Witness Herling testified that PJM evaluated new proposed second circuits on Furnace Run - Conastone 230kV and Furnace Run - Graceton 230kV and found that these alternatives could potentially violate NERC Reliability standards. It is unclear exactly what PJM modeled here with regard to existing PPL EU-owned facilities because "the Furnace Run - Conastone 230 kV circuit towers and the Furnace Run - Graceton 230 kV circuit towers" are not PPL EU-owned facilities (and indeed have not yet been constructed).

Transource 9A proposes a new circuit from Furnace Run to Conastone. This parallels an existing Otter Creek-Conastone 230 kV line jointly owned by PPL EU and BGE. The PPL EU owned section of the line is designed to accommodate a second circuit without acquiring new Right of Way. PPL EU's Otter Creek 230 kV substation is built next to the TMI-Peach Bottom 500 kV line and can be connected to the line through 500-230 kV transformers. Thus, adding 500-230 kV transformation at the existing Otter Creek
substation, adding a second high capacity 230 kV circuit and replacing the current circuit with a higher capacity circuit on the existing Otter Creek-Conastone 230 kV line may provide similar economic benefits as the proposed new Furnace Run substation and a new double circuit line between Furnace Run and Conastone substation. Furthermore, there is another PPL EU-BGE jointly owned line (Manor-Graceton 230 kV) in the area that can be utilized to add a second 230 kV circuit from north to south.

...it does not appear that PJM ever considered adding a new 500 kV circuit from the existing TMI-Peach Bottom 500 kV line (utilizing a new 500 kV substation at Otter Creek) to the 500 kV Conastone substation, utilizing PPL EU owned right of way on the Otter Creek- Conastone 230 kV line.

In fact, a new 500 kV circuit utilizing PPL EU's existing Right of Way between a new Otter Creek 500 kV substation (to be built by expanding PPL EU Otter Creek 230 kV substation) and the existing Conastone 500 kV substation will provide more capacity than the total capacity of the proposed Transource 9A project, which only adds a new double circuit 230 kV connection between the Furnace Run and Conastone substations.

PJM proposed a change to the way market efficiency projects are evaluated. PJM members were frustrated by the fact that few large projects were passing the metrics of their old formula. So they proposed relaxing the rules so that more projects would pass.

The implications of these changes are the primary reasons that this project is still being proposed by PJM today. Before this change, the benefit side of the B/C ratio was 75% based on the benefit across the entire PJM footprint (PJM uses the word “socialized.”) If a proposed project, such as the IEC, resulted in lower-rate “winners” and higher-rate “victims”, 75% of the calculation was made on the basis of netting the winners against the victims. After the change, 100% of the calculation for Lower Voltage projects, and 50% of the calculation for Regional projects, is based solely on the savings to the “winners”, without consideration to the higher rates incurred by the “victims.”

Both the IEC-East and IEC-West are able to carry more power than a Regional  345kV line, and taken together, move more power than many Regional double-circuit 500kV lines, a configuration that forms the backbone of the electrical grid.

Based upon the amount of capacity in those lines, the IEC clearly qualifies as a Regional project, as Regional was initially intended.

IF THE IEC WERE CLASSIFIED AS A “REGIONAL” PROJECT, HOW WOULD THE B/C CHANGE?
The benefits of the project would be subject to a 50/50 weighting of overall production cost to load energy payment. The $707M benefit that currently is weighted at 100%, would shrink to $353.5M. The other 50% of the weighting would be based on net production cost changes, a number that includes production cost increases as well as decreases. I have not been able to identify this value in the non-confidential public discovery record, and discovery is still pending. However, we know from OCA filings (SJR-3, p2), that many zones saw significant cost increases, and that the net change in load payment over 15 years was just over $-17M. Net production cost could not have decreased much more than that, or the savings would have been passed on to the customers who saw increased rates. Even assuming a generous $50M savings (which approximates the estimate in the optimistic 2015 14 RTEP presentation) would yield a benefit of only $353.5+(0.5*50)=$378.5M, far less than the $505M cost of the project, yielding a B/C ratio of 0.74.

