Docket Nos. ER24-2336-000, ER24-2336-001, ER24-2338-000, ER24-2338-001, EL24-119-000
I concur in the Order’s rejection of the two section 205 filings,[1] one filed by the PJM Transmission Owners (PJM TOs) to amend the Consolidated Transmission Owners’ Agreement (CTOA) and one filed by PJM largely consistent with the CTOA Amendments proposed in the PJM TOs’ filing and made to effectuate a move of the Regional Transmission Expansion Planning (RTEP) Protocol to the Open Access Transmission Tariff (OATT).
With regard to PJM’s section 206 complaint seeking to move the PJM RTEP Protocol from the Operating Agreement (OA) to the OATT,[2] I concur only in the result of the Order, which is to reject the complaint. I do not join the Order’s rationale for the rejection, and I emphasize that my concurrence in the result is without prejudice to a future filing seeking to move the RTEP Protocol from the OA to the OATT.
On the broad issue of moving the RTEP Protocol to the OATT, I agree with the Organization of PJM States, Inc. (OPSI), which commented:
OPSI agrees with PJM and the [PJM] TOs that PJM should have unilateral authority to amend its regional transmission planning rules commensurate with its responsibility to ensure the reliability of the grid . . . . However . . . PJM has chosen to tie its FPA § 206 Complaint to an unjust and unreasonable FPA § 205 filing from the [PJM] TOs to amend the CTOA. Several proposed amendments to the CTOA are unjust and unreasonable and require the Commission to reject that filing outright.[3]
Moving the RTEP Protocol from the OA to the OATT
The practical effect of moving the RTEP Protocol from the OA to the OATT is to transfer the authority over the RTEP’s development from the Members of PJM to the PJM Board of Managers. There is nothing intrinsically wrong in doing so; on the contrary, I agree in principle with OPSI that it should be done. The details of this move, however, are critically important, as I discuss below.
As a state commissioner in PJM for 17 years, I am more than a little familiar with the sector-weighted Membership voting processes in PJM and whether this governance structure serves the public interest. Before going further, we should define our terms. “Members” and “stakeholders” are often used interchangeably, but are very different. “Members” are entities that satisfy the requirements set forth in PJM OA Section 11.6. A Member is either (i) a Transmission Owner, (ii) Generation Owner, (iii) Other Supplier, (iv) Electricity Distributor, or (v) End-Use customer. These are the Members with voting rights. Votes are weighted by sector, and voting outcomes are subject to arcane supermajority requirements.[4] Currently there are more than one thousand Members of PJM, including voting members, ex officio voting members, affiliate members, associate members and special members.[5]
“Stakeholders” is an even broader term that does not necessarily include Members with voting rights.[6] States and their utility regulators, by the way, are not Members and, I would argue, not “stakeholders” either. States are sovereign entities with the duty to serve the public interest in their states. No other entity, including special interests who label themselves “public interest organizations,” has the duty or the authority under federal or state constitutions and laws to protect the public interest.[7]
So the fatal flaw in allowing this unwieldy assemblage of various interests to vote on one of PJM’s most important functions – the development of the RTEP Protocol which informs the RTEP – is obvious. Virtually all of the voting Members have their own monetary interests in the regulatory outcomes of the process. Not to be indelicate, but they are clearly rent-seeking interests. That is not a moral judgment; it is simply economic reality. To believe that a process in which rent-seeking special interests get to vote to affect regulatory outcomes will somehow serve the public interest is naïve in the extreme. Not in this universe.
This unwieldy process of special-interest voting apparently reflected a belief during the “Founding Era” of RTOs that multi-state RTOs such as PJM would be essentially regional governments – quasi-governments – for setting electricity grid policy. These regional governments would operate high above state authority and be subject only to the Commission’s authority. In PJM in particular, the states were given no governance authority whatsoever, in contrast to the states in MISO and SPP, which at least had some section 205 rights related to cost allocation.[8] As regional quasi-governmental bodies for the grid, RTOs therefore needed their own quasi-parliaments and parliamentary procedures, as well as various guarantees of “transparency,” “inclusiveness,” etc., to make the whole structure look more, well, governmental.[9]
Yet there have always been fatal flaws in this belief in RTOs as regional quasi-governments for the power grid. First, nowhere in the Constitution of the United States is there an article entitled “Regional Transmission Organizations” that institutes RTOs as regional governments for grid policy, governed by “Members” who get to vote to affect regulatory outcomes. James Madison, who famously identified the threat to the public interest from what he termed “factions” in The Federalist No. 10,[10] would label the voting Members of PJM as exactly the “factions” he warned against.
