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Yesterday, the Delaware Public Service Commission (PSC) approved with conditions the application of Silver Run Electric, LLC to become a certified electric transmission company in Delaware.
Silver Run’s application related to construction and operation of a transmission line from the Artificial Island nuclear complex in southern New Jersey to a substation near Odessa, Delaware. PJM, the company responsible for the flow of wholesale electricity in the Mid-Atlantic region, deemed the project necessary to improve the reliability and stability of the nuclear units.
The cost allocation for the project is contentious because of the burden it may place on all Delaware electric customers. Current PJM cost allocation rules call for the PJM “Delmarva Zone” – made up of Delaware and parts of the Maryland and Virginia eastern shore region, to be allocated 90% of the project costs while receiving only 10% of the project benefits. The Federal Energy Regulatory Commission (FERC), which oversees PJM activities, requires that cost and benefits for transmission projects be “roughly commensurate”.
Based on PSC analysis, under the current cost allocation methodology transmission charges for residential customers could increase by $4 per month. Commercial and industrial businesses that use larger amounts of electricity may face much higher price increases.
A group led by the Delaware Public Service Commission and including the Delaware Division of the Public Advocate and Maryland Public Service Commission, among others, filed a complaint with FERC regarding the cost allocation. FERC initially denied the complaint but in July 2018 agreed to reopen the record to consider alternate cost allocation methodologies. The cost allocation matter is still pending before FERC.
In the PSC hearing on Thursday, December 20th, the Commission approved Silver Run’s Certificate of Public Convenience and Necessity (CPCN) application on the condition that FERC approves one of two alternative cost allocation methodologies developed by PJM at the request of the Delaware PSC Staff. Those methodologies are the Stability Interface Method, which would allocate 6.94% of the costs to the Delmarva Peninsula or the Stability Deviation Method, which would allocate 10.36% of the costs to Delmarva Peninsula. If FERC does not resolve the cost allocation issue via an order by February 28, 2019, the CPCN will be suspended.
The PSC Staff had recommended the application be denied because the cost allocation issue is still pending at FERC.
“Delaying this project will undoubtedly trigger undue costs to ratepayers, which I cannot agree with, and I believe that Silver Run Electric is more than qualified to handle this important job” said PSC Chairman Dallas Winslow.
With the conditional approval, Silver Run will be able to continue construction activities and other important critical path project initiatives that otherwise would have stopped if the CPCN application was denied. Representative from Silver Run successfully argued that a denial would have led to increased costs for all Delaware electric customers.