In addition, given its responses to data requests and Transource’s filings in the Pennsylvania proceeding, it appears that Transource is modifying its position as to the need for and benefits of the Project from a straightforward purpose of lowering some customers’ electricity costs as a “market efficiency project” to now asserting other benefits associated with emerging reliability concerns. However, if PJM has now determined that there are reliability concerns and an associated need for transmission system enhancements, it would be more appropriate to first investigate reasonable alternatives within the relevant PJM processes rather than latching solutions on to this discretionary market efficiency project.

Furthermore, even though PJM’s market efficiency processes do not incorporate Maryland statutes, it is incumbent on the Applicant to meet the State’s requirements for a CPCN by presenting alternatives to the Project that use existing lines. The PJM process is not a substitute for Maryland’s statutory requirements and its determination that a project is the most effective solution should not allow that project to circumvent Maryland’s comprehensive siting process.

New production cost simulations based on these updated parameters results yielded a $600.73 million present value of net load payment benefit (for zones where payments decreased).

(of a price or amount of money) very small; far below the real value or cost

For new economic enhancements or expansions with costs in excess of $50 million, an independent review of such costs shall be performed to assure both consistency of estimating practices and that the scope of the new Economic-based Enhancements or Expansions is consistent with the new Economic-based Enhancements or Expansions as recommended in the market efficiency analysis.

The MMU recommends that PJM reevaluate the rules governing cost benefit analysis and cost allocation for economic projects. (Priority: Medium. New recommendation. Status: Not adopted.)

The MMU recommends the creation of a mechanism to permit a direct comparison, or competition, between transmission and generation alternatives, including which alternative is less costly and who bears the risks associated with each alternative. (Priority: Low. First reported 2013. Status: Not adopted.)

Differences in CLMP among eastern, southern and western control zones in PJM were primarily a result of congestion on the AEP - DOM Interface, the Cloverdale Transformer, the Tanners Creek - Miami Fort Flowgate, the Graceton - Safe Harbor Line, and the 5004/5005 Interface.
The AEP - DOM Interface was the largest contributor to congestion costs in the first nine months of 2018. With $120.4 million in total congestion costs, it accounted for 10.8 percent of the total PJM congestion costs in the first nine months of 2018.

Visual simulations are based on the level of design available at this time.  Moderate changes in structure height and location may occur following subsequent engineering and design refinements and minor modification of the alignment.

Why didn’t Transource have updated costs at the time of PJM’s annual cost / benefit analysis?
Transource is following a planning and engineering process that requires a variety of data. For example, land surveys provide Transource valuable data needed for construction bids. Since winter 2017, the company has been working with landowners to access properties to be able to complete that work. The survey information is one example of information that was part of the bid package provided to potential suppliers.

Landowners are encouraged to work with right-of-way agents now, during the design phase of the project, to best incorporate property owner desires into the final placement of the facilities.

Transource has not filed condemnation on anyone

The PUC process requires utilities to submit a condemnation filing during the application process. This filing includes property owners with whom the company has not yet secured a signed option to grant an easement agreement. Transource provided written notice and information explaining the process to landowners before filing the report in May.

Regions where IEC is proposed to be built — Franklin County, Pennsylvania, and Washington and Harford counties, Maryland — are located in benefiting power zones, as identified by PJM.

Does Pennsylvania Act 45 of 2018 apply to IEC?
Transource PA has been granted utility status by the PA PUC. Act 45 excludes “public utility facilities” from the required approval and has no effect on this project's proceedings.

Farming is hard. And the farming of orchard crops is arguably the most difficult. Every time it rains during the period of April through July, my apples are at risk from disease, requiring frequent and expensive protective chemicals. We have experienced two major exotic pests in just the last 6 years, with Brown  Marmorated Stink Bug, Spotted Wing Drosophila, and a third pest, The Spotted Lanternfly, which has spread to the next county will arrive next year if it is not here already. Most of the apple varieties we produce on the farm are worth little more now than they were 30 years ago, while labor, chemicals, and insurance, our three biggest expenses, have increased significantly in that time. The labor supply for the hard fieldwork is almost non-existent, and our crew size shrinks each year. My wife and I work an average of 12 hours a day, six days a week, from mid-March through November each year. We do not have a summer vacation.
Still, there is something intrinsically good about farming that is difficult to describe to those who have not experienced it. Maybe it is the challenge of overcoming all the adversity. Perhaps it is the knowledge that thousands, hundreds of thousands of people, have been nourished through our efforts. Or maybe it is a pride that our orchard is an important destination for thousands of people each year who would otherwise not be able to teach their kids where food comes from. Whatever the reason, in the sincere words of Washington, “I'd rather spend a day on my farm than be emperor of the world.”

