Tuesday, March 19, 2019

PJM Extends Planning Window After FERC Approvals

By Christen Smith

PJM will extend the submission window for long-term projects an additional two weeks to account for recent transmission planning rule changes approved by FERC.

“We are not expecting significant changes, but we are expecting some changes, so we felt it right to extend the window,” PJM’s Brian Chmielewski told a special meeting of the Transmission Expansion Advisory Committee Feb. 20.

PJM will extend the submission window for long-term transmission planning projects another two weeks to account for market efficiency rule changes. | © RTO Insider

FERC earlier this month approved PJM’s revisions to its market efficiency planning rules effective Feb. 13. (See FERC OKs PJM’s Market Efficiency Rule Changes.) The updates impact Section 1.5.7 of the RTO’s Operating Agreement that would exclude from market efficiency planning — with exceptions — generation either with only an executed facilities study agreement (FSA) or with an executed interconnection service agreement (ISA) under suspension (ER19-562).

A second ruling issued Tuesday accepts PJM’s changes to its evaluation of economic-based enhancements as part of its Regional Transmission Expansion Plan, ensuring the benefit/cost ratio for projects proposed in the current year — as opposed to those with delayed in-service dates — will be an “apples-to-apples” comparison (ER19-80).

The rule changes come near the tail-end of the long-term transmission planning window opened in November, which accepts proposals capable of reducing future congestion. (See PJM Market Efficiency Rules Could Slip Deadline.) Chmielewski said extending the submission window will not affect the market efficiency planning cycle, with final review by the TEAC and the board scheduled for December.

Revised Benefit/Cost Ratio

In the Feb. 19 ruling, PJM won its bid to revise the benefit/cost ratio to ensure projects with delayed in-service dates only receive analysis within the existing 15-year planning horizon. Under previous rules, PJM said it spent considerable time developing ad-hoc projections for years beyond the current cycle, resulting in “risky” and “unreliable” modeling.

FERC agreed with PJM’s argument that “limiting the timeframe over which benefits are calculated for market efficiency projects with in-service dates beyond the RTEP Year would address concerns regarding the additional risk of using more speculative benefit estimates for projects with farther out in-service dates.”

The new calculation factors the present value of the total annual enhancement benefit for the 15-year period starting with the RTEP year — defined as current year plus five — minus benefits for years when the project is not yet in-service, divided by the present value of the total enhancement cost for the same 15-year period.

“Thus, under this proposal, if a proposed market efficiency project has an in-service date that extends beyond the RTEP Year, benefits and costs (i.e., revenue requirements) would be evaluated over the same timeframe used for projects with an in-service date of the RTEP Year, which would be for a shorter period than under the current calculation,” FERC concluded.

ITC Mid-Atlantic and NextEra filed a joint protest Oct. 31 arguing the calculation favors smaller, more incremental market efficiency projects and incumbent transmission owners with the ability to propose small-scale upgrades to their own systems. The Independent Market Monitor seconded protestors’ concerns in a separate filing, noting PJM didn’t provide sufficient evidence to suggest their new calculation wouldn’t encourage developers to “game” the system.

PJM said it reviewed 13 projects from the 2016/17 planning window with in-service dates beyond the RTEP year and found that benefit/cost ratios for 11 improved under the changes. The RTO acknowledged several methods exist to levelize project evaluations — each with pros and cons — but prefers its proposed method because it eliminates ad hoc projections for out years.

“We find PJM’s proposal to use the same 15-year planning period for evaluating all projects to be just and reasonable, given that the data for periods outside of the planning period are less accurate,” FERC ruled. “PJM has made a filing to align its benefit/cost analysis with its planning horizon, and we find that proposal just and reasonable as it establishes a level playing field upon which competing market efficiency projects may be evaluated.”

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