Commissioner Chang’s Dissent on PJM’s RRI, ER25-712

Docket No. ER25-712-000

I dissent from this order because PJM has not demonstrated that its proposal represents a just and reasonable and not unduly discriminatory or preferential solution to the resource adequacy and reliability concerns it has identified beginning as soon as 2026.  As discussed further below, I would instead reject PJM’s filing with targeted guidance to place greater weight on the Commercial Operation Viability criteria in a revised proposal and thereby better align PJM’s reforms with its demonstrated needs.  

This proceeding concerns PJM’s diagnosis of looming reliability challenges in the 2026-2030 timeframe and its proposed solution to address those challenges.  PJM argues, and I am persuaded, that it faces increasing reliability risks in the next five years.  PJM states that the increased reliability risks are due to sudden and rapid load growth partially driven by buildout of data centers,[1] projected generator retirements, and the addition of intermittent and limited duration generating facilities.[2]  The Commission and PJM have a paramount obligation to ensure that PJM’s system reliably serves its load.  Accordingly, I am interested in the potential solutions to address this reliability challenge, even if they may deviate from or supplement PJM’s generally applicable interconnection queue procedures.[3]   

Commission Precedent Governing Open Access and Exceptions to Standard Interconnection Processes

The Commission, in Order No. 2003, adopted standardized interconnection procedures to, among other things, prevent undue discrimination and increase the amount and variety of new generation to compete in wholesale electricity markets.[4]  The Commission has stood fast behind this non-discriminatory principle, finding that proposals that do not offer access to the transmission system through the generator interconnection process on a comparable basis for similarly-situated proposed generating facilities are inconsistent with open access and must be rejected.  In recent years, that has included rejecting proposals that create barriers to entry for specific classes of interconnection customers or that create unduly discriminatory priority access to the generator interconnection process.[5]

Nevertheless, the Commission has approved proposals that allow different treatment for generating facilities that could meet a unique system need or significantly increase the efficiency of interconnecting needed new generation.  For example, in 2022, the Commission approved emergency interconnection procedures filed by California Independent System Operator Corporation (CAISO) that allowed certain generating facilities to proceed more quickly than CAISO’s standard interconnection process, provided those generating facilities could meet certain criteria.  The Commission’s approval expressly recognized that this process was “narrowly tailored…for emergency generation that is necessary to preserve system reliability,” and that CAISO “developed adequate criteria to narrow the future use of the emergency interconnection process….”[6]  The Commission also has allowed for differently situated generating facilities to interconnect more quickly either through the use of surplus interconnection service[7] or by replacing a retiring existing generating facility.[8]  In those instances, the Commission found that the efficiency gains in interconnecting new generating facilities through either the surplus interconnection process or through generator replacement, alongside the natural limitations in availability of surplus interconnection service or retiring generating facilities available for generator replacement, warranted a departure from otherwise applicable open access requirements.[9]

These examples highlight that the Commission balances multiple considerations –including the need for and benefits of a particular proposal, the impact on other interconnection customers, and whether the solution is adequately tailored to the identified need – when considering targeted or surgical deviations from the standardized interconnection procedures that have been a foundation of its open access interconnection policies since at least Order No. 2003.[10]  In balancing these considerations, I believe the Commission should apply particular scrutiny to proposals that facilitate “queue jumping” and ensure, consistent with its obligations under FPA section 205, that harms to interconnection customers are adequately justified and mitigated to the extent possible.  PJM’s proposed approach does not accomplish that.

PJM’s Proposed Solution Is Misaligned with Its Stated Problem

While PJM faces looming reliability challenges, its proposed solution primarily prioritizes the size of the new interconnecting resources over speed, and thus is poorly designed to address those very real challenges.  By expediting projects that are unlikely to directly address PJM’s reliability risks in the 2026-2030 timeframe, PJM’s filing also presents a risk of the worst of both worlds: it compromises the Commission’s open access principles with no guarantee it will resolve PJM’s reliability issue.  By facilitating queue jumping for large generators, which are the most challenging to develop, acquire the necessary environmental permits, and obtain adequate material supplies and labor for construction and focusing primarily on large generators over speed of development, PJM’s proposal may not actually resolve its impending capacity shortage.  Given this misalignment, I am not persuaded that PJM has met its burden to show that its proposal is just and reasonable and not unduly discriminatory or preferential and therefore would reject it with guidance to provide PJM a path towards a more tailored and effective solution. 

