On November 27, 2018 in Docket No. ER18-2510, FERC approved an Abandonment Incentive requested by First Energy for an electric transmission project in PJM for which they are partially responsible to build and won. The Abandonment Incentive provides for 100% recovery of prudently-incurred abandonment costs if the project is abandoned or cancelled for reasons beyond the transmission developer’s control. FERC also confirmed that First Energy is eligible to seek recovery of 50 percent of prudently incurred project costs expended prior to a Commission order granting the Abandonment Incentive.
First Energy sought the same Abandonment Incentive previously approved for Transource, BGE, and PECO for the project – other entities responsible to build and own portions of the project. Specifically, First Energy requested the Abandonment Incentive to recover 100 percent of their prudently incurred costs, including plant costs, real estate procurement costs (including any losses incurred on the future sale of real estate), pre-commercial development costs, and all related costs, if the project is abandoned or cancelled for reasons beyond their control. First Energy stated that that it faces several risks in developing and constructing the project that are beyond its control, including permitting risks in two jurisdictions (Pennsylvania and Maryland), the risk that PJM may cancel the project due to changed system needs or economics, and completion risks arising from other transmission owners having development and construction responsibility for different parts of the project.
FERC has found that transmission projects approved as baseline upgrades and included in PJM’s Regional Transmission Expansion Plan (RTEP) are entitled to the rebuttable presumption, as established under Order No. 679, if the facilities will either ensure reliability or reduce the cost of delivered power by reducing transmission congestion. The project under consideration here received approval as a baseline project through the RTEP process. In this case, FERC found that there was a nexus between the incentive sought and the investment made and that the total package of incentives requested is “tailored to address the demonstrable risks or challenges faced by the applicant….” as First Energy demonstrated that the project faces substantial risks and challenges because it will cross several jurisdictions, require multiple layers of governmental approvals, is an interdependent part of a single integrated project, and that the larger project previously was found to face substantial risks and challenges. Prudence determinations would be made based upon a separate filing pursuant to FPA section 205 if First Energy seeks to recover any abandoned plant costs at which time First Energy would be required to demonstrate that the abandonment or cancellation of the project was beyond its control.
Dr. Paul Dumais
CEO of Dumais Consulting with expertise in FERC regulatory matters, including transmission formula rates.