Commissioner Christie’s Concurrence in PJM Proposal in ComEd Zone Related to Illinois Legislation

Docket No. ER24-462-000

I concur with the order and add the following.

The order notes that the Commission approved a 17-year amortization schedule for the hypothetical reference unit in response to a proposal by the New York Independent System Operator (NYISO).[1]  That is true, but I would point out that the New York case and this case are fundamentally different.  NYISO is a single-state ISO, and a single-state ISO should quite properly reflect the public policies of that individual state.  In that case, as a result of the State of New York’s new climate law,[2] the ISO proposed a 17-year amortization schedule for the reference unit while the New York State Public Service Commission (NYSPSC) – the state utility regulator – and other entities, including the independent Market Monitoring Unit for NYISO (MMU), argued to use a 20-year amortization schedule.  It is important to remember that in the NYISO matter, regardless of which amortization schedule was used, because this involved a single-state ISO, none of the implementation costs of New York’s law would be borne by customers in states other than New York.  So the question of whether the NYISO filing produced rates that were unjust and unreasonable was limited to its impact on New York consumers.[3]

Here, by contrast, PJM is obviously not a single-state ISO but a regional RTO consisting of 13 states and the District of Columbia.  So the analysis of whether the filing here produces rates that are unjust and unreasonable must include consideration of the impact on consumers in states other than Illinois.  That threat is very real, as pointed out, for example, by the Public Utilities Commission of Ohio’s Office of the Federal Energy Advocate (Ohio FEA), which supports the PJM filing.  As referenced by today’s Order, Ohio FEA states that:

PJM and its stakeholders briefly but belatedly considered creating a new [Cost of New Entry (CONE)] Area in response to the Illinois [Climate and Equitable Jobs Act (CEJA)] legislation as part of the 2022 Quadrennial Review.  CONE Area 3 includes all or parts of seven states where CEJA does not apply, including Ohio.  PJM noted that adjusting the useful life of the Reference Resource for all of Area 3 would increase costs to customers in states that had not enacted the CEJA restrictions and effectively socialize the compliance costs to customers in those states.  The Commission agreed, finding it would be “inappropriate” to reflect the effects of Illinois’ CEJA on all of CONE Area 3.  The Ohio FEA strongly agrees that it would be inappropriate to subject Ohio customers to higher capacity prices due to Illinois’ legislation, a process in which Ohioans had no say or involvement.  PJM’s proposal to establish a new CONE Area 5 for ComEd alone ensures that other PJM states are not subjected to the consequences of Illinois’ self-imposed restrictions on its electric generating sector.[4]

With this filing, PJM seeks to prevent the costs of the Illinois law from being unfairly put on consumers in the other PJM states, a very real threat and one that would certainly raise the specter of unjust and unreasonable rates being charged to non-Illinois customers.[5] 

Further, while today’s Order notes PJM’s efforts to describe the factual situation here as unique[6] and the Order appears to accept that assertion,[7] I would just add that while the specific factual record of this matter may be unique, the issue of the redistribution of the costs of one state’s public policies to consumers in other states in multi-state RTOs (again, the issue does not arise in single-state ISOs) is one that is not unique at all and will require much more attention and focus in the future, both from the states and the Commission.  In the recent order involving the Commission’s approval of PJM’s cost allocation for baseline upgrades in an update to the Regional Transmission Expansion Plan (RTEP) which involved projects driven by the closure of the Brandon Shores coal generating units in Maryland and the need to build new transmission as a direct result, I wrote:

Let me emphasize that the State of Maryland, within its sovereign police powers, clearly has the authority to mandate any particular mix of generating resources it prefers.  Maryland’s new climate law is well within its inherent authority to enact.  Such policies are for Marylanders to choose, not RTOs or FERC.  But if the resulting transmission projects under protest in this RTEP filing are caused more by Maryland’s policy choices than by organic load growth and economic resource retirements, then a salient question that may be asked is whether these transmission projects are more accurately categorized as public policy projects . . . ?

And if they are more accurately categorized as public policy projects, should such projects be regionally cost-allocated, potentially to consumers in Pennsylvania, West Virginia, Ohio, et al.?  For example, the State of Illinois has a law similar to Maryland’s that PJM has already estimated will cause $2 billion in transmission upgrades, costs that will be allocated to consumers in other states under PJM’s existing cost-allocation formula.  These are questions that the states within OPSI may wish to start considering, as some already have.  As the National Association of Regulatory Utility Commissioners (NARUC) noted in comments filed at FERC:  “. . . the PJM states are not voting members of PJM, but the majority have reached an equally valid agreement that the burden for costs driven by public policy requirements of one state should not be placed on customers of load serving entities in non-participating states.”[8]

As both this and the Maryland matters illustrate, the issue of the cost allocation of public policy driven costs in multi-state RTOs implicates both transmission and generation and potentially hundreds of billions, if not trillions, of dollars, in costs to consumers.  It is an issue that the states in multi-state RTOs must ultimately decide for themselves, with FERC’s statutory role primarily that of ensuring that any resulting rates to customers from such costs meet the standard of FPA section 205, or do not violate section 206.  I agree that PJM’s filing in this matter meets the section 205 standard, as today’s Order finds. 

For these reasons, I respectfully concur.