For the past three years, we’ve been following the appeal of the Delaware and Maryland PSCs to the Federal Energy Regulatory Commission to grant a rehearing of how a regional power authority (PJM) calculated the cost allocation to cover the building of a transmission power line across from NJ to the Delmarva Peninsula.
On July 19, FERC announced it would grant the rehearing. In the announcement they note:
"…we grant rehearing. Specifically, we find that it is unjust and unreasonable to apply PJM’s solution-based DFAX cost allocation method to Regional Facilities, Necessary Lower Voltage Facilities, and Lower Voltage Facilities that address stability-related reliability issues, including the Artificial Island Project. To determine the just and reasonable rate to be applied, we are establishing paper hearing procedures."
This is good news for Delaware and Maryland rate payers. To recap, previously PJM allocated over 90% of the project cost to be paid for by Delmarva zone ratepayers, driving the cost of power for those receiving less than 10% of the benefit of the line’s use. The estimated project costs are $279 million according to the latest PJM projection, meaning Delmarva Zone customers will be expected to bear responsibility for $250 million. The economic impact to large industrial users would be immense, and for both large and smaller users, concerns over closures and job losses remain.
The Chamber will continue to monitor this issue, and weigh in as appropriate.
by James DeChene
With the General Assembly back this week a few bills of interest to the business community were worked in both committees, and on the House and Senate floors.
SB204 related to storm water management is a bill the business community and DNREC have been working on together. It provides a way for redevelopment to operate by establishing interim standards and criteria in order to permit redevelopment projects to move forward while revised regulations are being drafted. The interim standards set forth in this Act would effectively "sunset" upon the adoption of regulations governing redevelopment.
SB80, related to the electric industry, allows for investments in infrastructure to be included as an increase without having to go through a PSC rate case. The benefit is to help lengthen the time between filing rate cases, which are costly, whose cost then gets passed along to the rate payer. The bill was a joint effort between large energy users and the energy industry.
SB113, a bill related to the SEU, would provide businesses the opportunity to put a voluntary assessment on energy and/or capital improvements for the life of the unit. The potential benefit to a business is the ability to take a longer term loan that may not be granted under normal borrowing practices. The bill passed the Senate, and now heads to the House to be assigned to committee.
With 10 legislative days left, there are many bills of interest remaining including the budget, bond bill, sexual harassment training, marijuana legalization and apprenticeship training requirements on certain public works projects—all in all a jam packed agenda. More to come.
by James DeChene
Although the dog days of summer are upon us, there have been some items of interest the last few weeks.
The decision by PJM to review the Artificial Island project for both scope and cost was welcome news. Faced with political and public relations backlash, along with a pending FERC plan review, it was a wise move by PJM to step back and reevaluate. We are hopeful come February 2017 there will be a better, more fairly equitable, plan put forward.
Conversely in unwelcome news, abandoned property was in the headlines again–this time with the State settling the Temple-Inland case, with further potential ramifications on the horizon. We now wait and see how many companies currently under audit choose not to settle, or how many who have settled under a flawed system, choose to attempt to sue to recoup money given to the state. In addition, there’s the remaining contracted years with Kelmar Associates, the auditing firm behind the huge uptick in revenue these last few years, and the pending case at the Supreme Court brought by 21 states challenging Delaware’s escheat process. The state faces a significant reduction in revenues next year as a result, with no clear path to replace them.
And finally, Delaware’s Chancery Court was in the news related to TransPerfect and the decision to prepare the company for sale. It’s important to note that the Court, and the corporate bar community, have been the gold standard for corporate law for decades, making Delaware internationally known, and respected, as a result. It’s always news when a controversial case is decided, and the hubbub surrounding this decision is no different. It bears remembering, however, that shareholder disputes are settled all the time.
All in all, a fairly exciting few weeks for summertime.
By James DeChene
As reported this week in the News Journal, Delaware received unfortunate news from FERC regarding the Artificial Island cost allocation proceedings. The agency has decided not to intervene in the cost allocation debate on whether Delaware rate payers should shoulder roughly 90% of the cost burden of constructing a power line across the Delaware River. Back in December, in response to the claims raised by the Delaware and Maryland Public Service Commissions (Docket EL15-95-000), regarding the cost allocation made by PJM as to who would pay for a new transmission line to be constructed between New Jersey and the Delmarva Peninsula, FERC determined that the cost allocation for Artificial Island filed by the PJM transmission owners may not be just and reasonable. FERC therefore accepted the cost allocations but delayed implementation for 5 months (subject to refund if FERC denies the cost allocation) and established a technical conference with PJM to determine whether there is a certain category of reliability projects for which the solution-based DFAX may not be appropriate and whether another cost allocation method could be established for such projects.
