FERC Upholds Postage Stamp Cost Allocation Methodology

Countering an earlier remand from the Seventh Circuit, the Commission explains why a regional transmission organization should use a postage stamp methodology to allocate the costs of its new high-voltage transmission lines.

In an order issued on March 30,¹ the Federal Energy Regulatory Commission (FERC or Commission) issued an order requiring "postage stamp" pricing to allocate the costs of new 500 kV and above transmission projects in the PJM Regional Transmission Organization Region. PJM Interconnection, L.L.C., 138 FERC ¶ 61,230 (2012). The Commission acknowledged that other just and reasonable cost allocation methodologies may exist to allocate the costs of high-voltage transmission facilities. It concluded, however, that PJM Interconnection, L.L.C.'s (PJM's) use of a static-flow-based model is unjust and unreasonable.