(November 2009)Regulators are in the unenviable position of determining an allowance for ROE that’s fair to consumers and investors in a volatile economy. The cases that stand out this year...
Every Last Penny
Transmission cost allocation, the worth of the grid, and the limits of ratemaking.
overloads on the ComEd system in 2024, did not see any need at that time for 765-kV lines on the ComEd system.
Instead, as Naumann testifies, any new wind-driven grid connections into the ComEd zone likely will come in at the 345-kV level:
Several large wind farms, specifically the 300-MW Top Crop Wind Farm, the 400-MW Twin Groves Wind Farm and the 300-MW Cayuga Ridge South Wind Farm are already in service, or will be in service by the end of 2010 and connected to the ComEd 345-kV system, and any reinforcements needed to allow continued operations are likely to be at 345 kV.” (See, Comments, Naumann affidavit at pp. 54-55.)
Naumann also cites the 345-kV Central Transmission project, proposed recently as the first-ever merchant transmission line to be approved as part of PJM’s regional transmission plan. (See FERC Docket EL10-52, filed March 25, 2010.)
Nevertheless, the record appears clear that DFAX won’t work very well for EHV lines without continuous revising and updating to reflect the changing grid topology—a task that PJM claims will prove impossible in practice for lines 500 kV and above:
“Performing recurring DFAX allocations over a period of years would be virtually impossible as this would require unwinding the transmission grid, line by line, to determine whether the impacts driving the need for a previously approved project had changed. (Response of PJM, p. 27.)
ELCON appears untroubled about calculating precise line flows and allocating costs accordingly: “It is not only possible to determine who benefits from transmission projects; it is done all the time.”
But shortcomings over the DFAX model leads PEPCO to state that Judge Posner and the 7th Circuit should not waste effort comparing DFAX results to a socialized allocation:
“The issue,” write PEPCO, “has to an extent been framed in a manner that appears to treat DVAX-based cost allocation as a kind of ‘default’ approach from which socialization is purportedly a departure. However, the relevant issue in this proceeding is not how socialization compares …
“The relevant issue is whether the broad regional benefits of 500 kV-and-above facilities support socialization.
“The commission’s order accepting the settlement, moreover, made clear that it made no finding on the merits that … DFAX … was just and reasonable as to any voltage level.”
Having It Both Ways
In one sense, this fight never had to happen.
RTO membership remains voluntary, so, as PEPCO has pointed out, “had Commonwealth Edison elected to remain in the Midwest ISO instead of joining PJM, there would be no issue today about the allocation of PJM’s 500 kV-and-above facilities in Illinois—and thus no Seventh Circuit remand and no paper hearing.”
And as FERC’s postage-stamp method would allocate the expense of grid upgrades across all utility service areas in the RTO by load-ratio shares, ratepayers would be treated substantially the same across the region. Only the utilities, as corporate entities, would show significant disparity in rate treatments.
BG&E writes that as RTOs mature, “the boundaries between the individual franchise service territory of each transmission owner has less meaning with respect to high-voltage 765-kV