A delicate balance between State and Federal authority over transmission lines has existed for decades. It is what has kept the peace between federal transmission planning and state permitting authority. The Third Circuit Court of Appeals stands poised to destroy it in a case that has so far escaped the notice of the hundreds of millions of people who will be profoundly impacted by its outcome.
Transource Pennsylvania LLC v. Steven M. Defrank, et.al asks the court to determine that a state permitting a new transmission project has no authority to second guess the findings of PJM Interconnection regarding need for a new transmission project.
Transource was selected to build a market efficiency project nearly 10 years ago that, according to PJM, would reduce transmission congestion and make electricity cheaper in Washington DC and Baltimore. The project was to be built connecting transmission lines in Pennsylvania with transmission lines in Maryland. It needed permission from the Maryland PSC and the Pennsylvania PUC. Maryland approved the project after PJM agreed that the eastern portion of the project could be built on existing easements. Pennsylvania denied the project altogether on the basis of PJM's congestion forecast and cost/benefit analysis being proven wrong during the permitting process in that state.
Transource didn't like that outcome and filed several appeals. The appeal to the federal district court struck paydirt and that judge opined that Pennsylvania had no authority to second guess PJM's findings regarding need. The only role for Pennsylvania was to determine where to put the project and it was prohibited from denying a permit.
Pennsylvania appealed and the case has just been heard by the Third Circuit this month. The oral argument was a disaster for the State -- its attorney couldn't get a word in edgewise as the panel of judges asked questions that only they seemed to know the correct answers to. The writing is on the wall. Next stop... SCOTUS.
States have laws in place that determine how an application for a new transmission project must be adjudicated. The state is required to make several findings under state law. While the findings may be different from state to state, most of them include a directive to determine if the project is needed. This is why the permit issued is called a Certificate of Public Convenience and Necessity (or other variations on this theme). The state evaluates the case for need presented by the utility. The utility presents its witnesses who say the project is needed, including witnesses from regional transmission organizations like PJM. The state evaluates the evidence and makes its findings. Never before in history has a state been required to accept the need findings of the regional grid operator without question. In most cases, however, the state finds the regional transmission authority witnesses to be credible and adopts their determination of need in its determination. However, in rare cases, the state has not found the regional transmission to be credible and has denied the permit. It happened in New Jersey a few years ago in the Monmouth County Reliability Project case. The utility in that case accepted the result and the project was not built. Apparently we didn't need it anyhow.
And that's just the case with the Transource project. The Pennsylvania PUC was right... the project was not needed. PJM has recently revealed that the cost benefit ratio for the project has fallen below break even and that, if built, the project would cause uncontrolled congestion on the transmission system. But when the lawyer for the State tried to bring that up during oral argument, the judges cut him right off. They didn't want to hear it.
The Court's position would saddle electric ratepayers with huge costs for transmission projects that don't deliver more benefits than their cost to build. Perhaps the Court would see it differently if they attended a couple of PJM meetings where these projects are evaluated and added to the plan. PJM meetings are one-sided information sessions. Although meeting participants can ask questions, PJM dismisses any arguments against its findings. PJM is a utility member organization. It always sides with the utilities. There is no independent evaluator who looks at all the evidence before deciding the project is needed. Compare to a state's evaluation of need, where all parties can present evidence to be decided by an impartial judge or panel of commissioners. There is no give and take, or independent thought, at PJM... it is an authoritative dictatorship.
If states are prohibited from determining if a transmission project is needed under state law, what happens with merchant transmission projects or those planned by utilities outside a regional planning process? Must the state also take the utility's determination of need without question?
The Court is prepared to open a can of worms that will ensure transmission is delayed or denied for other reasons. Nobody likes being told that they have to accept the word of a dictator without question, states included. The Court has suggested that a state who doesn't think a transmission line found needed in the regional planning process is actually needed should file a complaint against the grid operator at the Federal Energy Regulatory Commission. If that is the only avenue open to states, prepare for a deluge of complaints at FERC. Since FERC moves at a snail's pace (on a good day) this is going to tie up regional transmission planning for years and ensure that nothing gets built until need for it has completely evaporated, as it did in the case of the Transource project. A state that may have agreed with PJM that a project is needed is now required to file a complaint at FERC to get a determination on whether it is actually needed. Instead of states, grid operators, and federal regulators cooperating to keep the transmission system reliable, we're going to have nothing but litigation and delays while the lights go out.
