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

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.