On August 30, 2019, FERC instituted a section 206 proceeding to require PJM Interconnection, L.L.C. (“PJM”) to revise its Amended and Restated Operating Agreement (the “PJM Operating Agreement”) in light of a recent reversal from the U.S. Court of Appeals for the District of Columbia Circuit (the “D.C. Circuit”). In the new section 206 proceeding, FERC is requiring PJM to revise the PJM Operating Agreement to include projects needed solely to address Form No. 715 local planning criteria in PJM’s competitive proposal process, or to show cause why such revisions are not required. In a concurrent order on remand, FERC also rejected revisions to the PJM Transmission Owner Tariff that had previously been amended to clarify that 100 percent of the costs for projects that are included in the PJM Regional Transmission Expansion Plan (“RTEP”) solely to address individual transmission owner Form No. 715 local planning criteria should be allocated to the transmission owner’s transmission zone. FERC expects to issue a final order on the section 206 proceeding within 180 days.

These proceedings primarily center around cost responsibility for certain transmission projects in PJM’s RTEP process. PJM conducts annual transmission planning according to several criteria, including its own planning procedures, NERC Reliability Standards, and individual transmission owner planning (included as part of each transmitting utility’s annual FERC Form 715 filing). Projects identified through PJM’s regional planning process are subject to PJM’s competitive bidding process to allow non-incumbent transmission developers the opportunity to participate in its regional planning.

In 2015, the PJM Transmission Owners proposed tariff revisions to allocate 100 percent of the costs for projects included in the RTEP that solely address an individual transmission owner’s local planning criteria to that same transmission owner’s zone. Previously, cost for such projects had been allocated pursuant to a hybrid cost allocation method (see May 15, 2019 edition of the WER). Pursuant to the PJM Operating Agreement, when a transmission owner is allocated 100 percent of the costs of a project in its own zone, the transmission owner is designated to construct the project. Given the revised Tariff language and the existing provisions of the PJM Operating Agreement, FERC required PJM to revise the PJM Operating Agreement to clarify that such projects are exempt from PJM’s competitive bidding process.

The D.C. Circuit subsequently reversed FERC’s acceptance of the 2015 PJM Transmission Owner Tariff revisions, finding FERC had not adequately justified why projects that provided regional benefits would be prohibited from cost sharing simply because they were reflected in an individual utility’s annual planning criteria. Due to this reversal, the costs for these certain projects (those that were deemed to be needed solely to address individual transmission owner planning criteria) will no longer be allocated solely to the individual transmission owner’s zone, and as a result, FERC no longer believes they should be exempt from PJM’s competitive bidding process. FERC is instituting the section 206 proceeding to require PJM to revise the PJM Operating Agreement accordingly, or to show cause why such changes are not necessary.

A copy of the order is available here.