It should come as no surprise that many customers who seek out family farms to buy fruit and vegetables are concerned with their health, and the health of their families. A large proportion of the population has concerns regarding the health effects of high voltage lines. Put simply, it doesn't matter what I think about the health effects of high voltage lines, if my customers believe that they are dangerous, then their presence will cost me money, either from people refusing to pick near them, or because they don't want food that is grown near them.

We use permanently sited irrigation in many of our fields, including the field that lies under the proposed power line. There are not only concerns about damage during construction, but concern that after construction is complete, an accident in the field could cause water under high pressure to jet into the line.

...a leak in the irrigation system presented a danger to those working under the lines. In this case, a break in the irrigation line under pressure was projected to fly 100 feet in the air, causing any person that came into contact with the system to suffer an electrical shock.

On August 9, 2017 Transource held an open house at Norrisville Elementary School. I arrived between 30 minutes and an hour after the event began. As I walked in from the parking lot, I was immediately recognized by a citizen who took me by the arm and asked if it was true that the Shaws were negotiating with Transource. I was confused, and said we had not even spoken to Transource. She told me that Transource had been telling people that “the Shaws are onboard” and that we were negotiating during the meeting. I asked her to take me to the person who told her that. On the way into the building, I was recognized by Transource’s Public Affairs person, Mary Urban (whom I had never met in person). She tried to welcome me, but we continued together into the event and met the Transource representative who had been spreading the rumor. He confessed to stating that he believed we were negotiating. I told him in no uncertain terms that my family was not negotiating and that he must stop spreading rumors  about me and my family. I admit to raising my voice. He was ushered out of the room by other Transource people.

In an editorial published in local papers on 9/21/18, PJM Vice President of Planning Steve Herling stated the core justification of the IEC: “After all, it would not be fair for customers in one area to consistently pay higher prices than others do simply because the system's design prevented some customers from accessing the lowest-cost electricity.” The implication of this statement is that all customers are entitled to the lowest-cost electricity possible. There is no assertion here that there is any law, regulation, constitutional guarantee, or even a policy that would indicate that there is something wrong with the status quo. Instead, he says, “it would not be fair.” This project is predicated solely on the assumption of an entitlement that is documented nowhere.

I believe that proximity to generating facilities should matter. People who live near generators should pay less for electricity. These are the people who tolerate the noise, the emissions, the visual impacts, and the other deleterious effects of large generating facilities. These are the people who absorbed the capital charges for existing facilities in their rates over the years. There is as little logic in Mr. Herling's statement as there is legal responsibility to approve a market efficiency project... none.

Large-scale transmission intended solely to decrease Locational Marginal Price (LMP) has the adverse effect of discouraging investment in generation capacity in the destination market. Maryland imports 47% of their electricity, and Washington DC imports 100%. For each megawatt that is imported into the  state, the decreasing price provides less incentive for generators to make an  investment in the state.

First, neither Transource nor PJM considered minimizing the environmental impacts of new
transmission ROW and new transmission towers proposed for the IEC. As discussed later in my testimony, there are two existing available PPL transmission lines on existing rights-of-way, recently completely rebuilt with towers that have the capability of carrying an additional 230 kV circuit in the vicinity of the IEC East Project Line. PJM did not consider trying to use these as part of the IEC, because such use was not included as part of any of the proposals submitted to PJM. Such use could significantly reduce the environmental impact of this portion of the IEC.

Q. Transource witness Ali testified that an additional benefit of this Project was that it would also improve reliability. How do you respond?

A. Any major new piece of transmission line infrastructure will provide additional paths for power to flow, and thus could potentially improve reliability. However, there is no stated reliability need here, based on the Company’s filed testimony.

