Stakeholders heard the results of a design components options poll, reviewed proposed PJM templates for competitive project submissions and received a presentation from the Office of People’s Counsel of Washington, D.C., regarding the value of binding cost commitments on return on equity at the April 27 special Planning Committee session – Consideration of Cost Commitment for Evaluation of Competitive Transmission Proposals.
The group, which began its work last May, has one more meeting on May 11 to reach consensus around a proposal to be presented to the Markets and Reliability Committee on May 24.
For the past year, members have been tasked with evaluating the need for, and, if appropriate, developing, guiding principles for PJM to use when considering cost containment provisions offered by proposing entities in the evaluation and selection of projects within the FERC Order 1000 competitive planning process.
It would have created guidelines for PJM to use in evaluating cost caps of construction costs and the related expenses of bringing a project into service.
An alternate motion supported by LS Power, D.C. Office of the People’s Counsel, Delaware Division of the Public Advocate, Maryland Office of the People’s Counsel, the Public Service Commission of West Virginia, the PJM Industrial Customer Coalition and American Municipal Power would extend PJM’s evaluation to include the legal enforceability of proposed cost commitments involving construction costs or revenue requirements.
LS Power is in the process of amending that alternate motion before it is presented to the MRC, and that final proposal should be ready for review at or before the May 11 meeting, according to the company.
When asked at Friday’s meeting whether any other entity also would be putting forward a proposal, none responded.
Stakeholders also received the results of a non-binding, seven-question poll and related comments.
The poll ran April 11–19 and garnered 22 unique responses representing 123 companies. Respondents could choose more than one answer for each question. They were:
- How do you prefer PJM communicate proposal details and the outcome of proposal evaluations?
- How do you prefer PJM handle proposal confidentiality?
- What is your preferred evaluation method for analysis of cost commitment?
- What is your preferred method to assess cost commitment exceptions?
- What is your preferred method for evaluation of total project cost and risk of actual cost exceeding the independent PJM estimate?
- What is your preferred method for cost containment mechanisms (capping components) evaluated by PJM?
- Where would you prefer to see the rules documented going forward?
But the issue that generated the most discussion was the role of ROE caps, as presented by Erik Heinle of the Office of the People’s Counsel for the District of Columbia.
He proposed standardized language for total ROE and percent equity in capital, which he said would make it easier to compare proposals.
Under this structure, an initial rate filing would contain all related cost commitments and their terms and conspicuously show their numeric value. A developer also would agree that it would make no voluntary, additional rate filing inconsistent with its commitments unless directed by FERC, and any formula rate would specifically reflect the commitments.
In addition, for any ROE cap to be binding, it would have to be lower than the PJM-wide average.
Thus ensued a lively debate over whether such a plan – albeit voluntary – would be legal and/or enforceable, given that transmission owners have the sole responsibility to file and determine appropriate rates and recovery for their asset investments, and that PJM has no rate-making authority.
Suzanne Glatz, director – Infrastructure Planning, encouraged members to consider the issue through the lens of the common goal of transparency in the process.
Mark Sims, manager – Infrastructure Coordination, also provided insight into how PJM currently evaluates FERC Order 1000 projects. Cost commitment is one factor, along with qualitative and quantitative data related to performance, project cost and feasibility.
“It is not a point system, not a ranking system,” he said. “But at the end of the day, we have to arrive at a decision.”