PJM and FERC Stick Con Ed Customers with $120 Million Added Annual Costs of PSEG Transmission Upgrade Mainly Benefiting New Jersey

Under FERC approved tariffs, PJM, the transmission grid utility, allocates costs of transmission upgrades.  Ostensibly the costs are to be allocated to beneficiaries.

Con Edison has a complex agreement for the wheeling of 1,000 megawatts of power from New Jersey to New York using lines of PSE&G.  According to a petition for rehearing of a FERC order  filed by Con Edison and the City of New York:

“Con Edison, with a load of 1,000 MW, was allocated $629,086,000 of the project’s cost, while PSE&G, with a massively greater load of 11,000 MW, was allocated only $52,372,000 of the project’s costs. Con Edison also demonstrated that many entities would benefit substantially from the project, but would be allocated little or no cost. PSE&G, the only party that argued that Con Edison would benefit from the project, failed to demonstrate more than a negligible benefit to Con Edison.”

“* * * * [Con Edison and the City of New York] submit that PSE&G and PJM would not have proposed and approved a project of that magnitude simply to facilitate a pre-existing 1000 MW transmission service to Con Edison. Rather, they designed a project that will provide benefits for all users of PSE&G’s facilities largely at the expense of Con Edison.”

“* * * * PJM’s allocation would increase the annual charges to Con Edison for transmission service by a factor of four (from approximately $40 million to $160 million).”Con Edison and the City lodge a procedural objection that the PJM utility did not transparently disclose how costs of the upgrade would be allocated disproportionately to Con Edison and its customers until late in the process, and FERC swiftly approved the PJM allocation without a hearing in a routine order.  Unless reversed, these costs will be passed through by Con Edison to its customers.

Notwithstanding the vaunted “rate freeze” in the recent PSC rate case, every month Con Edison adjusts its rates and flows through to customers variations in many costs, including transmission costs.  Under well established Supreme Court precedents, FERC approved charges for wholesale electricity and its transmission can be flowed through to retail customers.  Unless the City and Con Edison are successful in reversing FERC’s order, customers will pick up this tab.

Meanwhile, the cavalier slamming of costs to Con Edison and its customers by the grid utility and FERC will only make matters worse for customers.  Con Edison customers already owe the utility hundreds of millions of dollars they cannot afford to pay, hundreds of thousands of residential customers receive final shutoff notices each month, and about 8,000 customers a month are shut off when they are unable to pay or make satisfactory repayment arrangements.

We wish Con Edison and the City luck in trying to reverse this apparent injustice that will harm New York electricity consumers.  Regrettably, the wholesale consumer advocacy funds allocated in October 2012 to benefit New York consumers have not been used to participate in matters such as this.

Gerald A. Norlander

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