How to Read Your PJM Cycle 1 Phase I System Impact Study Results

What Phase I tells you (and what it doesn't)

A Phase I System Impact Study is the first quantitative answer PJM gives a Cycle 1 applicant: If your project interconnects at the proposed Point of Interconnection, here are the network upgrades the system requires, and here is your initial cost responsibility. Phase I results are necessary for the Decision Point I go/no-go decision under Manual 14H Section 4.

What Phase I results do not tell you is final. Cost allocations finalize in Phase III. Network upgrade scope refines in Phase II. Affected systems studies on neighboring RTOs proceed on a separate timeline. A project that receives a $0 cost allocation in Phase I can have a non-zero share assigned at Phase II if upstream projects in the cluster withdraw or reduce in size. Reading Phase I results as final is the most expensive misreading a developer can make.

This guide walks the structure of an actual Phase I report, line by line, using the AF2-126 Phase I report from Transition Cycle 1 as a published reference. It then steps through the most-cited figures from PJM's TC1 study completion announcement (September 22, 2025) and third-party TC1 economic analysis to set realistic expectations. Finally, it lays out the withdraw-vs-continue framework keyed to the Decision Point I deadline.

The 15 sections of a Phase I Study Report

Every Phase I report follows the same skeleton. The order, headings, and content map are consistent across project types. Once you learn this structure, every future Phase I report is faster to read.

#	Section	What to look for
1	Introduction	Project name, queue number, MW size, requested in-service date
2	Preface	Study methodology and any PJM actions noted (e.g., re-runs)
3	Decision Point I Requirements	The Readiness Deposit #2 amount and the DP1 site control submission requirements
4	General	Project description, technology, configuration
5	Point of Interconnection	PSSE bus number, line terminal, voltage, distance — verify against your application
6	Cost Summary	The single most important table in the entire report
7	Readiness Deposit	Required financial commitment to advance to Phase II
8	Transmission Owner Scope of Work	What the host TO is required to build; major equipment, timing
9	Transmission Owner Analysis	Network impact assessments; flagged constraints
10	Developer Requirements	Equipment standards, modeling submissions, dynamic data
11	Revenue Metering and SCADA	Telemetry obligations and reporting standards
12	Summer / Winter / Light Load Analysis	Seasonal reliability impacts under different load conditions
13	Short Circuit Analysis	Fault current evaluations against breaker ratings
14	Stability Analysis	Dynamic performance assessment
15	System Reinforcements	Required upgrades, contingent facilities, and affected systems impacts

Reading the Cost Summary, line by line

The Cost Summary is the section every counterparty — lender, offtaker, board — will ask about. It is also the single biggest source of misinterpretation. The table looks deceptively simple. Each line is shaped by upstream PJM decisions about cost allocation methodology that materially change what a number means.

A typical Cost Summary contains two columns and three to five rows.

Description	Cost Allocated	Cost Subject to Readiness
Network Upgrades	$152,886	$152,886
System Reliability Network Upgrades	$0	$0
Direct Connection Network Upgrades	$11,994,284	$11,994,284

Each row category has a precise meaning under PJM's OATT and Manual 14C:

• Network Upgrades — transmission upgrades required by your project that benefit the system at large. Allocation is governed by FERC Order 2023 cost-causation rules.
• System Reliability Network Upgrades — upgrades driven by reliability standards (NERC) rather than your specific interconnection. These often appear as $0 to your project at Phase I but can shift later.
• Direct Connection Network Upgrades — upgrades required to physically wire your project to the host transmission system. Allocation is typically 100% to your project.

The "Cost Subject to Readiness" column is the figure that drives your Readiness Deposit #2 obligation at DP1 — not the "Cost Allocated" column. They are usually the same number, but in cycles with multiple-project allocations, a portion of "Cost Allocated" may be excluded from the readiness obligation. Always check both columns.

Contingent facilities: the cost that isn't yours yet

The System Reinforcements section lists every transmission upgrade your Phase I results identify, along with the cost allocation share assigned to your project. Most allocations are 100% — your project caused the upgrade, and your project pays for it. But some allocations are partial, and a small subset are contingent.

A contingent facility is an upgrade whose cost responsibility is currently assigned to another project in your Cycle, but which can be reassigned to your project if the upstream project withdraws or reduces scope. The Cost Summary will show $0 for contingent allocations at Phase I. The risk is that this $0 line item becomes a $1.2 million or $4.5 million line item between Phase II and Phase III if the upstream sponsor exits.

An example pattern from the AF2-126 Phase I report (a published TC1 result): the "Transmission Owner Identified System Reinforcements on Sub-Regional Facilities" section listed two upstream projects — a $4.49 million reconductoring and a $7.5 million substation rebuild. AF2-126's allocation to those projects was $0 at Phase I. The reasonable expectation is that some portion of those costs becomes AF2-126's responsibility if the upstream sponsors do not advance through DP1 themselves.

Operationally: every $0 line item in the System Reinforcements section is a footnote in your Decision Point I memo to the board. The probability-weighted dollar exposure is the right number to report, not the face-value $0.