Importantly, it is highly unlikely this quasi-governmental RTO structure can be made more feasible or more likely to serve the public interest by fiddling with details, such as giving additional special interest groups more influence in the decision-making.[11] The fundamental problem has always been in treating RTOs as regional quasi-governments. They are public utilities, not regional governmental bodies, and should be regulated as such by federal regulators, with a far more robust role for state regulators, and not by rent-seeking special interests.
So I see nothing inherently unjust and unreasonable in moving the RTEP Protocol from this unwieldy and special-interest driven process under the OA to the OATT, where the PJM Board can and should take full responsibility for development of the RTEP. PJM would be free to provide for – and certainly should provide – ample opportunity for its Members, as well as stakeholders and other interests, to comment on proposed amendments to the RTEP Protocol, but it should be the exclusive responsibility of PJM to develop and approve any changes to the rules by which the RTEP is developed and approved for submission to the Commission.[12]
Getting the Replacement Rate Right is Critically Important
I also agree with OPSI that it is absolutely essential to get the “replacement rate” right.[13] The section 206 filing herein fails to get the second prong right and ties itself to the section 205 filings, which is why I concur in the result of rejecting PJM’s section 206 filing without prejudice to a future filing that would move the RTEP Protocol from the OA to the OATT but gets the all-important replacement rate right. OPSI’s Limited Protest argues persuasively and in substantial detail that many of the PJM TOs’ proposed CTOA Amendments could have the effect of limiting PJM’s authority to plan and select regional transmission projects that could be more cost effective than local projects in achieving the same or similar purposes.[14] As OPSI points out, since several states within PJM do not have adequate authority to conduct their own need and prudency reviews of transmission projects[15] – an issue I have raised repeatedly in other contexts[16] – the result could be the construction of both regional and local projects that serve essentially the same purpose, but will burden consumers with billions of dollars of unnecessary costs.
Any future section 206 filing to move the RTEP Protocol from the OA to the OATT should include sufficient information that provides answers to several relevant and compelling questions. As I noted, OPSI has raised several important issues that must be addressed in any future filing proposing a replacement rate, especially with regard to the need to avoid duplication of both local and regional projects and PJM’s authority to select the most efficient project.
I will note a few more issues, all related to what I regard as essential state authority over transmission planning and cost allocation, that I similarly believe should be explored in any future section 206 filing. In my Concurrence in Part to Order No. 1920-A,[17] I listed in the Appendix the specific provisions which I supported and to which I concurred.[18] These provisions are all related, directly or indirectly, to a greatly expanded scope of authority for the state regulatory agencies in the long-term transmission planning and, most importantly, cost allocation processes under Order No. 1920-A. The full scope of expanded authority set forth for the state agencies in the Appendix to my Order No. 1920-A Concurrence in Part is critically important in determining whether Order No. 1920-A ultimately is adequate to protect consumers and serve the public interest in each state. Indeed, the scope of state authority set forth in Order No. 1920-A may need to be expanded further – in PJM specifically – to include similar section 205 filing rights related to cost allocation historically enjoyed by state agencies in MISO, SPP, and ISO-NE. Since each one of these filings herein was made well before the Commission issued Order No. 1920-A, it would have been impossible for these filings to reflect that new and expanded scope of authority given to the states in Order No. 1920-A, including of course the states in PJM. So should PJM seek to refile to move the RTEP Protocol from the OA to the OATT, it would be essential to include information in that filing describing how the expanded scope of authorities given to the PJM states in Order No. 1920-A, specifically described in the Appendix to my Order No. 1920-A Concurrence in Part, would not in any way be limited or barred by a move of the RTEP Protocol from the OA to the OATT.
