Commissioner James Danly Dissent Regarding PJM Interconnection, L.L.C

Commissioner James Danly Statement
April 14, 2022
Docket No. ER22-902-000

I dissent from this order[1] because the new rate, the so-called “State Agreement Approach Agreement,”[2] includes an unnecessary and premature “cost sharing provision”[3] that bakes in a cost allocation that would entitle PJM to later require unwilling states’ ratepayers to pay for New Jersey’s new transmission project.  The State Agreement Approach Agreement’s “cost sharing provision” also usurps transmission owners’ reserved rights to propose rates in PJM. 

The “cost sharing provision” states that “PJM shall allocate to any future user of a [State Agreement Approach] Project . . . a pro rata share of the total costs.”[4]  This language is unambiguous.  The State Agreement Approach Agreement binds ratepayers and any other “future user”—as determined by PJM—to pay for New Jersey “or more states” that request “transmission facilities that would assist [New Jersey or more states] in implementing their public policy goals.”[5]

The majority “find[s] that the cost sharing provision ‘merely contemplates that future users . . . could be asked to pay their fair share of costs’” to be defined later and thus we need not worry about Paragraph 6.2(g)’s actual language or the protests focused on it.[6]  We are further promised that New Jersey commits to “‘partnering with all other states or entities in the future’ in a future cost allocation filing.”[7]  Indeed, the majority exhausts two paragraphs finding that the seven words “PJM shall allocate to any future user” do not mean what they say. 

Mere contemplation of partnering aside, the cost sharing provision settles the single most important cost allocation detail:  whether anyone besides the ratepayers in New Jersey can have the costs of a state “public policy” project foisted upon them.  The answer to that question is “yes,” the costs of a state’s pet project can be passed on to other states’ ratepayers.  Thus, notwithstanding lukewarm reassurances that “under the [State Agreement Approach] process, the costs of transmission facilities that a state voluntarily sponsors are recovered only from the customers in the sponsoring state(s),”[8] the actual language of the State Agreement Approach Agreement provides otherwise:  that PJM “shall allocate” to “[f]uture users,” including ratepayers potentially outside of New Jersey, “a pro rata share of the total costs” of the New Jersey projects.

The claims of PJM and New Jersey that no costs will be passed on to ratepayers in states that do not voluntarily agree to participate in a share of the costs are not supported by the plain language of the State Agreement Approach Agreement, which is the actual rate on file.  Promises and good intentions in pleadings are no substitute for, nor do they inform the rights or obligations created by, filed rates.  The language in the State Agreement Approach Agreement says nothing about the voluntary participation of other states and appears to conflict with other previously approved tariff provisions.[9]

This order cannot be written off as a mere punt of an issue to a future filing because the now-approved tariff language decides a critical question.  Many in the industry have been concerned that certain states might seek to shift or socialize the costs of the transmission projects that will be required to achieve their bold (some might say “brash”) renewable portfolio goals to the ratepayers in other states.  Now, the filed rate allows that very result.  The State Agreement Approach Agreement states that PJM “shall allocate” these costs to “future users,” as detailed in future filings.  The majority codifies an answer to this critical question even as it argues that protests are premature because, although the issue is now decided, the details are yet to come. 

To add insult to injury, the tariff revisions approved today contradict other provisions of the tariff.  The establishing agreements that created PJM reserved rate filing rights to incumbent transmission owners.[10]  The majority sets this issue aside because—again—the commitment that “PJM shall allocate . . . costs” is deemed insufficient to constitute a proposed rate.[11]  To “allocate . . . costs” is the core stuff of ratemaking, and while the language may be imprecise, it is also expansive.  PJM will decide how to “allocate . . . costs,” not the Transmission Owners.  The majority again tries to explain its way out of the plain language of the State Agreement Approach Agreement by “find[ing] that the ‘shall allocate’ language indicates only that PJM, as transmission provider, will be the entity administering cost allocation, but does not establish that PJM will file the future cost allocation.”[12]  Unfortunately, the State Agreement Approach Agreement does not actually say any of that.

I see no reason for the State Agreement Approach Agreement to include the cost sharing provision in Paragraph 6.2(g).  I agree with the Federal Energy Advocate of the Public Utilities Commission of Ohio statement that “the proposed language . . . is unreasonably broad” and that “any ‘future user’ of [a State Agreement Approach] Project, and the associated allocation of costs thereof, must only occur on a strictly voluntary basis . . . and that no costs shall be allocated to . . . the ratepayers of a jurisdiction that did not explicitly choose to join the proposed [State Agreement Approach]” Project.[13]  That is not what the State Agreement Approach Agreement provides.  I am at a loss for why the majority approves a provision that plainly contradicts the meanings the majority ascribes to it.

For these reasons, I respectfully dissent.