-3 to the PJM OATT, which were filed pursuant to FPA section 205 on the same day as the PJM TO’ filed their response to the Show Cause Order, were not just and reasonable, in part because they relied on PJM Operating Agreement and PJM OATT provisions that FERC had found are being implemented in an unjust and unreasonable manner. FERC thus acted pursuant to FPA section 206 in requiring changes to the PJM TOs’ Attachment M-3 filing to establish a just and reasonable transmission planning process for Supplemental Projects.

The PJM TOs and PJM are required to submit compliance filings within 30 days of the PJM Order to make specific revisions to Attachment M-3 of the PJM OATT and to the PJM Operating Agreement. The required revisions to Attachment M-3 of the PJM OATT include: (1) providing for separate stakeholder meetings at each stage of the process for developing Supplemental Projects (i.e., review of assumptions and methodology, review of system needs, and review of potential solutions); (2) providing for specific time frames (which the PJM TOs are required to propose after consultation with stakeholders) for meetings, posting of required information in advance of the meetings, and opportunities for stakeholder comment after each of the meetings; and (3) providing dispute resolution provisions that will apply to the transmission planning process for Supplemental Projects. The required revisions to the PJM Operating Agreement include making clear that the Subregional Regional Transmission Expansion Planning Committees shall be responsible for: (1) the timely review of the PJM TOs’ criteria, assumptions, and models used to identify Supplemental Projects; and (2) scheduling and facilitate meetings regarding Supplemental Projects. FERC will determine the effective date of these procedures upon review of the compliance filings.

For more information on the PJM Order, or on FERC’s transmission planning requirements, please contact Bhaveeta Mody or Michael Postar.

[i] Monongahela Power Co., et al., 162 FERC ¶ 61,129 (2018)(“PJM Order”).

[ii] A Supplemental Project in PJM is defined as a transmission expansion or enhancement that is not required for compliance with the following PJM criteria: system reliability, operational performance or economic criteria, pursuant to a determination by PJM, and is not a state public policy project. Id. at n.12. The costs of PJM Supplemental Projects are recovered solely from customers in the PJM TO’s zone. Id. at P 43.

[iii] Monongahela Power Co., et al., 156 FERC ¶ 61,134 (2016) (“Show Cause Order”).