On January 29, the Federal Energy Regulatory Commission (“FERC” or “the Commission”) approved a settlement agreement that will allow Duquesne Light Co. (“Duquesne”) to remain in the PJM Interconnection LLC (“PJM”). However, FERC made no decision on whether Duquesne has any residual obligations to the Midwest Independent Transmission System Operator, Inc. (“MISO”) for abandoning its plans to join that regional transmission organization (“RTO”).

Duquesne originally announced its intention to leave PJM for MISO in November of 2007 in order to avoid increased capacity costs stemming from PJM’s Reliability Pricing Model (“RPM”). However, two conditions in the Commission’s orders approving the move likely contributed to Duquesne’s decision to remain with PJM. First, in January 2008, the Commission ruled that Duquesne would be liable for capacity payments through the 2010-11 delivery year. Second, in September 2008, the Commission held that Duquesne was prohibited from re-selling capacity acquired through the RPM to third parties.

Late last year, Duquesne apparently changed its mind. On December 10, 2008, Duquesne, PJM, and other interested parties (but not MISO) asked FERC to approve a settlement to keep the company in PJM. (see December 19, 2008 edition of the WER). As part of the approved settlement agreement, Duquesne will participate in PJM’s upcoming RPM auction for the 2012-2013 delivery year.

FERC did not make a determination on whether Duquesne is a “contractually bound operating member” of MISO, and therefore obligated to remain a member for five years and pay an exit fee of more than $7 million if it leaves. Duquesne had told the Commission that being held to such obligations would be an “unacceptable condition” of its settlement with PJM. FERC justified its silence on the issue on the basis that it was not addressed in the settlement agreement. Furthermore, the Commission stated that ruling on the issue would interfere with MISO’s right to pursue its claims in a separate proceeding before the Commission or in court.

The Order accepting the settlement agreement is available online at: http://www.ferc.gov/
EventCalendar/Files/20090129133545-ER08-194-000.pdf