Transource Pennsylvania LLC v. Steven M. Defrank, et.al asks the court to determine that a state permitting a new transmission project has no authority to second guess the findings of PJM Interconnection regarding need for a new transmission project.
Transource was selected to build a market efficiency project nearly 10 years ago that, according to PJM, would reduce transmission congestion and make electricity cheaper in Washington DC and Baltimore. The project was to be built connecting transmission lines in Pennsylvania with transmission lines in Maryland. It needed permission from the Maryland PSC and the Pennsylvania PUC. Maryland approved the project after PJM agreed that the eastern portion of the project could be built on existing easements. Pennsylvania denied the project altogether on the basis of PJM's congestion forecast and cost/benefit analysis being proven wrong during the permitting process in that state.
Transource didn't like that outcome and filed several appeals. The appeal to the federal district court struck paydirt and that judge opined that Pennsylvania had no authority to second guess PJM's findings regarding need. The only role for Pennsylvania was to determine where to put the project and it was prohibited from denying a permit.
Pennsylvania appealed and the case has just been heard by the Third Circuit this month. The oral argument was a disaster for the State -- its attorney couldn't get a word in edgewise as the panel of judges asked questions that only they seemed to know the correct answers to. The writing is on the wall. Next stop... SCOTUS.
States have laws in place that determine how an application for a new transmission project must be adjudicated. The state is required to make several findings under state law. While the findings may be different from state to state, most of them include a directive to determine if the project is needed. This is why the permit issued is called a Certificate of Public Convenience and Necessity (or other variations on this theme). The state evaluates the case for need presented by the utility. The utility presents its witnesses who say the project is needed, including witnesses from regional transmission organizations like PJM. The state evaluates the evidence and makes its findings. Never before in history has a state been required to accept the need findings of the regional grid operator without question. In most cases, however, the state finds the regional transmission authority witnesses to be credible and adopts their determination of need in its determination. However, in rare cases, the state has not found the regional transmission to be credible and has denied the permit. It happened in New Jersey a few years ago in the Monmouth County Reliability Project case. The utility in that case accepted the result and the project was not built. Apparently we didn't need it anyhow.
And that's just the case with the Transource project. The Pennsylvania PUC was right... the project was not needed. PJM has recently revealed that the cost benefit ratio for the project has fallen below break even and that, if built, the project would cause uncontrolled congestion on the transmission system. But when the lawyer for the State tried to bring that up during oral argument, the judges cut him right off. They didn't want to hear it.
The Court's position would saddle electric ratepayers with huge costs for transmission projects that don't deliver more benefits than their cost to build. Perhaps the Court would see it differently if they attended a couple of PJM meetings where these projects are evaluated and added to the plan. PJM meetings are one-sided information sessions. Although meeting participants can ask questions, PJM dismisses any arguments against its findings. PJM is a utility member organization. It always sides with the utilities. There is no independent evaluator who looks at all the evidence before deciding the project is needed. Compare to a state's evaluation of need, where all parties can present evidence to be decided by an impartial judge or panel of commissioners. There is no give and take, or independent thought, at PJM... it is an authoritative dictatorship.
If states are prohibited from determining if a transmission project is needed under state law, what happens with merchant transmission projects or those planned by utilities outside a regional planning process? Must the state also take the utility's determination of need without question?
The Court is prepared to open a can of worms that will ensure transmission is delayed or denied for other reasons. Nobody likes being told that they have to accept the word of a dictator without question, states included. The Court has suggested that a state who doesn't think a transmission line found needed in the regional planning process is actually needed should file a complaint against the grid operator at the Federal Energy Regulatory Commission. If that is the only avenue open to states, prepare for a deluge of complaints at FERC. Since FERC moves at a snail's pace (on a good day) this is going to tie up regional transmission planning for years and ensure that nothing gets built until need for it has completely evaporated, as it did in the case of the Transource project. A state that may have agreed with PJM that a project is needed is now required to file a complaint at FERC to get a determination on whether it is actually needed. Instead of states, grid operators, and federal regulators cooperating to keep the transmission system reliable, we're going to have nothing but litigation and delays while the lights go out.
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