FERC Upholds 11 Years of PJM Transmission Refunds, and the Recalculated Bills Run Back to June 18, 2015
- FERC & Federal Policy & Markets Regulatory
Marin Holt
- 0
- 7 minutes read
- De Minimis Threshold Eliminated: 1% DFAX
- Refunds Effective Back To: June 18, 2015
- Compliance Window: 90 days from the March 6, 2026 order
- Estimated Refunds and Re-billing: More than $1 billion including interest
- Lead Docket: EL15-18-005
The Federal Energy Regulatory Commission upheld its decision to scrap PJM Interconnection’s 1% de minimis cost allocation exemption on October 8, 2026, RTO Insider reported, leaving standing an order that makes PJM transmission owners recalculate transmission cost assignments back to June 18, 2015. The March 6, 2026 order it affirms covers complaints by Consolidated Edison Company of New York, Linden VFT, Neptune Regional Transmission System and the Long Island Power Authority. A law firm analysis of that order put the refunds and re-billing at more than $1 billion including interest.
PJM allocates the cost of reliability-driven transmission by calculating a distribution factor, or DFAX, for each load zone. The factor measures the flow a zone adds to a facility when its load rises by one megawatt at peak. PJM then replaced any DFAX value below 1% with zero. Zones under that line were treated as putting no flow across the facility, so they were assigned none of its cost.
FERC found the exemption “unjust and unreasonable and unduly discriminatory” in its March 6 order, cited as 194 FERC ¶ 61,179. The order describes the outcome the 1% cutoff produced: a large zone could escape cost allocation because it had not met its own de minimis threshold, while a smaller entity that crossed its threshold was billed. The Commission directed PJM to eliminate the exemption outright as the replacement rate rather than reset the number lower.
Why It Matters
Transmission cost allocation rarely reopens a decade of settled bills. This one does, and the estimate outside counsel attached to it, more than $1 billion including interest, is large enough to show up in rate cases across the PJM footprint. The reallocation is a transfer, so every dollar refunded to one zone is a dollar billed to another. PJM filed for rehearing along with the Illinois Commerce Commission, the Indicated PJM Transmission Owners, East Kentucky Power Cooperative, the New York Entities and LIPA and Neptune. The October 8 order is the point at which those arguments stopped working.
The order reaches further back than most transmission cost disputes because of where FERC placed the effective date. The Commission set it at June 18, 2015, the day it denied the Con Edison complaint and, in its own words, “committed legal error.” That is a little over 11 years of billing to redo. FERC gave the PJM transmission owners 90 days from the March 6 order to file a revised Schedule 12 of the PJM tariff and to correct the billing, with interest calculated under section 35.19(a) of the Commission’s regulations.
The dispute runs through the dockets consolidated as EL15-18-005, EL15-67-005, EL17-68-003, ER17-950-006, EL21-39-000 and ER22-1606-000. It returned to FERC on a remand the U.S. Court of Appeals for the D.C. Circuit issued on August 9, 2022 in Consolidated Edison Co. of New York v. FERC. In the same March order FERC rejected the PJM transmission owners’ host zone proposal and a settlement proposal, both of which kept a version of the threshold the court had found unlawful.
The money moves between utilities and their customers, not out of PJM. Zones that sat under the 1% line for a decade now pick up a share of facilities they were told they did not use. The merchant lines that brought the complaints, which export power from PJM into New York, spent that decade paying the difference.
Critical Perspective
FERC’s own March order leaves part of this case unfinished. It established paper hearing procedures on how to allocate the cost of transmission built to fix short circuit reliability problems. Until that piece resolves, the amount being re-billed is not settled, so the figure outside counsel put at more than $1 billion is an estimate against a moving total. The order also rejected both the transmission owners’ tariff proposal and a negotiated settlement, and deleted the threshold instead of lowering it. That removes the discrimination the D.C. Circuit identified. It also hands PJM the job of allocating cost shares so small the tariff had previously defined them as not worth assigning, and no party in the proceeding has published what that administrative work costs.
Sources
- FERC, Order on Remand, 194 FERC ¶ 61,179 (Docket Nos. EL15-18-005 et al.)
- RTO Insider, FERC Upholds 11 Years of Refunds for PJM in Linden VFT Cases
- Foley Hoag Climate Solutions Law, FERC Eliminates PJM’s De Minimis Rule
