Potomac Edison’s proposed incentives for $1.1 billion in transmission project spending for data centers should be denied, OPC tells federal regulators
BALTIMORE – The Federal Energy Regulatory Commission should deny Potomac Edison’s request for added financial incentives to build an estimated $1.1 billion worth of transmission projects, the Office of People’s Counsel said this week in a filing with the federal agency.
The proposal of Potomac Edison, the electric utility serving Western Maryland owned by Ohio-based FirstEnergy Corp., would add new, immediate cost burdens on Maryland customers that are driven primarily by data centers planned for Northern Virginia, OPC’s filing said.
Potomac Edison’s request is similar to the request of Baltimore Gas and Electric, which OPC opposed in a filing earlier this month.
“Similar to BGE’s proposal, Potomac Edison is asking that Maryland customers pay now for its investor profits, but the big tech corporations that stand to benefit from the data centers will not pay anything for years until after the transmission projects are in operation,” said Maryland People’s Counsel David S. Lapp. “Potomac Edison’s proposal would add to the burden Maryland customers are experiencing as a result of data centers that are not even located in Maryland.”
Potomac Edison competed to win the right to build the projects based on a different cost recovery arrangement—with a lower return for investors—than it is now requesting, OPC noted. The change in how the utility wants to be compensated raises questions about the fairness of the PJM competition under which the utility was awarded the right to build the projects, according to the filing.
The transmission projects are part of the “2022 Regional Transmission Expansion Plan, Window 3 Project,” developed by PJM, the regional transmission system operator. PJM says the projects are needed to address reliability risks caused by rapid data center electric demand in Northern Virginia.
Like BGE’s request, Potomac Edison’s request would add another financial incentive for transmission investments on top of the “abandoned plant” incentive it already is receiving. The abandoned plant incentive assures the utility cost recovery of amounts spent even if the projects are never completed. The current request is for the “construction work in progress,” or CWIP, incentive. CWIP recovery would give FirstEnergy profits on project spending prior to completion of the project—earlier than is usually allowed under normal ratemaking policy that requires that projects first be “used and useful” before any profits are earned.
Residential customers pay for the costs of these transmission projects, including the financial incentives, through the supply portion of their utility bills. The costs of transmission service across PJM have more than doubled in the last decade.
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers of electric, natural gas, telecommunications, private water and certain transportation matters before the Public Service Commission, federal regulatory agencies and the courts.
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