With that 5 month deadline came with it FERC’s response, along with news that the project will now exceed $400 million dollars, an increase of $135 million over last cost estimates. The ruling will be appealed, and the potential for a court case challenging the cost allocation remains prominent.
More details to follow as we know them.
As reported last week in the News Journal, Delaware recently received good news from FERC regarding the Artificial Island cost allocation proceedings. In response to the claims raised by the Delaware and Maryland Public Service Commissions (Docket EL15-95-000), regarding the cost allocation made by PJM as to who would pay for a new transmission line to be constructed between New Jersey and the Delmarva Peninsula, FERC determined that the cost allocation for Artificial Island filed by the PJM transmission owners may not be just and reasonable. FERC has therefore accepted the cost allocations but delayed implementation for 5 months (subject to refund if FERC denies the cost allocation) and established a technical conference with PJM to determine whether there is a certain category of reliability projects for which the solution-based DFAX may not be appropriate and whether another cost allocation method could be established for such projects. Paragraphs 34 and 35 of FERC’s order, below, are the most significant for Delaware. This is a fantastic initial order from FERC.
34. Our preliminary analysis indicates that the assignment of cost allocation for the proposed Tariff amendments in Docket No. ER 15-2562-000 Filing and Docket No. ER15-2563-000 have not been shown to be just and reasonable and may be unjust, unreasonable, or unduly discriminatory or preferential. Accordingly, we will accept the proposed Tariff revisions for filing, suspend them for five months, to become effective on April 25, 2016, or an earlier date set forth in a subsequent order, subject to refund, and the outcome of a technical conference in the complaint proceedings, Docket Nos. EL15-18-001, EL15-67-000, and EL15-95-000.
35. We direct staff to establish a technical conference to explore both whether there is a definable category of reliability projects within PJM for which the solution-based DFAX cost allocation method may not be just and reasonable, such as projects addressing reliability violations that are not related to flow on the planned transmission facility, and whether an alternative just and reasonable ex ante cost allocation method could be established for any such category of projects.
by James DeChene
May you live in interesting times…
If you needed evidence of how the world has changed look no further than to the announcement of Ellen Kullman’s retirement as proof. That one event has put in motion discussions reminiscent of when MBNA was in transition, and coupled with the uncertainty surrounding the future of Chemours, tongues are certainly wagging. The positive in all this is the opportunity to reevaluate how Delaware can compete to bring and to keep businesses in Delaware. Exercises like that have begun as task forces are evaluating state spending and revenues, tax policy and other incentives that can help create the next round of growth in the state.
Delaware needs to continue to position itself as a place where businesses incorporate, relocate, and expand. There has been some good news on this front. Calpine recently opened the Garrison Energy Center in Dover, a 300 mega-watt generating facility helping to bring lower cost energy downstate, with the ability to expand on their current site in the future. Right next door to Calpine, German floor material manufacture Uzin Utz recently opened their doors, and Incyte in Wilmington announced 400 jobs coming to Delaware. Sunoco is planning a $3 billion reinvestment into its Marcus Hook facility, and if Delaware positions itself, the state may see some of that investment on the 40 acres that crosses into Delaware.
However, all of these gains and projections rest on the head of a pin. Speculation and rumor have already started as to the ways the General Assembly plans to balance the FY 2017 budget. Proposals to raise the graduated personal income tax by 13% on top earners, raise the franchise tax, increase gross receipts tax—all have a negative impact on businesses’ decisions to located and expand in Delaware at a time when we can least afford it. The Delaware State Chamber of Commerce is committed to promoting policy and legislation focused on economic growth and will continue to be the voice of Delaware business in Dover working to ensure a bright future for Delaware and its citizens.
by James DeChene
An extension has been granted for those seeking to provide comment on the complaint filed by the Public Service Commissions of Delaware and Maryland against PJM Interconnection and the PJM Transmission Owners regarding the manner in which costs will be allocated for a new transmission project, Artificial Island. PJM proposes to allocate over 90% of the costs for the new project to ratepayers in Delaware and Maryland, raising the transmission portion of our electricity bills by 20 to 25 percent to solve a problem the ratepayers of Delaware and Maryland did not cause.
At issue here is the way in which PJM calculates who bears the cost of projects like these. Factors such as project size and scope, as well as the reason for the project, such as line stability or easing congestions are also taken into consideration. The filed complaint seeks PJM to reconsider how the allocation is to be applied in an effort to reduce Delaware’s responsibility and to help mitigate the hit to residential and industrial rate payers.
The Delaware State Chamber of Commerce and the Delaware Manufacturing Association will be weighing in, and urge any interested companies to join them in doing so. There is no cost, and the effort consists of writing a letter supporting the Delaware and Maryland PSC position. For more information on how to file, contact James DeChene at 302-5786-6560, or firstname.lastname@example.org.
James DeChene is the Chamber's Senior Vice President of Government Affairs.