[co-author: Steven Boughton]
On April 5, 2022, the Federal Energy Regulatory Commission (“FERC” or “Commission”) approved PJM Interconnection, L.L.C.’s (“PJM”) proposed revisions to the Consolidated Transmission Owners Agreement (“CTOA”) aimed at improving effectiveness and efficiency in decision-making among the 18 transmission owners currently eligible to vote on PJM business. Despite a protest arguing that the proposal would disenfranchise non-traditional transmission owners, FERC found that the proposed revisions “rebalance the CTOA voting rules to better align with individual PJM Transmission Owners’ economic stakes in the transmission system.”
Prior to FERC approving the new voting rules, action on PJM business was taken by two votes: a vote of the individual transmission holders, where each unaffiliated owner got one vote, and a vote of the owners weighted by the net asset value of their investments in the transmission system. PJM transmission owners sought changes, however, out of concern that actions supported by 95% of the weighted vote (i.e. 95% of the asset value of the transmission system) could be stymied by the failure to obtain the necessary majority of individual votes. Under the new voting rules, an individual vote will no longer be required if the weighted vote exceeds 95%, a so-called “extreme supermajority.” The rules determining individual and weighted votes remain unchanged, and so does the limitation that a single owner’s weighted vote cannot exceed 24.9% of the weighted total. In addition, the revised rules provide greater flexibility for obtaining a quorum.
In the FERC proceeding, protesters argued that the proposed revisions were unduly discriminatory to smaller, non-incumbent transmission owners and that the value of their votes would be diminished through the coordinated votes of the large, incumbent transmission owners. FERC disagreed and approved the revisions, finding them just and reasonable because they are “limited modifications” that resolve transmission owners’ concerns about being able to execute their responsibilities effectively and efficiently under the CTOA, and because the provisions were approved with broad support under the prior rules (over 80% of the individual vote and 99% of the weighted vote under existing rules). The Commission found no undue discrimination because not all transmission owners are “similarly invested” in the transmission system. FERC also agreed with the PJM transmission owners that the new rules would allow for the filing of tariff revisions deemed necessary by the owners holding more than 95% of the transmission assets and that the minority, with much less invested into the system, should not be able to prevent such filings by owners with “substantial investment” in the system.
Commissioners Phillips and Clements wrote separately in a joint concurrence to address an outstanding concern that PJM “failed to adequately respond” to the Commission’s deficiency letter and to encourage the minority transmission owners in PJM to protest filings and file complaints under sections 205 and 206 of the Federal Power Act, respectively, where necessary to safeguard the just and reasonable standard.
A copy of FERC’s order can be found here.
