On July 25, 2024, FERC issued an order granting in part and denying in part a complaint raised by American Municipal Power, Inc., the People’s Counsel for the District of Columbia, and the PJM Industrial Customer Coalition (collectively, “Complainants”) against PJM Interconnection, L.L.C. (“PJM”) arguing, principally, that PJM violated Schedule 6 of the PJM Operating Agreement by failing to execute Designated Entity Agreements in all situations with each “Designated Entity,” or the entity designated to build transmission projects that PJM selects in the PJM Regional Transmission Expansion Plan (“RTEP”). FERC also granted in part and denied in part a separate request by PJM under section 206 of the Federal Power Act to revise Schedule 6 of the PJM Operating Agreement (the “PJM 206 Filing”) governing the RTEP process and associated requirements for Designated Entity Agreements. FERC established paper hearing procedures to develop a record to determine PJM’s responsibilities concerning Designated Entity Agreements for certain RTEP projects already in process and whether remedial actions are required to address the Operating Agreement violations.
As to the complaint, Complainants argued that PJM violated Schedule 6 of the PJM Operating Agreement and requested that FERC direct PJM to both (i) execute Designated Entity Agreements for all previously approved RTEP projects currently under construction and (ii) execute Designated Entity Agreements for all RTEP projects moving forward. Regarding the PJM 206 Filing, PJM asserted that Schedule 6 of the PJM Operating Agreement uses the term “Designated Entity” in an “overly broad and imprecise” manner that renders the PJM Operating Agreement unduly ambiguous. According to PJM, it need only execute Designated Entity Agreements for projects it chose through the competitive proposal window process and selected in the RTEP for cost allocation purposes. PJM thus asked FERC to find certain parts of the PJM Operating agreement unjust and unreasonable and adopt PJM’s proposed replacement rate provisions.
FERC granted in part and denied in part both the Complaint and the PJM 206 Filing. Concerning the Complaint, FERC found (i) Schedule 6 to the Operating Agreement is not ambiguous as to when PJM must execute Designated Entity Agreements, and (ii) PJM violated the Operating Agreement by failing to execute Designated Entity Agreements in every required instance. However, FERC found that PJM need not execute Designated Entity Agreements for transmission projects planned pursuant to Schedule 6, section 1.5.8 of the Operating Agreement to address certain reliability violations (on facilities below 200 kV and thermal violations on substation equipment) and denied the Complaint as it concerns those projects. FERC also established paper hearing proceedings to develop a record on which to determine what—if any—remedial actions FERC must order to address PJM’s violations of the Operating Agreement. As to the PJM 206 Filing, FERC found that the requirement in the PJM Operating Agreement for incumbent transmission owners to provide Designated Entity Agreement-related security for certain transmission projects is unjust and unreasonable but that the Operating Agreement is otherwise just and reasonable. FERC therefore directed PJM to submit a compliance filing that removes those provisions from the PJM Operating Agreement.
The Order was issued in Docket Nos. EL22-80 and EL22-85 and can be found here.
