RTO Cost Allocation Practices
Cost allocation practices differ across all regions of the country and within regions based on how a project is classified – for the reliability of the grid, or for the economic benefit of consumers. Here are brief descriptions of the cost allocation methodologies currently in place in regional wholesale markets. Note that some of these methodologies are under review.
| RTO/ISO |
Reliability Projects |
Economic Projects |
Midwest Independent System Operator
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Projects 345kV and above:
- 20% of costs go to all of the MISO zones, pro rata based on load
- 80% of costs go to the MISO zones designated as beneficiaries based on a power flow analysis
Projects 100-345 kV:
- 100% of costs go to the MISO zones designated as beneficiaries based on a power flow analysis
Projects below 100kV:
- Paid for by the local zone in which the facility is located
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All projects that pass threshold:
- 20% of the costs go to all MISO zones
- 80% to MISO sub-regional zones based on the benefits
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Southwest Power Pool
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- 1/3 of the costs go to all SPP zones
- Assuming the project is more than 60kV and, costs more than $100,000 and is located in the base plan, 2/3 of the cost are allocated to the zones that benefit
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Projects 345kV and above:
- If portfolio benefits are greater than costs in all zones, the costs are spread across all SPP zones (a new Highway/Byway methodology is being evaluated)
- Individual Projects
- Allocated as agreed among project sponsors
- Sponsors get transmission revenues for use by others
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New York Independent System Operator
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Allocation depends on whether need is local, bounded, or statewide
- NYC and Long Island pay 100% of projects to meet local reliability needs
- Remaining statewide needs allocated to zones based on peak load
- Remaining need allocated to zones that fail a reliability test
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- Eligible project costs are allocated to zones by current and future prices, and allocated within zones by load
- To be eligible for cost sharing, a project must pass three tests:
- Cost greater than $25 million
- Benefits are greater than costs
- 80% of the beneficiaries vote for it
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Pennsylvania-New Jersey-Maryland Regional Transmission Organization
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New facilities 500kV and above
- Shared by all PJM systems
New facilities less than 500kV
- Allocated to zones based on power flow analysis of beneficiaries
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New facilities 500kV and above
- Shared by all PJM systems
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| RTO |
All Projects |
New England Independent System Operator
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Allocate costs across the NE-ISO foot print if the project is:
- 115kV and above
- In the regional system plan
"Excess" costs of projects over $500,000 elective, local benefit, and merchant transmission costs are directly assigned.
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California Independent System Operator
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Projects 200kV and above:
- 100% of cost recovered through a uniform transmission rate per kW
Projects below 200kV:
- Recovered in the subregion
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ERCOT (most of Texas)
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Projects 60kV and above
- Recovered through an ERCOT-wide postage stamp rate
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