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Hogan joins Delaware in opposing electricity project rate increases

f Delaware Governor Jack Markell, Democrat and Maryland Governor Larry Hogan at a press conference in Delmarva. (The Daily Record / Bryan Sears)

f Delaware Governor Jack Markell, Democrat and Maryland Governor Larry Hogan at a press conference in Delmarva. (The Daily Record / Bryan Sears)

FENWICK ISLAND, Delaware — Gov. Larry Hogan Wednesday vowed to join with Delaware Gov. Jack Markell in opposing the allocation of a $400 million electricity project that will primarily benefit New Jersey.

Hogan, a Republican, traveled just north of the Maryland line along the Delmarva peninsula to have lunch with his Democratic counterpart and join forces in opposing a recent federal decision that will impose 90 percent of the costs of the Artificial Island electric project on residents of Delaware, Maryland and Virginia even though the area will only receive 10 percent of the benefit.

“Simply put: This is a mistake, it is unreasonable and it is not fair to the hard-working ratepayers of Maryland and Delaware,” said Hogan, adding that the state was joining forces with Markell to oppose the decision and ask the Federal Energy Regulatory Commission to reconsider its order allocating the costs to areas outside of New Jersey.

“We have expressed our disappointment, frustration and opposition in a letter to the Federal Energy Regulatory Commission this week and we have let the agency know that we are going to use every tool at our disposal to reverse this regrettable and improper decision,” Hogan said.

Both Hogan and Markell stopped short of vowing to pursue the matter in court, saying they hoped federal regulators would change their ruling without the need for a lawsuit.

Hogan said the decision to allocate most of the costs to residents and businesses along the Delmarva peninsula will add millions of dollars more every single month to electricity ratepayers in the region “for power they do not use or benefit from.”

The $400 million project involves adding more transmission lines from three nuclear power plants on Artificial Island that will run under the Delaware River. The new lines will allow the plants to deliver more electricity, primarily to customers in New Jersey. The project is operated by PJM, a regional transmission organization that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia

“Traditionally, the beneficiaries of the projects pay for those projects,” Hogan said. “Unfortunately, in this case PJM determined that the brunt of the cost for this project, 90 percent, would fall on customers in neighboring Maryland and Delaware while 90 percent of the benefits of these new lines will go solely to customers in New Jersey.”

Hogan’s challenge to the ruling, should it be successful, would place more costs for the project on ratepayers in New Jersey and potentially put him at odds with his friend Gov. Chris Christie.

The two-term New Jersey Republican campaigned for Hogan in 2014 and Hogan returned the favor, supporting Christie in his short-lived presidential campaign. The two built a personal relationship during Hogan’s cancer treatments last year, but Hogan broke from his friend when it came to supporting presumptive Republican presidential nominee Donald Trump. Christie has endorsed the controversial real estate mogul while Hogan has said he will not vote for Trump.

Hogan said he has left phone messages for Christie on the electricity issue.

“We haven’t actually connected, but I let him know what we were going to be doing with Governor Markell today and just briefed him,” Hogan said. “We haven’t had a real discussion on it yet though.”

The Federal Energy Regulatory Commission in April ruled that, on the basis of an existing formula it uses to determine who pays for such upgrades, 90 percent of the of the cost of the project should be borne by ratepayers in Delaware, Maryland and Virginia.

Hogan said the additional rates will “significantly increase” monthly bills for residential customers and “deal a crushing blow to small businesses in the region.”

Mary Beth Tung, director of the Maryland Energy Administration, said larger consumers of electricity such as manufacturing and data centers could see six-figure increases over 25 years. Residential customers would pay an additional $800 over the same period.

Delaware residents and businesses will shoulder about 60 percent of the amount allocated to the region by the federal agency. Maryland ratepayers on the Eastern Shore will pick up 35 percent of that allocation with the remaining amount falling on coastal Virginia ratepayers.

Markell said federal regulators made their decision based on an existing rule that doesn’t take into account situations such as the Artificial Island project.

“The argument that FERC made on their decision relied on a basic assumption: That this one-time situation did not warrant a full reconsideration of the method used to calculate the cost to consumers,” Markell said, adding that federal regulators have said “the method works on most occasions and it prefers to use it all the time rather than to make exceptions to their broad guidelines. But that is not an acceptable outcome for the citizens of our states.”

The Delaware governor said federal regulators are expected to reconsider their decision, an action which may not necessarily include a new hearing.

“Not only is the cost allocation unjust and unreasonable and unduly discriminatory and preferential, but also long delays will bring about uncertainty regarding costs, and that has a negative impact on economic development,” Markell said. “And while the project has not impacted utility bills yet, planning for construction is already under way and it is vital that we are able to resolve this issue before it goes too far.”