Affected systems: when your neighbors send you a bill

An Affected Systems study evaluates whether your interconnection at a PJM Point of Interconnection causes reliability impacts on a neighboring grid operator's system. PJM's neighbors are MISO to the west, NYISO to the north, ISO-NE further northeast, and within PJM, sub-regional zones like AEP, ATSI, and Dominion. Each can require network upgrades on its own system that your PJM project must fund.

The Affected Systems section will appear in your Phase I report only if PJM identified material impacts in the contingency analysis. When it does, three figures matter:

• Affected systems identified — named operators (e.g., MISO, AEP, ATSI) and the loading percentages or MVA contributions that triggered the flag
• Coordination status — whether PJM has formally notified the affected operator and whether a separate study is in progress
• Cost estimate — if available; often deferred to Phase II or III pending the affected operator's own analysis

Affected systems studies operate on the affected operator's timeline, not PJM's. A MISO Affected Systems study triggered by a PJM Cycle 1 Phase I result may not return findings until well after PJM has finalized your Phase II cost allocation. The financial close window between Phase I results and Decision Point I is not enough time to procure binding affected systems numbers. Plan financing assumptions accordingly.

What TC1 results actually showed

PJM completed all three phases of Transition Cycle 1 studies on September 22, 2025, issuing draft agreements for 130 New Service Requests against an opening cluster of 40.7 GW. The TC1 cluster is the closest analog Cycle 1 applicants have for what to expect. The headline figures:

• Capacity attrition — only 35% of submitted capacity received final agreements. Two-thirds of the cluster withdrew or was disqualified.
• Battery attrition — 18% of opening battery capacity made it through TC1. Eighty-two percent withdrew — almost certainly driven by the cost allocations revealed at Phase I.
• Cost variance — battery network upgrade allocations averaged $206/kW. Five projects faced costs above $400/kW. Four projects paid less than $15/kW. Three battery projects exceeded $50 million in absolute allocation. One project required no upgrades.
• Speed — 668 days (about 22 months) from TC1 start to final agreement — substantially faster than the 5-plus years typical of the legacy serial queue.

The most useful interpretation is that Phase I results in Cycle 1 will reveal a wide bimodal distribution. A meaningful share of projects will see allocations under $50/kW. Another meaningful share will see allocations above $400/kW. The middle is thinner than developers expect.

The Decision Point I deadline and what it triggers

Decision Point I is the first formal go/no-go milestone after Phase I results. The mechanics are set in Manual 14H Section 4 and Tariff Part VII, Subpart D, Section 309. Three things happen at DP1.

1. Readiness Deposit #2 posting. Each project either posts the Readiness Deposit #2 amount calculated from the Phase I Cost Summary or withdraws. The deposit is at risk through Phase III.
2. Site Control submission. The DP1 Site Control evidence is compared against the initial Site established at application. Manual 14H Section 7.2.2 controls the modification rules — parcels can be added (adjacent or with recorded easement) or removed without further demonstration.
3. Continuation election. The project formally elects to continue into Phase II under the cost allocations identified in Phase I, or withdraws and recovers any portion of the Readiness Deposit not yet at risk.

The DP1 deadline for Cycle 1 will be set by PJM in coordination with the Phase II start, which itself depends on the close of TC2 Decision Point III. The current schedule communicated through the Interconnection Process Subcommittee places DP1 in late summer or early fall 2026. Verify against the most recent Cycle Service Request Status page on pjm.com.

The withdraw vs continue framework

Phase I results put a number on a project's economics. The DP1 decision is a comparison of three forward paths, each with materially different risk and capital implications. We frame this as three questions to a board, in order.

Question 1: Are the Phase I costs viable under the project's existing capital plan?

The Phase I "Cost Subject to Readiness" plus the contingent facilities risk-weighted exposure plus any flagged affected systems exposure is the right denominator for a viability test. If that figure plus all other interconnection-related capex breaks the levered return target the project was financed against, the answer is no. The next two questions decide whether the project withdraws or attempts to absorb.

Question 2: Is the Phase I result expected to improve at Phase II?

It can. Phase II re-runs the cost allocation against a smaller cluster after DP1 withdrawals. Some allocations decrease. Some line items disappear entirely. But the more common pattern is the opposite — contingent facilities convert to direct allocations, and affected systems estimates land for the first time. The base rate from TC1 is that allocations between Phase I and Phase III move up for most projects that continued. Withdraw expectations should be based on the modal outcome, not the optimistic tail.

Question 3: Is there a structural change available between Phase I and DP1 that improves the picture?

Two structural changes are available. First, the project can re-elect MFO downward, which often reduces some allocations though not in a 1:1 ratio. Second, the project can modify Site Control to add or drop parcels per the Manual 14H Section 7.2.2 rules — useful when the Phase I results have revealed that the proposed POI is not optimal. The catch: any structural change must satisfy the same density rules, term minimums, and adjacency-or-easement restrictions that govern any DP1 site control submission.

