PA Environment Digest Blog: PUC Urges Federal Energy Regulatory Commission To Modernize Evaluation of Regional Electricity Transmission Projects

On August 19, the Public Utility Commission urged the Federal Energy Regulatory Commission to strengthen the process used to evaluate certain high-voltage transmission investments across the nation's largest regional electric grid, arguing that better analysis leads to better decisions for consumers, electric reliability and the future of the regional power system.

"Pennsylvania supports a reliable, resilient electric grid, and we recognize that transmission infrastructure plays a critical role in serving consumers across the region," said PUC Chairman Steve DeFrank.

"As our electric system evolves to meet growing demand, we must ensure that major infrastructure investments are guided by the strongest possible analysis. Every significant cost and every significant benefit should count before consumers are asked to finance billions of dollars in long-term transmission investments. Better analysis leads to better decisions—and ultimately better outcomes for consumers."

To advance that goal, the Commission has filed a formal complaint asking FERC to revise portions of PJM Interconnection's Operating Agreement governing Market Efficiency transmission projects – a specific category of transmission upgrades selected primarily for their projected economic benefits.

The PUC asserts that PJM's current methodology unreasonably discriminates against some consumers and overstates the value of certain projects by counting projected consumer savings while excluding projected consumer cost increases elsewhere in the regional electric system.

The complaint does not challenge transmission projects needed to maintain electric reliability, nor does it seek to revisit previously approved transmission projects.

Instead, it focuses exclusively on the methodology PJM uses to evaluate future Market Efficiency transmission projects before they are selected for construction.

The Commission is asking FERC to find PJM’s Operating Agreement unjust, unreasonable and unduly discriminatory and to direct revisions so that evaluations of Market Efficiency transmission projects include both projected consumer savings and projected consumer costs affecting the PJM region as a whole when determining whether a project delivers an overall economic benefit.

Building Better Decisions

The PUC emphasizes that this filing is not an argument against transmission investment. Rather, the Commission believes the analytical framework used to evaluate future transmission projects should more accurately reflect their overall impact on consumers and the regional electric system.

"Good infrastructure planning begins with good analysis," DeFrank said. "Before consumers are asked to finance billions of dollars in new transmission investments, regulators and grid operators should have confidence that every significant cost and every significant benefit has been considered. That's the principle at the heart of this filing. Better information produces better decisions—and that's how we build a stronger, more affordable and more reliable electric system."

The Commission asserts that a more comprehensive evaluation process would improve regional planning by helping ensure that transmission investments deliver measurable benefits to consumers while preserving appropriate market signals for new electric generation and other resources needed to meet growing electricity demand.

The complaint further notes that other regional transmission organizations across North America already use broader approaches when evaluating the economic impacts of transmission projects, accounting for both positive and negative impacts on consumers when determining whether projects provide an overall benefit.

Planning for the Future

The PUC notes that the issues raised in its complaint will become increasingly important as PJM and the broader electric industry confront unprecedented growth in electricity demand, expanding energy infrastructure needs, and the challenge of ensuring that major investments deliver the greatest possible value to consumers.

Rather than opposing transmission investment, Pennsylvania is urging FERC to strengthen the analytical foundation on which future transmission investment decisions are made.

"Our goal is not simply to build more transmission," DeFrank said. "Our goal is to encourage investments that provide the greatest value to consumers, strengthen reliability, support competitive energy markets and promote the long-term health of the regional electric grid. Careful planning, transparent analysis and sound decision-making are essential if we are going to meet tomorrow's energy needs while protecting the consumers who ultimately pay for these investments."

DeFrank added that the Commission believes the filing presents an opportunity to strengthen regional transmission planning for the benefit of all PJM states.

"The regional electric grid is evolving rapidly, and planning processes must evolve with it," DeFrank said. "Pennsylvania believes consumers are best served when investment decisions are transparent, economically sound and based on a complete accounting of their impacts across the entire region. This filing is about improving the process—not just for Pennsylvania, but for every consumer served by the PJM system."

Background

The complaint was filed under Section 206 of the Federal Power Act, which allows parties to ask FERC to determine whether an existing tariff or practice is unjust, unreasonable or unduly discriminatory and, if appropriate, establish a just and reasonable replacement.

The Commission requests prospective revisions to PJM's tariff governing the evaluation of future Market Efficiency transmission projects.

The filing does not seek to halt ongoing reliability projects or revisit previously approved transmission projects.

Instead, it asks FERC to improve the evaluation of future Market Efficiency projects by requiring PJM to consider impacts on all affected consumers when determining whether those projects provide an overall economic benefit.

Click Here for the PUC announcement.

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