Dive Brief:
- With transmission costs rising, Maryland’s ratepayer advocate last week called for more regulatory scrutiny of transmission projects and said data centers — a key driver of load growth — should pay for transmission needed to serve them, rather than ratepayers sharing those expenses across the PJM Interconnection.
- Maryland ratepayers could face a $5.4 billion tab for transmission built over five years starting in 2031. That’s compared with the $7.1 billion they are paying for transmission built over the preceding 20 years, according to a report the Maryland Office of People’s Counsel released on Thursday.
- Fifty-nine percent, or $3.2 billion, of the project costs slated for construction after 2030 are for baseline reliability projects selected by PJM, it said. Local utility projects make up 41%, or $2.2 billion, of the total estimated costs.
Dive Insight:
While the report focuses on Maryland, it comes as utility regulators and policymakers across the United States are increasingly focused on keeping electricity bills as affordable as possible, in part by scrutinizing the factors that can push bills higher, such as spending on transmission infrastructure.
Reflecting those growing costs, a NextEra Energy transmission project in PJM is expected to cost $960 million, up from an original $441 million estimate, the Institute for Energy Economics and Financial Analysis said Tuesday. IEEFA estimates that West Virginia customers will be charged $572 million for the project, which crosses the state but is designed to serve data centers in Northern Virginia.
Transmission rates have roughly doubled in the last 10 years in PJM, according to the OPC’s report. PJM runs the grid and wholesale power markets in 13 Mid-Atlantic and Midwestern states and the District of Columbia. Transmission charges make up 10% of residential electricity bills in Maryland, the report said.
Data center load growth, especially in Virginia and Ohio, is a main driver of recent transmission cost increases, according to the OPC.
“Without stronger oversight and proactive policy engagement, Maryland customers will continue to bear rising costs — often driven by electricity growth outside the state,” the OPC said.
PJM states share the cost of baseline transmission projects, which the grid operator proposes and vets. Local projects generally receive relatively little regulatory review and are paid for by ratepayers in the zone where they occur, the report notes.
The OPC proposed a series of regulatory and policy changes to help ensure transmission investments are “necessary, cost-effective, and fair to Maryland electricity customers.”
They include tighter oversight of transmission planning and development at PJM and in Maryland.
When reviewing transmission proposals, the Maryland Public Service Commission should require cost-benefit analysis and consideration of less expensive options, according to the report. “This would add an additional layer of regulatory oversight to local projects, which would improve transparency and help mitigate costs, project overbuilds, and unnecessary local projects,” the OPC said.
Also, PJM should have an independent transmission monitor to review proposed transmission projects and their costs, according to the report. ISO New England recently created an “asset condition reviewer” to provide additional scrutiny of projects utilities propose for replacing aging transmission infrastructure, the OPC noted.
Data centers should be required to pay for the transmission development that they require — costs that are currently shared by ratepayers across PJM’s system, the OPC said.
Maryland should also press for more accurate load forecasts, especially for data centers, according to the report. “Increased transparency, oversight, and better data overall is needed to improve the accuracy of PJM’s data center load forecast,” the OPC said.
Maryland should support lower-cost “grid-enhancing technologies” and “advanced transmission technologies” to reduce transmissions costs and network upgrades, the OPC said.
Utilities in Maryland include Exelon’s Baltimore Gas and Electric, Delmarva Power & Light and Potomac Electric Power Co. and FirstEnergy’s Allegheny Power and Potomac Edison Co.
