Commissioner John R. Norris Statement March 30, 2012 Docket No. EL05-121-006

The PJM Remand Order

"In today’s order, the Commission responds to the Seventh Circuit Court of Appeals’ remand of an earlier set of decisions regarding transmission cost allocation in the PJM Interconnection, LLC (PJM) region. I support our determinations today because I believe they appropriately apply the foundational principle of “beneficiaries pay” to the record evidence before us regarding the planning and usage of transmission facilities in the PJM region. In addition, I believe today’s order faithfully adheres to the principles laid out by the Seventh Circuit in its remand decision and carefully addresses the court’s concerns.

However, this was certainly not an easy case to decide. As I have stated on numerous occasions, cost allocation is perhaps the most difficult hurdle we face in building a more robust transmission infrastructure in this country. Applying the foundational principle that only those who benefit from a transmission facility should share in its costs requires difficult judgments regarding how to account for the benefits provided by transmission infrastructure. While making these decisions is not a “matter for the slide rule,” as the Supreme Court has noted, the Commission bears the responsibility to conduct a searching inquiry into whether particular cost allocation mechanisms assign costs to ratepayers in a manner that is, in the words of the Seventh Circuit, “roughly commensurate” with the benefits they receive. I believe we have met that responsibility in this case.

Today’s order comes at an awkward time, as the PJM region is considering how it will comply with Order No. 1000. I want to emphasize that today’s order should not be viewed as predetermining how PJM and its stakeholders should comply with Order No. 1000. This case is about allocating the costs of transmission facilities prior to compliance with Order No. 1000, and separate proceedings will address how transmission costs will be allocated for transmission facilities subject to that rule.

It is also important to note that this case is somewhat unique in that the Commission, having found PJM’s previous cost allocation methodology unjust and unreasonable in 2007, bore the legal burden under section 206 of the Federal Power Act to determine and fix a just and reasonable methodology. The Commission also had a legal obligation here to respond to the court’s remand.

In contrast, Order No. 1000 puts the regions in the driver’s seat, empowering stakeholders to work together to develop planning processes and cost allocation methodologies that work best for them. As our order emphasizes today, the slate is clean for PJM and its stakeholders as they work towards compliance with Order No. 1000. I encourage them to consider any and all planning and cost allocation mechanisms, including those that were offered by the parties but not adopted in this proceeding, in determining what will work best for their region."