PJM’s RRI proposal advances new interconnection requests to join the Transition Cycle #2, which consists of projects that were in the AG2 and AH1 queue windows prior to its transition to a new cluster study approach for interconnection.  Proposed generating facilities that seek to join the RRI group will be scored according to a 100 point system that will be allocated based on the attributes of the interconnection request: 1) a set of Market Impact criteria made up of UCAP (maximum of 35 points), ELCC (maximum of 20 points), and location (maximum of 10 points); and 2) a set of Commercial Operation Viability criteria made up of in-service date (maximum of 10 points), project support (maximum of 10 points), uprates (maximum of 10 points), and headroom (maximum of 5 points).  Proposed generating facilities that enter Transition Cycle #2 through the RRI will not be able to extend construction milestones[11] and will be required to participate in PJM’s base residual auction for a minimum of ten years once they go into service.

Because PJM’s stated reliability needs are in the 2026-2030 timeframe, its proposal should be designed to meet those needs in a timely manner.  PJM justifies its departure from its approved interconnection procedures by citing a significant reliability issue that must be resolved in this time frame.  But PJM’s proposed point system does not, in fact, appear to target those needs.

Instead, PJM’s filing proposes to only award a maximum of 10 points (out of a total of 100 possible points) to interconnection requests that propose commercial operation dates within PJM’s identified shortage window (i.e., 2026 to 2030).  PJM, when designing its proposal, should have ensured that the in-service dates of the interconnecting resources receive the greatest weight in the evaluation of the candidate projects. 

Similarly, PJM’s proposal allows for a maximum of 5 points given to interconnection requests that propose sites where there is existing headroom on the transmission system.  Headroom is one of the key factors to a project coming online quickly with low cost, goals that PJM has explained are fundamental to resolving its reliability shortage.  If a proposed generating facility chooses a site where extensive upgrades to the transmission system would be required, there is little chance that the generating facility will be commercially operational in PJM’s identified reliability window.[12]  With PJM’s stated need to quickly add new generation to its system, I find that the ability to use existing available transmission capacity (in the form of headroom) to be much more important than the 5% of the total that PJM assigns to it.  The combined effect of PJM’s headroom and commercial operation date proposals is that only 15% of its weighting is assigned to arguably the two most critical factors to meeting its identified reliability needs. 

In contrast, PJM awards a disproportionately large number of points based on project size, which will have the effect of skewing its selection decisions toward large resources that actually are less likely to be in-service in that time window, and not towards resources that can meet its stated reliability need in the five-year time frame.  PJM’s UCAP criterion is inextricably tied to project size and represents the largest single point category: 35 points in the scoring system.  Large generating facilities will be given a priority to access the RRI group over smaller resources.  However, the larger the proposed generating facility, the more complex the project development and construction would be.  Further, new large generators are more likely to require significant upgrades to the transmission system and developing and constructing the necessary transmission upgrades would more likely delay the commercial operation of the new generating facility as compared to those proposed generating facilities that require fewer network upgrades.  These factors, as PJM knows, are exacerbated by the recent delays and disruptions to the supply chain for critical transmission infrastructure. 

In addition, I am concerned about PJM’s design choice to target a specified number of projects through RRI, rather than a specified amount of capacity.  As PJM has explained, it is facing a gap in available generating capacity, which can only be resolved by the addition of new generation.  PJM proposes to limit the additions to Transition Cycle #2 through the RRI to only 50 proposed resources to minimize impacts on the existing interconnection customers with interconnection requests in Transition Cycle #2, without any guarantee of how many megawatts of new generation would be in-service in a timely manner as a result of the RRI.  Because PJM’s need is in terms of additional megawatts of generating facility capacity, it is unclear why PJM did not propose to add, through the RRI, a specific targeted megawatt of new interconnection requests to more specifically meet its identified need. 