Further, any filing should include information regarding whether the PJM TOs and PJM acknowledge that the expanded scope of state authority set forth in Order No. 1920-A for transmission planning and, most importantly, cost allocation, does not in any way conflict with TO rights under Atlantic City[19] or any other court ruling.
Information should also be included as to whether both PJM and the PJM TOs acknowledge that, consistent with Order No. 1000,[20] the selection of a transmission project for the RTEP does not pre-empt a situs state’s authority to conduct its own proceeding under its own state laws to determine the need and/or prudence of that project and to approve or disapprove the construction of that project in accordance with its state laws.[21]
For these reasons, I respectfully concur in the Order’s rejection of the two section 205 filings. I concur only in the result of the Order’s rejection of PJM’s section 206
complaint. I emphasize again that my concurrence in the result to the rejection of the PJM section 206 complaint is without prejudice to a future filing seeking the same relief: moving the RTEP Protocol from the OA to the OATT.
For these reasons, I respectfully concur in part and concur in the result in part.
[1] The section 205 filings are found in docket numbers ER24-2336 and ER24-2338.
[2] This section 206 filing can be found in docket number EL24-119.
[3] OPSI Limited Protest and Motion to Lodge at 4 (footnotes omitted) (filed July 22, 2024) (Limited Protest). OPSI also noted that “if the Commission agrees the location of the RTEP Protocol is unjust and unreasonable, the Commission should establish paper hearing procedures to further develop the record to determine the just and reasonable and not unduly discriminatory or preferential set of replacement rules. This is necessary because by linking its replacement to the [PJM] TOs’ CTOA filing it has proposed an unjust and unreasonable replacement rate, and some of the amendments to the CTOA are unnecessary to give PJM the filing rights it needs.” See, e.g., id. at 5. As today’s Order recognizes, however, PJM and the PJM TOs have noted that each of the three filings are interrelated such that, given these facts and circumstances, following that bifurcated path may not be effective given the procedural posture and status of the multiple proceedings. See, e.g., Order at P 22 & n.47. If the filings had not been interrelated in this way, I may have supported OPSI’s suggestion in this regard.
[4] See, e.g., https://learn.pjm.com/pjm-structure/member-org/committees-groups-faqs/sector-weighted-voting.aspx.
[6] See, e.g., PJM Manual 34, Section 2 (Definitions) (“Stakeholders – PJM Members, OPSI and its members, state consumer advocates who are not PJM Members, Independent Market Monitor, PJM staff, and PJM’s Board.”).
[7] Some states have established consumer advocates’ offices that specifically represent residential consumers and do a good job, as Virginia’s does, but are not always tasked, as state utility commissions typically are, with protecting the overall public interest. In any event, consumer advocates are just that – advocates serving as parties in cases where allowed – while state utility commissions are decisional authorities.
[8] OPSI accurately notes this history in its Limited Protest at 13.
[9] See, e.g., Reg’l Transmission Orgs., Order No. 2000, FERC Stats. & Regs. ¶ 31,089 (1999) (cross-referenced at 89 FERC ¶ 61,285), order on reh’g, Order No. 2000-A, FERC Stats. & Regs. ¶ 31,092 (2000) (cross-referenced at 90 FERC ¶ 61,201), aff’d sub nom. Pub. Util. Dist. No. 1 of Snohomish Cty. v. FERC, 272 F.3d 607 (D.C. Cir. 2001); Wholesale Competition in Regions with Organized Elec. Mkts., Order No. 719, 125 FERC ¶ 61,071, at PP 7, 477 (2008) (setting forth four principles of RTO “responsiveness” as “(1) inclusiveness, (2) fairness in balancing diverse interests, (3) representation of minority positions, and (4) ongoing responsiveness.”), order on reh’g, Order No. 719-A, 128 FERC ¶ 61,059, order on reh’g, Order No. 719-B, 129 FERC ¶ 61,252 (2009).