PJM solicited proposals to address congestion on the AP South Reactive Interface (“APSRI”) as part of its 2014/15 Long Term Proposal Window. The APSRI is a set of four 500 kV transmission lines running from West Virginia into Maryland and Virginia. If the sum of the power flows over these four lines exceeds certain calculated limits, then the electric system can be susceptible to low voltages or voltage collapse under certain operating conditions. The power flow across the APSRI must be kept within these limits. Sometimes that means that less expensive-to-operate generating units outside of Maryland and Virginia will be backed down to generate less power, while more expensive-to-operate generating units inside Maryland and Virginia will be ramped up to generate more power, thus resulting in decreased power flows across the APSRI and increased generation costs for Maryland, DC, and Virginia customers.10 Transource witness Paul McGlynn references the PJM Independent Market Monitor, which has estimated that congestion costs on the APSRI were about $800 million from 2012 through 2016. The IEC reduces congestion costs on the APSRI by providing an alternative path to load centers in Maryland, DC, and Virginia, connecting them mainly to lower-cost generating units located outside of these areas.

As Table 3 shows, the annual congestion costs due to the AP South Interface have been sharply declining since 2014 both in absolute terms and as a percentage of PJM total congestion costs. The 2017 annual congestion cost due to the AP South Interface has decreased by more than 95% from 2014.  Table 3 also shows the total decline in PJM
congestion costs since 2014. For 2014, total PJM congestion is $1.98 billion. For 2017, total PJM congestion has decreased to $697 million. This means that total congestion on PJM’s transmission system has decreased by more than 60% over the past three years.

One of the major shortcomings of PJM’s process of determining the B/C ratios of the IEC Project is that the costs of the project elements have not been updated since the project was initially evaluated in 2015.

Summer peak loads and peak load forecasts have been declining across PJM’s Mid-Atlantic area for at least the past five years or more. This area includes loads in New Jersey, Maryland, Delaware, DC, and Pennsylvania, some of which are loads that contribute to the projected loads on the IEC Project transmission lines.

In recent months, there have been proposals of new renewable resource generating units
proposed to be located in Maryland and Virginia on the load-side of the APSRI. On July
24, 2018, Dominion Energy announced new plans to add 3,000 MW of new solar and wind generation during the 2020s. The Dominion announcement also referenced plans to add 240 MW of solar generation to be located in Virginia. There is no indication that the effects of any of these recent proposals, which could reduce the amount of load in Maryland and Virginia potentially being served over the APSRI, have been reflected in PJM evaluations of the IEC Project.

There are also non-transmission alternatives that could address the load requirements in the MD-DC-VA area and reduce any congestion levels that currently exist in the Project area and without the impact on land, the environment and communities that have been identified in the public input hearings and site views.

• Transource’s filings in this case do not consider the effects of recent changes in Pennsylvania law that should affect the Commission’s review and analysis of the proposed projects.
• Transource’s East and West Applications each identify only one reasonable alternative route to its selected routes. The route selection process apparently failed to consider other routes that would be likely to result in lower cost and lessened environmental impacts.
• PJM’s so-called “benefit-cost” analysis for non-reliability projects like the IEC Project does not properly evaluate the benefits of a proposed project. The analysis completely ignores increases in costs that would be incurred by zones outside of the region benefiting from a project. That is, the economic analysis used by PJM and Transource completely ignores the fact that the lower-cost power that would flow into certain regions is already being used elsewhere.
• While the IEC Project would reduce costs in portions of PJM, the overall effect on PJM would be that the costs of the IEC Project would greatly exceed the project’s benefits. Indeed, accepting all of Transource’s assumptions shows that every dollar invested in the IEC Project would produce less than three cents of benefits for PJM.
• The effects on Pennsylvania consumers would be even more severe than the impact on PJM. Over a 15-year period, consumers in Central and Eastern Pennsylvania would incur increased power costs of more than $340 million while consumers in Western Pennsylvania would receive lower-cost electricity valued at only $2 million.

If a zone has a positive ΔNLP – that is, its power costs increase over the 15-year study period – the zone is dropped from the calculation. Only zones whose discounted sum of ΔNLP is negative – that is, power costs decreased over the 15-year period – are included in the benefits calculation.

