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Wellinghoff's War

FERC fights for the green-grid superhighway—even if Congress won’t.

Fortnightly Magazine - January 2010

in eastern PJM, Exelon asked FERC to open the record in Opinion 494 via a paper hearing to admit additional evidence on costs, benefits, and pros and cons of PJM’s bright-line 500-kV cutoff for regional cost sharing. Exelon argues that the evidence in the case, even if repackaged and explained by FERC, never will convince the appeals court to relent on its August ruling. (See Motion to Establish Procedures on Remand, FERC Docket EL05-121, filed Oct. 29, 1009.)

Exelon argues that PJM had proposed its 500-kV postage-stamp method only after the date that administrative law judge Cowan had closed the trial record with the various parties still at loggerheads, and even had issued his initial decision before PJM sent its proposal to FERC as a last-ditch effort to win some sort of consensus among stakeholders. In essence, FERC’s Opinion 494 was more like an uncontested settlement than a clearly reasoned and argued case.

In fact, that’s one of Hoecker’s key points, featured in the WIRES petition noted earlier, asking for a rulemaking:

“This may illustrate the risks of relying so heavily on stakeholder processes that do not yield an adequate record and are not otherwise bounded by specific rate requirements” (Petition for Rulemaking, p. 7) .

The Ohio and Illinois commissions have since sided with Exelon and still feel aggrieved by PJM’s cost-sharing formula, as it leaves them as net losers, having to spend millions of dollars to pay for the 500-kV lines (see Figure 1) , without receiving any measureable benefits—let alone any of the unquantifiable kind.

Dayton Power & Light, representing only 2.5 percent of PJM’s retail load, has weighed in as well. DP&L points out that if the Court of Appeals upholds FERC’s Opinion 494 on remand, its share of socialized PJM 500-kV grid-expansion costs will exceed $120 million, boosting its annual transmission revenue requirement by half, from $40 million to $60 million—all for facilities from which it derives virtually no benefit, in a classic rate-making sense.

Dayton adds that this higher cost must be borne by fewer ratepayers, as its zonal peak load is falling from 3,740 MW in 2007 to a forecast (by PJM) of 3,368 MW for 2010.

“A significant portion of this reduction is not going to return any time in the near future,” writes Randall V. Griffin, chief regulatory counsel for the parent company DPL (Answer of Dayton P&L, FERC Docket EL05-121, filed Dec. 10, 2009) .

“Several large businesses,” adds Griffin, “including the Delphi Corporation, General Motors Corp., DHL Express, and NCR have shut down their plants or largely eliminated operations in Dayton’s zone. Thus a 50-percent transmission rate increase will be shouldered increasingly by Dayton’s residential ratepayers.”

Exelon’s answer, however, isn’t to backtrack to the old beneficiary-pays formula, based on DFAX distribution power flows. No, that would spoil the party. Rather, Exelon’s remedy calls for bringing out a second punchbowl, and sharing costs across the region for all transmission lines down to the level of 345 kV. (Motion to Respond to Indicated Transmission Owners, p. 6, FERC Docket No. EL05-121, filed Nov.