 |
PJM adopts the common practice of new power producers paying for the grid upgrade required to support the new load being introduced by the producer. This ensures fairness as a principle and avoids free-riding.
A similar model exists for most markets including MISO, ISO-NE, SPP, ERCOT, NYISO, although with e.g. ERCOT, broader upgrades beyond the interconnection can be shared with the transmission operator funded through transmission rates.
However: In PJM, MISO, ISO-NE and SPP, transmission owners also have the unilateral ability to fund upgrades and charge the interconnection owner for the cost plus a return. There are concerns by FERC that this increases the cost for end consumers because the transmission owners is earning a return for the upgrade vs. this being paid for by the generator - although still to be reconciled that funding of capex should in general earn a return to attract capital, regardless of the source of that capital. The transmission owners should therefore have the right to compete to fund upgrades. But should this be at the transmission owner or the producer’s discretion?
Another concern is around cost allocation - how much of the burden is funded by the producer, and balancing that against burdening the rate base to be shouldered by consumers who may not ultimately benefit from the upgrade.
