On March 5, 2018, FERC accepted PJM Interconnection, L.LC.’s (“PJM”) revisions to the appendices to Schedule 12 of its Open Access Transmission Tariff (“Tariff”). Under Schedule 12, PJM annually files updates to the cost responsibility assignments for transmission enhancement and expansion projects selected in PJM’s Regional Transmission Plan (“RTEP”). Through the Tariff revisions, PJM sought to update load-ratio share and solution-based distribution factor (“DFAX”) cost allocations in the appendices to Schedule 12 for Regional Facilities, Necessary Lower Voltage Facilities, and Lower Voltage Facilities. Additionally, pursuant to prior FERC orders issued in late-2017, PJM’s Tariff revisions sought to reduce the cost responsibility assignments under the appendices of Schedule 12 of PJM’s Tariff to certain merchant facilities—including, Hudson Transmission Partners and Linden VFT, LLC (together, the “Merchant Facilities”)—to zero.

PJM sought to reduce the Merchant Facilities’ cost responsibility to zero because, in a series of orders issued on December 15, 2017, FERC granted the Merchant Facilities the right to convert their Firm Transmission Withdrawal Rights (“FTWRs”) to non-FTWRs. In doing so, FERC stated that, as of the effective dates of the Merchant Facilities’ conversion of their rights, PJM would no longer be required to provide firm service to the Merchant Facilities and, as a result, RTEP costs would no longer be allocable to them. Therefore, in accordance with these prior orders, PJM stated that load-ratio and solution-based DFAX costs should not be allocated to the Merchant Facilities “to reflect the conversion of their rights commencing January 1, 2018.”

FERC’s order approved the Tariff revisions updating the load-ratio share and DFAX cost allocations for Regional Facilities, Necessary Lower Voltage Facilities, and Lower Voltage Facilities without discussing these revisions. Regarding the Tariff changes to reduce the cost responsibility for the Merchant Facilities, FERC agreed that the Merchant Facilities’ load-ratio share and solution-based DFAX cost responsibility assignments should be reduced to zero. FERC reasoned that the language of Schedule 12 provided that RTEP cost responsibility assignments, whether allocated through load-ratio share or solution-based DFAX, should be based on the FTWRs actually held at the time allocation is made at the beginning of the calendar year. FERC explained that the Merchant Facilities held no FTWRs at the time the annual cost responsibility allocation was established at the beginning of the calendar year, January 1, 2018. Similarly, as it pertains to solution-based DFAX cost allocation, FERC reasoned that Schedule 12 of the PJM Tariff requires the use of “existing” FTWRs as of the beginning of the calendar year, which for the Merchant Facilities was zero. Therefore, FERC acknowledged, “Because the actual [FTWRs] held by the Merchant Facilities equal zero, the distribution factor from the most recent base case scenario would result in no RTEP cost responsibility assignments to the Merchants Facilities in 2018.”

A copy of FERC’s order can be found here.