PEG Explains New Jersey RBP/RBA Cost Allocation Timeline and PJM Flexibility

Analysis of PEG/PSE&G’s RBP (RBA) cost-allocation process in New Jersey and flexibility mechanics in PJM vs. transmission owners

1) How to think about the “RBP/RBA” cost allocation basis and the timeline for New Jersey (specifically BPU-driven process)

From management’s perspective, the practical workflow is: FERC must approve the federal construct, while New Jersey’s BPU has its own state timelines that “the state will be involved” to meet. Management explicitly notes that the process is still contingent on what FERC ultimately approves (“got to see what comes out of FERC when they finally approve everything”), and therefore they do not want to lock into a specific timeline detail until the federal outcome is known. ¹

What timeline do they currently assume?

Management indicates the state timeline is currently “set up at 12 months,” but they expect it may change over time, again emphasizing they are not finalizing specific dates until FERC’s outcome is clear. ¹

Why is state involvement central (BPU as the enabling party)?

They frame it as an execution/implementation matter: the BPU will have timelines it must meet, and management believes cooperation between the company and the BPU can materially help achieve customer cost objectives. ¹

Evidence they can execute with the BPU (a comparable cost-allocation effort)

Management points to a recent, concrete example in the same “cost allocation” domain: they state that a filing they made for cost allocations was approved by FERC after working through last-minute hurdles with the state, resulting in $65 million per year of savings going forward for customers (not a one-time benefit). ¹
This is offered as proof of capability to collaborate effectively with the state even when the process involves federal approval steps. ¹

Financial interpretation: the key “process” takeaway is that the cost allocation basis is not purely an internal accounting exercise—it depends on a regulatory sequence where FERC approval is upstream, and state regulators (BPU) operationalize the implications via timelines and filings. The 12-month assumption suggests the state implementation horizon is likely aligned to an annual cadence unless the final rule changes it. ¹

2) What is “favorable” about having the cost allocated down to the states?

Management’s favorable framing is largely customer-cost and alignment oriented, rather than a claim that state-level allocation is inherently easier or automatically reduces costs. The clearest support in the excerpt is their emphasis that state-and-federal cooperation can produce measurable customer savings (the $65 million/year example) once the allocation mechanism is properly structured and approved. ¹

The practical “favorability”

• Customer cost benefit can be realized annually when the allocation mechanism is approved (explicitly cited as $65 million/year going forward). ¹
• They view the ability to influence the structure at the cost-allocation level as something they “advocated for strongly” and then executed alongside the state to clear hurdles—implying that allocating to state bases can create a channel to tailor outcomes to customer affordability goals. ¹

Financial interpretation (grounded in the excerpt): “allocated down to the state basis” is favorable in the sense that it can make regulatory outcomes more actionable for state affordability objectives, and management believes they have demonstrated the capability to drive such outcomes through coordinated FERC + BPU steps. ¹

3) Flexibility procedures: mandatory flexibility at the transmission owner tariff vs PJM dictating it

The provided excerpts do not contain a direct, explicit technical description of the “mandatory flexibility down to the transmission owner tariff versus PJM dictating it” question. There is, however, relevant related context on PJM’s evolving regulatory construct and how it is perceived.

What management says about PJM’s evolving construct (utility-like direction)

Management indicates that the PJM regulatory construct is getting closer to “utility-like” and references “RVP and IRAS processes” as mechanisms that help define expectations for participants—while also noting that discussions include considerations to avoid boxing parties into noncompliance. ²³

What this suggests for the user’s flexibility comparison (with limits)

Given the excerpt language:

• PJM processes are intended to set expectations and clarify “what is going to be expected of them,” which is consistent with PJM playing a strong role in determining flexibility requirements in practice. ³
• Management also suggests there is concern in the discussions about parties not being constrained in a way that would cause trouble staying compliant (“not boxing themselves into any kind of an agreement to trouble that thing that they need to stay in compliance with”). ³

But the excerpt does not specify:

• whether flexibility is implemented through transmission owner tariffs as the mandatory locus, or
• whether PJM mandates the flexibility directly (or both).

So the most accurate conclusion from the provided material is: management expects PJM’s framework to increasingly define operational/regulatory expectations (moving closer to utility-like constructs), but the excerpts do not give enough detail to adjudicate the exact allocation of “who dictates flexibility” between PJM vs transmission owner tariffs. ²³

4) Bottom-line answer to the two-part question

1. Process and timeline for New Jersey to create the cost allocation basis (RBP/RBA):

   • FERC approval is a gating step (“got to see what comes out of FERC”). ¹
   • The BPU will be involved with timelines it must meet, currently set up at 12 months but subject to change after FERC’s decision. ¹
   • PEG/PSE&G emphasizes its ability to collaborate with the BPU; it cites a prior cost-allocation filing approved by FERC producing $65 million/year savings going forward for customers. ¹

2. What’s favorable about allocating costs down to the states:

   • The favorable element evidenced by management is the ability to produce ongoing, customer-facing annual savings through a properly structured cost allocation mechanism coordinated across state and federal regulators. ¹
   • They portray cost allocation advocacy and execution as something they can do effectively with the BPU, implying state-level allocation is a practical lever for affordability outcomes. ¹

3. Flexibility procedures: PJM dictating vs transmission owner tariff mandatory flexibility:

   • The excerpt supports that PJM is moving toward a more utility-like framework and that PJM processes like RVP and IRAS help participants understand expectations, with a compliance-flexibility safeguard in discussions. ³²
   • However, the provided text does not specify whether mandatory flexibility is enforced primarily through transmission owner tariffs or primarily via PJM dictates, so a precise comparison cannot be supported from these excerpts alone. ³

Net: management’s operational stance is clear on the regulatory sequencing (FERC then state/BPU timelines) and the value of state-tailored affordability outcomes, but the excerpts are insufficient to conclusively resolve the “tariff vs PJM dictation” mechanics of mandatory flexibility. ¹³