The Federal Energy Regulatory Commission approved a first-of-its-kind electric transmission agreement between the PJM Interconnection LLC and New Jersey, rejecting claims that the framework could unilaterally impose costs related to offshore wind development on consumers outside the state.
PJM and the New Jersey Board of Public Utilities, or BPU, filed the agreement (ER22-902) in January as part of the state's effort to install 7,500 MW of offshore wind generation by 2035.
That target was established through an executive order by New Jersey Gov. Phil Murphy that requires a 100% clean energy grid by 2050.
The agreement was submitted under a special State Agreement Approach provision in PJM's tariff, which allows states such as New Jersey to pursue state-specific energy and climate policies with the understanding that transmission-related costs will be borne by their own ratepayers.
In an April 14 order approving the agreement, FERC rejected concerns raised in protests from a coalition of PJM transmission owners and a ratepayer advocacy group in Ohio.
Cost allocation at issue
Protesters objected to a provision in the agreement that clarified that PJM "shall allocate" project-related costs to "any future user" other than a BPU-designated generator on a pro rata basis. Those users may include users of offshore wind transmission facilities that extend to neighboring wholesale power market regions such as the New York ISO and ISO New England, according to the agreement.
New York and the New England region are also looking to develop thousands of megawatts of offshore wind generation in the coming years pursuant to state policies. Meanwhile, transmission advocates have called for an integrated approach to offshore wind development.
In a dissent, FERC Commissioner James Danly said the language FERC approved paves the way for PJM to assign project costs to developers and ratepayers outside New Jersey.
"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," Danly said. "The answer to that question is 'yes,' the costs of a state's pet project can be passed on to other states' ratepayers."
FERC disagreed with that reasoning in its April 14 order.
The majority found that PJM's and the BPU's answers in the proceeding, as well as the state agreement itself, "explain that no costs will be allocated to customers outside of New Jersey unless and until the commission accepts a future cost allocation filing as just and reasonable."
FERC added that it "need not speculate as to who cannot be among the future users in any future cost-sharing arrangement."
"The future users may not include a state other than New Jersey or that state's customers unless that state, consistent with the State Agreement Approach, voluntarily agrees to make its customers responsible for any costs," FERC said.
In a concurrence, Commissioner Mark Christie said the April 14 order does not address "speculative questions about the details of any subsequent cost-sharing or cost-allocation proposals" that may come before FERC.
"The only proposal on the table now is New Jersey's [State Agreement Approach], which does not allocate any costs to customers, wholesale or retail, in states other than New Jersey," Christie said.
In October 2021, PJM announced that it had received 80 proposals for onshore and offshore wind transmission facilities related to New Jersey's offshore wind development goals.
PJM expects to recommend the most cost-effective and efficient transmission solutions to the BPU by May, and the board will likely decide which projects to sponsor by September.
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