Path	Typical signal	Capital implication
Continue to Phase II as-is	Phase I costs < underwriting target; contingent / affected exposure manageable	Post Readiness Deposit #2; maintain site control; absorb potential drift up to Phase III
Continue with restructuring	Phase I costs marginal; structural change available (MFO reduction, parcel modification, POI adjustment)	Post Readiness Deposit #2 against revised structure; accept new comparison baseline at DP3
Withdraw at DP1	Phase I costs exceed viability threshold; no path to improvement	Recover unused Readiness Deposit; preserve Cycle 2 reapplication option; release site control where feasible

Common misreadings

"$0 today means $0 forever"

Phase I cost allocations can change at Phase II and Phase III. PJM has been explicit about this in its TC1 documentation: when other projects withdraw, reduce in size, or otherwise change posture in the Cycle, cost allocations to remaining projects can shift. A $0 contingent facility allocation at Phase I should be probability-weighted, not booked as zero.

"Phase I results are an offer to advance"

Phase I results are a study output, not an offer or a contract. The project's interconnection rights remain conditioned on satisfying Decision Point I requirements, posting the Readiness Deposit #2, and progressing through Phase II and Phase III. PJM does not commit to a specific cost allocation at Phase I and the Tariff explicitly preserves PJM's ability to update allocations downstream.

"The Phase I report covers affected systems"

It identifies affected systems impacts but does not study them on the affected operator's system. A MISO or NYISO Affected Systems study runs on the neighbor's process, on the neighbor's timeline, and may not return definitive cost numbers until well into PJM Phase II or Phase III. Build your DP1 financial model with explicit affected-systems uncertainty bands rather than treating an absent number as zero exposure.

"Site control work is on pause until DP1"

It is not. The site control package submitted at the April 27, 2026 Application Deadline establishes the initial Site against which DP1 is compared. Any modifications between Application and DP1 must comply with Manual 14H Section 7.2.2's adjacency-or-easement rule. Land teams that wait until Phase I results to begin DP1 site control work routinely run out of time on recording, title clearance, and PE-stamped layout refreshes.

"Cycle 1 will look like the legacy queue"

The closest empirical analog is TC1, not the legacy serial queue. TC1 attrition rates (65% capacity withdrawn) and timing (22 months start to final agreement) are the right priors for Cycle 1 expectations. The legacy queue's 5-year cycle and lower attrition rates reflect a process that no longer exists.

Glossary

• Phase I System Impact Study — The first formal cluster study, returning network upgrade scope and initial cost allocations.
• Phase II — The second cluster study, refining scope and cost allocations after DP1 withdrawals.
• Phase III — The final cluster study, finalizing cost allocations before GIA execution.
• Cost Allocated — Total cost responsibility assigned to a project for a specific upgrade.
• Cost Subject to Readiness — The portion of Cost Allocated that drives the Readiness Deposit #2 calculation at DP1.
• Network Upgrades — System-wide transmission upgrades caused by the project; FERC Order 2023 governs cost causation.
• System Reliability Network Upgrades — Upgrades driven by NERC reliability standards rather than the specific project.
• Direct Connection Network Upgrades — Upgrades required to physically connect the project to the host transmission system.
• Contingent Facility — Upgrade whose cost responsibility currently sits with another project in the Cycle but can shift.
• Affected Systems Study — Analysis by a neighboring grid operator (MISO, NYISO, ISO-NE) of impacts caused by a PJM interconnection.
• Decision Point I (DP1) — First go/no-go after Phase I; Readiness Deposit #2 posted, site control refreshed, continuation elected.
• Decision Point II (DP2) — Second go/no-go; no site control demonstration required, but any change at DP2 is evaluated under DP3 modification rules.
• Decision Point III (DP3) — Final go/no-go; final site control submission, executed by GIA execution.
• Readiness Deposit #2 — Financial security posted at DP1 against Phase I cost allocations.
• POI — Point of Interconnection. The PSSE bus number and physical location at which the project ties into the transmission system.
• PSSE — Power System Simulator for Engineering. The Siemens platform PJM uses for power flow modeling; bus numbers in Phase I reports refer to PSSE bus identifiers.
• MFO — Maximum Facility Output. The capacity rating used for cost allocation, study deposits, and capacity offers.
• CIR — Capacity Interconnection Rights. The MW value used for capacity market participation.
• NSR — New Service Request. The application form that initiates participation in a Cycle.
• Cluster study — A study run on a group of New Service Requests together rather than serially; the FERC Order 2023 standard.
• System Reinforcement — A network upgrade required for reliability, listed in the System Reinforcements section of the Phase I report.

Sources

• PJM Manual 14H: New Service Requests Cycle Process, Revision 03
• PJM Manual 14C: Interconnection Facilities and Network Upgrade Construction
• PJM Completes Interconnection Reform Transition Cycle 1 Studies, September 22, 2025
• PJM Public Phase I Study Report: AF2-126 (TC1 example)
• Modo Energy: PJM Transition Cycle 1 Battery Storage Buildout and Interconnection Costs
• PJM Cycle Service Request Status page
• FERC Order 2023 Interconnection Final Rule explainer
• Orrick: FERC Approves PJM Interconnection Process Reforms

Related articles

• PJM Site Control Requirements in 2026: The Complete Developer Guide
• Interconnection Queue Withdrawal Penalties by RTO
• Network Upgrade Costs and Solar Interconnection