Con Ed Rebuffed Again on NJ Cost Allocation Dispute

By: Rich Heidorn Jr. |

The Federal Energy Regulatory Commission again rejected Consolidated Edison of New York’s request that it force PJM to recalculate the cost allocation for two transmission upgrades in northern New Jersey, raising questions about whether the company will seek alternatives to the so-called “PSEG wheel” for delivering power to New York City.

The commission last week rejected Con Ed’s November 2014 challenge (EL15-18) and a rehearing request by Con Ed, the New York Public Service Commission and Linden VFT on an earlier order in the dispute (ER14-972).

PJM assigned Con Ed $629 million of the costs of a $1.2 billion transmission upgrade to address a short-circuit problem in the Public Service Electric and Gas transmission zone outside New York City. PSE&G was allocated $52 million of the cost.

Con Ed was also assigned $51 million of PSE&G’s $100 million Sewaren storm-hardening project. The company says it should be assigned only $29 million for the two New Jersey projects.

PJM said Con Ed’s responsibility resulted from its use of the “Con Ed-PSEG wheel,” in which Public Service Enterprise Group, PSE&G’s parent company, takes 1,000 MW from Con Ed at the New York border and delivers it to Con Ed load in New York City.

In April 2014, FERC rejected Con Ed’s attempt to avoid paying for the short-circuit project but said it wanted more information on how PJM performed the distribution factor (DFAX) analysis that determined Con Ed’s share of the cost. In last week’s order, the commission accepted PJM’s compliance filing, saying it was satisfied that the RTO had conducted the DFAX analysis correctly.

In filing the second complaint, Con Ed had sought a broader consideration of the cost allocation than the rate filing that prompted FERC’s earlier order.

‘Objectively Unreasonable’

Con Ed said PJM’s Tariff requires a review of instances where its cost allocations will produce “objectively unreasonable” results. The commission, however, sided with PJM, saying that “that the provision limits the discretion in reviewing the results of the solution-based DFAX method analysis to its engineering judgment of the flows over the subject facility.”

It agreed with PJM that, based on its Tariff and Order 1000, the RTO can use a “substitute proxy” only “when the solution-based DFAX method analysis cannot be performed for the facility in question and the resulting flows are not consistent with the normal expected flow results that an engineer would expect to see.”

FERC said PJM was able to properly conduct the analysis.

“Because Con Edison has provided no evidence the flows were not properly measured, there was no basis upon which to disregard those results,” the commission said, adding that the Tariff did not permit PJM the discretion to use a substitute proxy based on whether the resulting cost allocation appears unreasonable.

“Such an interpretation would require PJM to ignore the cost allocation procedures of its Tariff and examine every cost allocation to determine whether it is objectively unreasonable. We also find that such an interpretation would provide PJM with too much discretion and is at odds with the requirement in Order No. 1000 for determining ex ante cost allocation procedures, so all parties will know in advance how project costs will be allocated.”

Con Ed also protested the way PJM nets transmission usage, saying it discriminates against point-to-point customers and makes incorrect assumptions about the source of the generation serving its New York load.

PJM nets a customer’s positive energy flows with its negative flows, modeling the transmission zone as a whole and not bus-by-bus. PJM said that wouldn’t apply to Con Ed because its energy flows in only one direction over the Bergen-Linden Corridor.

Planning Transparency

FERC also rejected the complaints of Con Ed and Linden — which owns a 315-MW merchant transmission facility that interconnects both PJM and NYISO — about the transparency of PJM’s transmission planning process. FERC repeated its observation from the April 2014 order that the RTO had discussed the project during numerous Transmission Expansion Advisory Committee meetings in 2013. “Con Edison could have, but did not [raise] cost allocation issues at the TEAC meetings,” FERC said.

Con Ed’s contract for the wheel expires April 30, 2017, unless the company chooses to roll over the service. Con Ed spokesman Mike Clendenin said the company has not decided on whether it will appeal the ruling or renew the contract for the wheel.

“We are concerned about the unfair costs to our customers and will be reviewing our options,” he said.

“We’ve got some time,” he added, noting that the company would have to give notice of its intention regarding the contract in 2016.

Con Ed’s peak load in New York’s five boroughs and Westchester County is more than 13,000 MW.

Con Ed Rebuffed Again on NJ Cost Allocation Dispute