On September 20, 2018, FERC denied rehearing and partially granted clarification of its order regarding Multi-Value Project (“MVP”) rate pancaking charges between PJM Interconnection, L.L.C. (“PJM”) and the Midwest Independent Transmission System Operator, Inc. (“MISO”). In the underlying order, FERC determined that because MISO’s transmission projects benefited the existing MISO-PJM system, the limitation on rate pancaking imposed by FERC in 2003 and 2010 was no longer reasonable.

Dating back to July 2002, FERC permitted various utilities to join PJM instead of MISO. At the time, FERC was concerned that the inclusion of these utilities would result in an “elongated and highly irregular seam between MISO and PJM” that would isolate Wisconsin and Michigan from the rest of MISO—and would, necessarily, subject numerous transactions to rate pancaking, where a transmission customer would be charged separate access charges for each utility service territory that the customer’s contract path crosses. Therefore, FERC ordered that the pancaked rate design be supplanted by a license plate design, under which a customer pays the cost of transmission facilities located in the same zone as the customer.

On July 25, 2010, MISO and MISO Transmission Owners (“MISO Parties”) submitted revisions to MISO’s Open Access Transmission Tariff (“OATT”) that would include criteria to allocate the cost of MVPs to all load in, and exports from, MISO. On December 16, 2010, FERC granted MISO’s proposal but declined to pose such a charge on transactions that “sink in PJM” (“MVP Order”). According to FERC, although MISO’s proposal eliminated rate pancaking to some extent, it was “insufficient to mitigate the RTO scope and configuration concerns that led the Commission to find that pancaked rates between MISO and PJM were unjust and unreasonable.” FERC subsequently denied rehearing of the MVP Order on October 21, 2011.

Eventually, the United States Court of Appeals for the Seventh Circuit (“Seventh Circuit”) remanded the MVP rate pancaking issue back to FERC (see June 17, 2013 edition of the WER). In doing so, the Seventh Circuit emphasized that “at the time of the Commission’s decision to prohibit rate pancaking on transactions between MISO and PJM, all of MISO’s transmission projects were local and provided local benefits.” In contrast, the Seventh Circuit found that MVPs do not support only local transmission projects but “support all users on the system, including transmission on the system that is ultimately used to deliver energy to an external load.” On remand, FERC issued an order on July 13, 2016 (“Remand Order”), finding that “in light of current conditions, the prior limitation on export pricing to PJM for MVPs by MISO is no longer justified.” (See July 18, 2016 edition of the WER).

In rejecting requests for rehearing, FERC denied claims that it used the same evidence to justify the application of MVP Usage Rate as it did to previously reject them in the MVP Order. FERC explained that, unlike its prior MVP Order, it considered “Market-to-Market” coordination in the Remand Order, which allowed for MISO and PJM to better “address the inefficiencies…along the MISO-PJM seam.” FERC also noted that since the Remand Order, there had been “general improvements to coordination” between MISO and PJM, which would begin to reduce rate pancaking. Further, FERC rejected PJM’s clarification request that MISO should use the Joint Operating Agreement (“JOA”) process to review any MVP Usage Rate that would be levied against PJM through MVP charges. Finally, in granting PJM’s clarification request regarding potential double recovery of the costs of certain MVPs, FERC stated, “[w]e clarify that only the portion of an MVP’s cost that is allocated to MISO may be recovered in the MISO MVP Usage Rate, and the portion of an MVP’s cost that is allocated under the JOA to PJM may not be included in the MISO MVP Usage Rate.”

A copy of FERC’s order is available here.