(November 2008)Economic uncertainties are raising doubts over utility returns. Will regulators feel the need to consider broader economic effects when engaging in ratemaking? While...
Bad Day at Black Oak
Beware even the best of attempts at apportioning grid rights and costs.
says ODEC, tends “to skew upgrade allocations to the east, as the prevailing direction of flows in PJM during the peak hour used in the DFAX approach is west to east.” By contrast, says ODEC, “There are many other hours when flows are from east to west.”
Some question why RTEP should seek to allocate costs to zones, rather than simply to customers, on a system-wide, postage-stamp basis. By contrast, the various operating utilities and affiliates that make up the FirstEnergy, PEPCO, and PSEG corporate families argue that PJM should seek more granularity and assign costs to smaller, so-called “electrically cohesive areas” within zones, such as the Delmarva Peninsula, or the northern sector of the PSE&G zone.
Two additional objections appear particularly telling.
First, PJM in its RTEP plan treats the proposed Neptune high-voltage direct current transmission line as a load, since it creates a fixed, firm 20-year right for the Long Island Power Authority to siphon off 685 MW of power from PJM. Thus, PJM’s RTEP proposal would allocate a significant portion of costs for required grid upgrades to the Neptune Line (to its owners? to LIPA ratepayers?), even though Neptune plainly does not qualify as a load “zone” in the classic sense.
This strikes some as a prejudice against power exports. For instance, for the summer 2005 and winter 2005-06 capability periods, certain PJM generators had reserved 1,300 MW of ICAP import rights in New York State, to allow for firm and non-firm deliveries of real-time energy from PJM to the New York ISO, to help satisfy requirements for installed capacity. Yet, as pointed out by attorneys for Neptune Regional Transmission System LLC, these exports had remained immune from any assignment of upgrade costs under prior RTEP iterations. What’s the difference?
Second, the Maryland cities of Hagerstown, Thurmont, and Williamsport, (which also played key roles in the Gettysburg campaign, by the way), make an interesting and clever observation. They note that PJM’s RTEP plans in practice tend to take large, integrated grid upgrade projects and bifurcate them into smaller, manageable project segments, to be proposed piecemeal over months or years in successive RTEP proposals. The effect of this, they say, is to create a series of small projects that emerge from the modeling process as providing localized benefits only, suggesting a more narrow cost allocation. By contrast, if such projects were treated as a single integrated project, the critics say, the analysis would imply benefits covering a broader swath of zones, resulting in a wider cost allocation.
Rate Design and Beyond: Mixed Messages
In his initial decision issued July 13, 2006, administrative law judge William Cowan endorsed the commission staff’s position that PJM should move to a new design for its system-wide grid access charge, junking the license-plate pricing scheme for existing transmission (with grid costs tallied and allocated by zone), and instead adopt a postage-stamp pricing scheme, with costs and rates averaged across the entire RTO footprint. This new policy would acknowledge that the benefits from grid investment and expansion tend to benefit region-wide commerce, so that costs should