Electricity Markets

AMP calls for more transparency for transmission projects, cites increases in costs

American Municipal Power (AMP) is calling for more transparency for so-called "supplemental" electric transmission projects after a review released Sept. 29 found a substantial increase in their cost for some of AMP's 135 municipal members in nine states.

In PJM Interconnection, the Pennsylvania-based regional grid operator that covers 13 states plus the District of Columbia and home to most AMP members, there essentially are two types of transmission projects: Baseline, which undergo a thorough open and transparent review by PJM, AMP says, and supplemental projects that do not receive the same rigorous analysis by PJM.

Since 2012, there have been approximately $12.7 billion in supplemental projects in PJM compared with $11.6 billion of PJM in-service or planned baseline and network upgrades, according to a report prepared by Ken Rose, an independent consultant commissioned by Columbus, Ohio-based AMP.

The trend clearly is in the direction of more supplemental projects.

"There is a shift from baseline projects to supplemental projects as revenue requirements and transmission rates have gone up, a lot - way beyond the levels of inflation," Rose said. "Basically, if you continue to have a process where it is fairly easy for the regulated entity to pass project costs through, there is going to be an incentive to continue pursuing supplemental projects."

AMP president and CEO Marc Gerken said his organization's members have reported similar increases in transmission charges over the past eight years. In four of AMP members' transmission zones, annual revenue requirements have increased from 99% to 214% over the period, he said.

The dramatic increases in transmission rates, as much as 475% in some cases, across PJM's footprint were noticed by AMP starting in about 2011 as more renewable energy resources were added to replace retiring coal and other fossil fuel power plants and to replace aging transmission infrastructure, Lisa McAlister, AMP senior vice president and general counsel told reporters during a Sept. 29 phone call.

"What we're really seeing is supplemental project investment is growing faster than baseline projects," she said.

That is worrisome to AMP, which has made its concerns known to PJM, said AMP spokeswoman Holly Karg.

"Our recommendations are to proceed as aggressively as we can in the current PJM stakeholder process in trying to get transmission owners to provide similar amounts of information and transparency and data for supplemental projects as they do for the baseline projects and regional transmission projects," Edward Tatum, AMP vice president of transmission, said during the phone call.

In an ongoing proceeding before the Federal Energy Regulatory Commission, the commission has asked PJM to demonstrate that its supplemental planning process was sufficient, he noted. PJM did not immediately return a phone call seeking comment on the AMP review.

While the focus of Rose's review was on PJM, Rose said he looked less closely at other regions and surmised "there did seem to be a similar trend in MISO" toward supplemental transmission projects. "But I haven't put out any of that information publicly," he cautioned.

MISO is the Midcontinent Independent System Operator, a Carmel, Indiana-based regional grid operator that includes 15 states and the Canadian province of Manitoba. Some AMP members, particularly those in Indiana and Michigan, are in MISO.

In addition to Indiana, Michigan and its native Ohio, AMP has members in Virginia, Kentucky, West Virginia, Maryland and Delaware and Pennsylvania.

PJM, in an Oct. 3 statement, said the transmission issue “is a complex one we continue to work through with our stakeholders.”

PJM added it “believes in the importance of transparency in all aspects of the planning process and that’s why we have been working with stakeholders on it.”