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Commission Watch

PJM/Midwest Market:
Fortnightly Magazine - December 2004
    (for exports and imports). Measure the cost of grid assets required to achieve those flows and serve those regional needs, and spread the cost across total regional load (in the same manner as highway assets are allocated as per method #3).

In its full level of detail, the Regional Plan would allocate costs under a blending of methods 1, 3, and 4. For transmission lines deemed to be dedicated to region-wide economic transactions, the plan allocates costs across zones with separate usage-based and voltage-based formulas, with a 50-percent weighting for each method. Smaller lines dedicated to local reliability would follow the traditional license-plate allocation. The plan proponents estimate that a market-wide cost allocation something like that shown in Table 1.

Critics and Cost Shifts

Note that the Regional Plan would create winners and losers among utilities (zones) across the MISO/PJM footprint. Table 2, derived from a presentation prepared jointly by the Wisconsin Public Service Commission and the Minnesota Department of Commerce, shows what portion of the grid assets in each transmission zone that would be treated as serving regional needs, and thus reallocated to consumers elsewhere. It also shows how much that consumers native to any particular zone would save (or pay extra) under the Regional Plan, as opposed to a strict postage-stamp method for allocating the cost of lines having a regional character.

As can be seen, native retail ratepayers of ComEd, AEP, and Illinois Power would see a significant amount of native grid costs reassigned to consumers in other areas. But so would the "classic" PJM utilities (the original trasmission owning utilities in PJM, as before the admission of Allegheny Power, AEP, ComEd, Dominion, Dayton Power & Light, etc.). These re-assigned costs would represent lines deemed to serve a market-wide purpose of facilitating power exports and imports.

By contrast, as the Wisconsin and Minnesota regulators point out, utilities and ratepayers in some zones would pay more in transmission rates than they would if the costs of these market-serving lines were allocated according to simple load shares.

Critics assail the Regional Plan also for its reliance on proprietary software (the GE MAPS program) to estimate the grid-flow dynamics required to achieve a least-cost, security-constrained dispatch. They question whether the software has access to reliable data on the costs and capabilities of power plants. And the Unified Plan sponsors observe that a rate design taken from the Regional Plan would force a continuing recalculation of line voltages and power flows, such as if a new TO should join one of the RTOs in the combined market area.

Nevertheless, the most troubling criticism observes that the Regional Plan engages in a recalculation of revenue requirement for transmission rates when, from a strict point of view, the FERC had asked the parties only to reconsider rate design.

Back in late September, FERC had opened a new proceeding to investigate and implement a new long-term pricing structure intended to eliminate seams in the combined region marked by the PJM and MISO RTOs. ()

In particular, FERC had required the elimination of pancaking "through-and-out" surcharges on