Delaware power customers to pay Artificial Island bill
A federal agency has denied the state's request to reduce the cost of building a power line connecting Artificial Island to Delaware.
The decision by the U.S. Federal Energy Regulatory Commission means Delaware residential and commercial electricity customers will bear the cost of the $272 million project, despite receiving 10 percent of the benefit created.
PJM, an Audubon, Pennsylvania-based operator of electronic power systems, is overseeing the construction of a transmission line across the Delaware River connecting Artificial Island to the First State. The transmission line is part of a stability fix for Artificial Island — home to the Salem and Hope Creek nuclear plants — that is expected to improve reliability and increase the plant's power output.
Initially, PJM estimated the transmission line's price tag would be around $137 million, but in March, a company executive told the Transmission Expansion Advisory Committee its price tag is now $272 million. The additional $135 million will be added to the cost of other Artificial Island upgrades, increasing the overall project's total cost to more than $400 million.
Costs for the overall project, including the transmission line, will be borne by Delaware consumers, including customers of Public Service Electric & Gas and Delmarva Power & Light, operated by Pepco Holdings. Artificial Island is co-owned by PSE&G and Exelon, the parent of Delmarva Power. The plant provides power largely to New Jersey customers.
Nick Morici, a spokesman for Delmarva Power, declined to comment because the utility was not a party to the complaint.
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The Delaware Public Service Commission, in conjunction with its Maryland counterpart, filed a complaint with the Federal Energy Regulatory Commission, or FERC, against PJM alleging the cost burden is "unjust, unreasonable, unduly discriminatory and preferential." In the complaint, DPSC asked the agency to order PJM to find a way to reduce costs or distribute expenses more evenly between Delaware and New Jersey consumers.
FERC denied the request, ruling cost estimates often increase before a project is finalized and the PSC did not prove PJM acted either unjustly or unreasonably.
"The courts have recognized that no cost allocation method can perfectly assign costs to the beneficiaries of a transmission project, particularly in the case of a transmission grid," the agency said in a 36-page report.
Bob Howatt, PSC's executive director, called the decision "a shock" after FERC appeared to be open to the state's argument in a November preliminary opinion. In the November ruling, FERC said the cost increases "may not have been shown to be just and reasonable."
PJM spokeswoman Paula DuPont said FERC's decision reinforced a cost estimate method it previously approved as fair and transparent. She added PJM is concerned about the magnitude of the cost increase.
"As for the project costs of the Artificial Island project, they are not final yet," DuPont said in an e-mail. "We are working with PSE&G to understand the reasons for it. We are actively exploring whether alternatives or options will reduce the overall project cost."
FERC's decision effectively closed the door on the state's efforts to block the project's costs, which will be transferred to customers through surcharges in their monthly bill. The increased expenses could have the greatest impact on large businesses operating in Delaware.
"Residential and small commercial increases could be as small as $3 per month, but some of the major manufacturing companies could see tens of thousands of dollars in increases in their electricity bills," said Delaware Public Advocate David Bonar. "We already have difficulty attracting and maintaining businesses because of the high cost of utilities."
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Few options remain if Delaware wants to challenge the decision, according to Bonar. The state can file an appeal with The District of Columbia Court of Appeals because it has jurisdiction over federal agencies or ask FERC to reconsider the ruling. Bonar said it is unlikely FERC would review the decision again.
"I doubt they will give that much weight," he said.
Howatt said PSC is reviewing its options. A motion for reconsideration is rarely granted and would require the state to convince FERC it made errors in the decision, but may be a necessary step for pursuing legal action.
"You have [pursue reconsideration] if you want to reserve the opportunity to take it to court, but you need to figure whether you want to spend money in that direction," Howatt said. "The court process is not inexpensive."
Gov. Jack Markell is reviewing the FERC decision and considering the state options, said his spokesman Jonathon Dworkin
"The governor strongly disagrees that it meets the requirements, which the FERC itself set forth, of being “just and reasonable” to charge Delmarva ratepayers more than 90% of the cost for a project for which they will only receive 10% of the benefits," Dworkin said in an e-mail.
Democratic Rep. John Carney said he was extremely disappointed in the FERC ruling, calling it outrageous. He pledged to work with Gov. Jack Markell and members of Delaware's congressional delegation to develop a response to FERC's opinion.
"Delawareans should not have to shoulder nearly all of the cost of this project when we'll only receive a fraction of the benefits," he said in a statement. "It's burdensome, unsustainable and unfair to Delaware households and companies."
Contact Jeff Mordock at (302) 324-2786, on Twitter @JeffMordockTNJ or jmordock@delawareonline.com.