The PJM Board at its meeting Oct. 18, approved filing revisions to the PJM Tariff to update stated rates.
PJM will file the tariff changes to the Federal Energy Regulatory Commission by the end of October. If approved by FERC, the revised stated rates would go into effect Jan. 1, 2017.
The updated stated rate structure is a composite rate of 36 cents per megawatt-hour for two years and then 2.5 percent annual increases to 41 cents in 2024. The proposal calls for a formal review process by the Finance Committee after five years.
The rates, which recover PJM’s administrative costs for managing the grid and wholesale electricity markets, have remained the same since 2006. PJM has taken on a number of additional responsibilities in operations, markets, compliance and external relationships since stated rates were first implemented.
PJM has been reviewing its stated rates with stakeholders since earlier this year to ensure PJM’s continued ability to deliver benefits to the members and the region, to maintain rate predictability for members and to continue financial discipline and transparency. The Finance Committee led the review of the rate changes through the stakeholder process, culminating with unanimous endorsement from the Members Committee at its September meeting.
The proposed stated rate meets all of the objectives established by the Finance Committee and would project lower annual refunds than any other option with a more gradual increase in rates.
PJM’s structure for recovering administrative costs was credited recently by Moody’s Investors Service as a driver for upgrading PJM’s and PJM Settlement’s issuer ratings to Aa2 from their previous Aa3. Moody’s cited the anticipated revised tariff’s ability to support the maintenance of an operating reserve and credit metrics at or above their current levels as another reason for the upgrade.
With stated rates, PJM uses fixed, long-term capped rates for the administrative costs of managing the grid and wholesale electricity markets.