For this example, I will assume a very simplified system with only three zones. The 15-year NPV of ΔNLP shows the following: Zone 1 has a benefit (lower ΔNLP) of $100; Zone 2 has a benefit of $50; and Zone 3 has a detriment (higher ΔNLP) of -$110. Overall the three zones experience net savings of $40 ($100 + $50 - $110). For purposes of PJM’s analysis, however, Zone 3 would be dropped from the calculation and the project would have a “benefit” of $150.

To over-simplify a bit, the IEC Project will lessen the alleged electrical barriers (congestion) and enable lower-cost electricity to reach the higher cost areas of MD-DC-VA. To be clear, MD-DC-VA have plenty of power, so the IEC Project has no reliability benefit; but costs to those areas can be reduced if additional power can be imported cost effectively from lower-cost areas.

Q. Does the so-called benefit-cost methodology required by PJM and used by Transource meet the requirements of a benefit-cost analysis?
A. No. The PJM methodology used by Transource fails to capture all of the benefits and costs associated with the IEC Project.

...the PJM methodology ignores the negative consequences to utilities (and their customers) outside the region to be benefited. That is, when calculating the benefits of the IEC Project, Transource calculated the reduced power costs (primarily in MD-DC-VA) from being able to import lower-cost power into that region; but it failed to subtract from those benefits the higher costs that would result in other regions (including Pennsylvania) because they would no longer have the benefit of that same lower-cost power.

The spreadsheet model includes a calculation of the net benefit or cost for each control area within PJM. Incredibly, though, when it comes time to determine a project’s “benefits” only those regions that would experience reduced  costs are included in the calculation. All regions whose costs would increase as a result of a project are simply ignored.

When PJM first reviewed the IEC Project, it found Project benefits of $1,188 million, as shown on the attachment to OCA II-14 (attached as Schedule SJR-1). This represents the present value of 15 years of savings in Net Load Payments (“NLP”) (that is, energy costs). The Schedule shows, however, that this figure completely ignores the zones where energy costs would increase as a result of the IEC Project.

In the table provided by Transource, a positive number represents an increase in power costs (that is a net cost or detriment from the IEC Project) and a negative number represents lower power costs from the IEC Project (a net benefit). Take the first row as an example. AECO is the Atlantic Electric zone within PJM (the greater Atlantic City, NJ, area). This shows that over the first 15 years with the IEC Project in service, power costs would increase by [$17.90] million for Atlantic City area customers if the IEC Project is completed. Simply, this means that AECO currently is able to use slightly more of the lower-cost power than is economically optimal because of constraints that keep some of that power from flowing into MD-DC-VA.

The net efficiency gains are the only true measure of the IEC Project’s benefit. The approach used by the Company assumes that the lower-cost power that flows into MD-DC-VA would not otherwise confer any economic benefit but for the construction of the IEC Project. In reality, though, that lower-cost power is being used in other regions of PJM (primarily Pennsylvania and New Jersey).  Thus, the benefits from the IEC Project should be measured as the reduction in power costs in MD-DC-VA, offset by the increase in power costs in regions like parts of Pennsylvania where power costs will increase.

Q. If the IEC Project provides net benefits of $17 million over 15 years, should it be constructed?

A. No. As of September 2018, the estimated construction cost is $366 million, resulting in an estimated 15-year cost (PVRR) of $498 million. Thus, the IEC Project would cost significantly more than the benefits it would provide, resulting in a benefit-cost ratio of only 0.03. That is, for every dollar spent on the IEC Project, it would provide only three cents worth of benefits. Because the IEC Project is being built solely to reduce power costs, and not to provide any reliability benefits, the IEC Project is not economical and
should not be built.

The IEC project would cost $498 million over 15 years, but it would lower power costs by only $17 million, resulting in a net loss to PJM utilities of more than $480 million. Thus, PJM as a whole would experience a net loss of $32 million per year for each of the first 15 years of the IEC Project. The Project is not economical for PJM’s utilities (and the consumers who purchase electricity from those utilities) and should not be constructed.

Thus, when including the costs of paying for the IEC Project, the net effect on Pennsylvania would be to have power costs increase by approximately $367 million over the next 15 years, or by more than $24 million per year.