Ultimately, PJM’s proposed scoring system does not place sufficient weight on the most important characteristics such as commercial operation in-service dates or available headroom on the transmission system, which will more directly address the problem that it faces.  It is critical that PJM and the Commission take steps to ensure the reliability of PJM’s system, but I am not persuaded that this proposal – particularly given the harms it will likely inflict on other interconnection customers – is adequately tailored to actually accomplish PJM’s goals.      

A Revised Proposal Could Further PJM’s Stated Goals While Reducing Open Access Concerns

Given my concerns explained above, I would reject PJM’s proposal and draw on better approaches presented in the record and from Commission precedent to guide PJM towards a more effective solution with fewer collateral harms.  Specifically, PJM’s Independent Market Monitor (IMM) and CAISO’s emergency interconnection procedures provide good approaches for how PJM could structure a solution that would be more likely to address PJM’s needs while raising fewer open access concerns. 

First, with regard to the commercial operation date criterion, PJM’s IMM suggests that any proposed generating facility seeking to enter the RRI should be required to have a proposed commercial operation date in the window that PJM needs additional generation, i.e., between 2026 and 2030.  I agree with the IMM’s sentiment that the commercial operation date is one of the most important features and therefore PJM should have assigned the greatest weight in the point system to the in-service date of the proposed generating facility.

Using CAISO’s emergency generator interconnection process as an example, CAISO required that the study of the proposed generating facility need to demonstrate that it may resolve the identified system issue.[13]  Instead of assigning a limited number of points to this attribute, as PJM’s current proposal does, PJM should have focused on the in-service date of the proposed generating facility and ensured that those that received a priority in the interconnection process could ensure in-service dates to meet PJM’s stated timeline for needed generation.

Next, the available headroom at the location of the proposed interconnecting resource, or the need for only minor transmission system upgrades, should receive a greater number of points under the RRI criteria.  The ability to use available headroom, more than anything else, is a strong indicator for whether any proposed generating facility will be able to achieve commercial operation and meet PJM’s need for additional generation in the timeframe that PJM has identified.  Again, CAISO’s emergency interconnection procedures addressed this by incorporating specific thresholds that must be met for a proposed generating facility to use its emergency interconnection procedures.[14] A similar set of thresholds or an increase to the number of points awarded for headroom in the scoring process should have been used here.

Finally, I agree with the IMM’s conclusion that PJM should replace its 50 project cap with an identified “number of MW, with the required reliability characteristics, that it believes are needed to address PJM’s identified reliability shortfall and use the RRI process to obtain those MW.”[15]  This change, coupled with the other revisions described above, would focus PJM’s solution on the critical characteristics it needs to address its reliability shortfall.

The Commission, PJM, Market Participants, and Other Stakeholders Have Additional Work to Do

Notwithstanding my dissent from today’s order, I recognize that the challenges PJM faces are significant, not easily solved, and the subject of major ongoing efforts by PJM, the states, and PJM stakeholders.  I appreciate the time and hard work committed by the broad PJM community to develop, support, and critique this filing.  While I would have preferred a different resolution, I hope that RRI ultimately does succeed in bringing needed generation online to relieve the reliability pressures in the region. 

Coincident with this order, the Commission is approving certain revisions to PJM’s surplus interconnection service provisions.  I applaud PJM for making these revisions and allowing owners of existing generating facilities to make surplus interconnection service available to new generation.  This is a very important piece of the puzzle to address PJM’s anticipated resource adequacy issues.  Integrating more resources on the existing system through the surplus interconnection process is a pragmatic and efficient solution that will certainly help in the near term, and it is clear from the numerous supportive comments that these revisions are aligned with both PJM’s goals and Commission policy and precedent. 

PJM is acting in some cases to expediently withdraw interconnection requests that are not proceeding to commercial operation, in accordance with its tariff, and I encourage them to continue those efforts.  Resource developers should not enter the queue, sit for years, and then not proceed to commercial operation; the impact on PJM’s system from the combination of this behavior and PJM’s pace in processing requests have proved to be extremely problematic and have exacerbated the issues we see today.  Finally, I strongly urge PJM to continue its hard work on processing the interconnection requests currently in its queue.  There is much potential capacity waiting for study results, and processing those requests quickly will directly address these issues more efficiently than developing and working through controversial new procedures. 

For these reasons, I respectfully dissent.