MRC to decide on cost cap proposal  


The Markets and Reliability Committee on May 24 is slated to vote on a plan submitted by LS Power to guide PJM’s evaluation of cost commitments included in competitive project proposals, but it could opt instead to allow the Planning Committee more time to consider the cost-capping issue.

A Planning Committee subgroup has been working for the past year to devise principles for PJM to use when considering cost containment provisions as part of the overall evaluation of transmission projects submitted under the FERC Order 1000 competitive solicitation process.

One sticking point in the debate has been whether to allow PJM to consider cost caps on more than capital construction costs, enabling a broader range of cost commitment, including return on equity.  Because such commitment would bind the rates a developer could request of regulators and the FERC, some argue that it places PJM beyond its authority into rate-making territory.

The LS Power proposal, which was revised from its original January alternate motion, would consider cost-capping on construction costs; total project ROE, including incentive adder; and capital structure.

At the May 3 Planning Committee, PJM presented two packages, the first of which limits cost-cap proposals to construction costs. It garnered 64 percent approval in a vote requested from the floor. The second package was presented by PJM as an alternate and would retain the current operating agreement language, under which developers can submit any cost commitment. It did not pass. PJM committed to provide more details at the May 11 special PC session.

Also at the May 3 meeting, a “sense of the committee” motion asking the MRC to defer a vote on the LS Power proposal and remand the issue back to the special meetings of the Planning Committee received 78 percent approval.

The LS Power proposal originated as an alternate motion to a PJM proposal that was rejected by the MRC in January.

The PJM proposal currently on the table is substantially similar to the one that failed in January but includes enhanced templates and additional communications at TEAC. The enhanced templates are designed to communicate project specifics clearly and transparently and provide a uniform, fill-in format for project information. The additional communications are intended to better communicate the evaluation process and factors that were part of the decision.

Meanwhile, LS Power has integrated some of PJM’s proposal into its own; for example, it clarifies that operations and maintenance are not part of the PJM evaluation process and has adopted PJM templates in part.

LS Power is calling for PJM and its independent market monitor to develop a framework for how PJM evaluates cost estimates compared with cost caps regarding competitive project proposals.

At least one stakeholder took issue with the extent to which the LS Power proposal has been revised, saying that all sectors have not had a chance to review it, and the MRC should not be voting on it.