[10] Madison described a “faction” as “a number of citizens, . . . who are united and actuated by some common impulse of passion, or of interest, adverse to the rights of other citizens, or to the permanent and aggregate interests of the community.” The Federalist No. 10 (James Madison) (emphases added).
[11] For an excellent and informative article discussing the history of RTO governance see also Ari Peskoe, Replacing the Utility Transmission Syndicate’s Control, Energy Law Journal, Vol. 44.3 547 (2023). The author makes a very good suggestion for change: giving states in RTOs such as PJM Section 205 filing rights, which he argues – persuasively – would not infringe at all on the PJM TOs’ rights under the Atlantic City case. Id. at 614-615; see also infra P 15.
[12] This is essentially the process used in the California Independent System Operator Corporation (CAISO) to develop its transmission plan.
[13] See, e.g., OPSI Limited Protest at 1-2, 5, 13-15. Should a future proposal to move the RTEP Protocol from the OA to the OATT come as a section 205 filing, the same considerations and principles would apply in determining whether the proposal was just and reasonable.
[14] Id. at 14-15, 23-30.
[15] Id. at 29-30.
[16] See, e.g., The Potomac Edison Co., 189 FERC ¶ 61,161 (2024) (Christie, Comm’r, dissenting at PP 2-3, 12-14), https://cms.ferc.gov/news-events/news/commissioner-christies-dissent-potomac-edisons-abandoned-plant-incentive-er25-19; PSEG Renewable Transmission LLC, 188 FERC ¶ 61,142 (2024) (Christie, Comm’r, dissenting in part at PP 2-3, 12-14), https://www.ferc.gov/news-events/news/commissioner-christies-partial-dissent-award-incentives-pseg-renewable; Transmission Planning and Cost Management, Technical Conference, Docket No. AD22-8-000, Tr. 16:4-20:11 (Comm’r Mark Christie) (Oct. 6, 2022), https://www.ferc.gov/media/transcript-docket-no-ad22-8-000.
[17] See, e.g., Bldg. for the Future Through Elec. Reg’l Transmission Plan. & Cost Allocation & Generator Interconnection, Order No. 1920‑A, 189 FERC ¶ 61,126 (2024) (Christie, Comm’r, concurring in part) (Order No. 1920-A Concurrence in Part), https://www.ferc.gov/news-events/news/e-1-commissioner-christies-concurrence-part-order-no-1920-rm21-17-001.
[18] Id. P 2 & n.3. I voted in favor of only those provisions described in my Order No. 1920-A Concurrence in Part and listed in the Appendix and not to any other part of Order No. 1920-A. Id. at App.
[19] Atl. City Elec. Co. v. FERC, 295 F.3d 1, 9 (D.C. Cir. 2002) (Atlantic City); see also supra n.11.
[20] Transmission Plan. & Cost Allocation by Transmission Owning & Operating Pub. Utils., Order No. 1000, 136 FERC ¶ 61,051 (2011), order on reh’g, Order No. 1000-A, 139 FERC ¶ 61,132, order on reh’g & clarification, Order No. 1000-B, 141 FERC ¶ 61,044 (2012), aff’d sub nom. S.C. Pub. Serv. Auth. v. FERC, 762 F.3d 41 (D.C. Cir. 2014).
[21] Order No. 1000 made this clear, id. PP 227, 253 n.231, 287, and it is contra to the ruling in the U.S. District Court of Pennsylvania in Transource v. Defrank, which was wrongly decided. See Transource Pennsylvania, LLC v. DeFrank, No. 1:21-CV-01101, 2023 WL 8457071 at *6-*7, *17 (M.D. Pa. Dec. 6, 2023) (finding, inter alia, that by rescinding Transource’s provisional certificate of public convenience after engaging in its state analysis and finding insufficient evidence to establish “need” under Pennsylvania law for the project, the Pennsylvania Public Utility Commission (PUC) is “attempting to supplant the role of the RTO and expand its state authority into the regulatory territory occupied by the federal government. . . . Because the PUC’s decision presents an obstacle to achieving federal objectives, it is conflict preempted and violates the Supremacy Clause.”).