FERC Filings
REQUEST FOR REHEARING ON PJM GRANDFATHERING PROCESS
PJM'S Grandfathering Procedures Are Unfair and Unreasonable
PJM'S GRANDFATHERING PROCEDURES ARE UNFAIR AND UNREASONABLE
When PJM revised its queue, EPSA's worst fears were confirmed. The new queue contained several significant changes. Projects that were previously numbered in the 40s, 50s, 60s and 70s are suddenly in the number 3 through 11 slots. Despite PJM's statement that (1) it had received grandfathering requests from eight entities covering 20 generation sites and 8300 MW, (2) many of these requests were for generation expansions of less than 100 MW which would not likely affect other projects, and (3) PJM's preliminary review indicated that only five or six projects possibly would affect the queue and resulting cost responsibility, a review of the new queue shows that the effects of grandfathering on existing projects will be much more significant than initially asserted.
Only three of the nine projects moved into the 3 through 11 slots are less than 100 MW, and the largest is 750 MW, and almost half of the total number of grandfathered projects (9 out of 20) - comprising approximately 20 percent of the 8300 MW for which PJM indicated it had requests - were moved to these slots. With the exception of Project Number 4 from the old queue, projects which were previously numbered 2 through 22 were all moved down nine or ten slots each. In short, a significant number of projects lost their priority position, even though several projects were withdrawn before PJM reordered the queue. Those projects are now facing significantly higher interconnection costs.
Unfortunately, PJM's confidentiality rules precluded interested parties from determining which projects were moved or the basis on which queue changes were made. Because PJM has not published any objective criteria by which it planned to evaluate requests for grandfathering, and given the resulting "black box" nature of PJM's queue, many market participants want to ensure that PJM did not unfairly favor utility projects. Were, for example, projects advanced in the queue on the basis of transmission expansion or other plans that were limited to only rate-based projects? What if a non-utility generator could show that it could have met the perceived need for generation and been included in such plans if the plans had been open to non-utility sources of generation? Conversely, do these same planning documents, or other planning documents, contradict the basis for grandfathering projects by not mentioning these projects? Do the grandfathered projects provide any evidence that they could not have complied with PJM's earlier requests for project notification? In short, the closed nature of the PJM process has precluded any other participants from understanding the basis for PJM's actions, verifying PJM's conclusions, or providing contrary evidence.
Given that the effect of PJM's action on the development of merchant plants and on the competitive market itself may be significant - if, for example, it would result in new merchant generation being placed at a competitive disadvantage relative to utility-owned projects - it is important that FERC be able to assure itself and the industry as a whole that this is not the case. Indeed, clear and fair rules, which produce certain and predictable results, are vitally important to EPSA's members who are making significant investment in merchant plant development and in purchases of divested utility assets. Generation developers need clear, well-articulated, practical and non-discriminatory interconnection procedures. Allowing PJM to shuffle its interconnection queue without objective criteria or verifiable processes runs directly counter to these goals and will chill new investment. In addition, the burden should be squarely on projects seeking grandfathered status to explain why they failed to advise PJM of the projects at an earlier date.
To the extent that PJM's actions dampen the willingness of developers of new generating facilities to invest in PJM, the adverse impacts of PJM's decisions will be felt by the competitive wholesale power market generally. Competitive generation, in the form of new or expanded merchant facilities, injects competition into pricing for power, promotes diversity in products and services offered to the market, and mitigates the vertical market power of incumbent utilities. Equitable rules for new market entry are critical to the willingness of participants to step forward with the projects necessary to ensure adequate generation in the developing competitive markets. Thus, fair, workable and well-established interconnection rules are critical to the success of merchant construction and, in turn, robust wholesale markets.