Monday, December 10, 2018

FERC Approves PJM Rate Increase

By Rory D. Sweeney

Rejecting criticism over employee salaries and a lack of detail on other spending, FERC approved PJM’s requested rate increase, saying it was “adequately supported” (ER17-249).

The Dec. 22 order allows PJM to increase its composite rate from $0.3349/MWh to $0.36/MWh for 2017 and 2018, with a 2.5% annual increase in subsequent years through 2024, when the charge will reach $0.41/MWh. The first increase is effective Jan. 1.

FERC PJM rate increase

Consumer advocacy group Public Citizen protested PJM’s filing, arguing that the increase was requested without first considering ways to reduce costs, such as limiting salary increases. (See Public Advocacy Group Files FERC Complaint over PJM Rate Increase.)

The commission said that the financial statements questioned by Public Citizen are “subject to adequate independent review” by stakeholders on the Finance Committee and noted the committee may reject unjustified expenditures and direct refunds to ratepayers.

Public Citizen also complained that the RTO provided no support for its spending on outside services, which the group said may include expenses related to political advocacy. FERC did not address the advocacy question but noted PJM testimony that outside labor services “includes building and ground maintenance, utilities, outside legal fees and cybersecurity monitoring” and said it provided sufficient detail justifying the expenses.

“PJM has implemented cost-control measures, including reducing the number of full-time equivalent contractors, renegotiating telecommunications and utility contracts, expanding PJM’s vendor pool to increase supplier competition, increasing PJM employees’ share of medical insurance costs and modifying PJM’s retirement benefits,” FERC wrote. “PJM further supported the increased compensation levels, documenting that compensation levels were in line with industry averages, and identifying increased staffing requirements.”

The commission acknowledged PJM’s concerns that it needed to restore its depleting financial reserves.

“Nearly two-thirds of the estimated 7.5% increase in the 2017 stated rate proposed by PJM is to restore the reserve to its prescribed level of 6% of annual revenues, with a 2.5% annual increase in 2019 through 2023 and a 0.7% increase in 2024, while 2018 will see no increase,” the order read.

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