IMM Backs PaPUC Complaint Challenging PJM's Asymmetric Benefit/Cost Methodology for Market Efficiency Transmission Projects

The PJM Independent Market Monitor filed comments at FERC (Docket No. EL26-98) supporting a complaint by the Pennsylvania PUC, agreeing that PJM's Operating Agreement Schedule 6, Section 1.5.7 benefit/cost methodology for market efficiency transmission projects is unjust, unreasonable and unduly discriminatory because it counts only load cost reductions (not increases) while netting both increases and decreases for production costs. The IMM endorsed PAPUC's 'Option 1' remedy (netting all load cost changes in the numerator) over PAPUC's 'Option 2' (adding load cost increases to the cost denominator), stating the two are not mathematically equivalent and that Option 2 would understate corrected results relative to Option 1.

PJM's market efficiency benefit/cost test determines which transmission expansion projects clear the 1.25:1 threshold and proceed to Board approval. The IMM's analysis concludes the current asymmetric treatment systematically overstates net benefits, potentially causing PJM to approve and build costly transmission that does not actually deliver net societal benefit, with costs socialized to load across zones — directly affecting transmission cost allocation, RTEP investment decisions, and downstream energy market price signals in constrained and unconstrained zones.

This is a methodology-level market design dispute rather than a rate case: the object of contention is the internal symmetry of a cost-benefit calculation embedded in tariff language (Schedule 6, Section 1.5.7), not a specific project or price. The IMM's intervention is significant because it is the independent monitor — not just a state regulator — validating the core diagnosis, which increases the likelihood FERC will find the existing rule unjust and unreasonable under FPA Section 206. The choice between PAPUC's two options is consequential: Option 1 (netting in the numerator) can produce zero or negative net benefits when load cost increases exceed decreases, correctly killing projects with no net benefit; Option 2 (adding increases to cost denominator) mathematically cannot produce a negative numerator and inflates the denominator disproportionately for high-voltage projects (only 50% of decreases count as benefit vs. 100% of increases as cost), understating the corrected benefit/cost ratio relative to Option 1. This distinction matters because whichever formula FERC orders will materially change which future RTEP market efficiency projects clear the threshold. No FERC decision, procedural schedule, or implementation date is yet established in this filing.

PJM Operating Agreement Schedule 6, Section 1.5.7; PJM Open Access Transmission Tariff (OATT); Federal Power Act Section 206 (just and reasonable / undue discrimination standard); FERC Docket No. EL26-98

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