On July 16, 2009, FERC granted a complaint filed by Pepco Energy Services, Inc. (“Pepco”) challenging provisions of PJM’s Open Access Transmission Tariff regarding peak-hour-period availability penalties for infrequently-run generation units. The Commission determined that the market rules governing the peak-hour-period availability penalties for infrequently-run generators were unjust and unreasonable, and established new rates to be applied as of the date of the complaint (April 22, 2008).
In PJM’s capacity market, resources that commit to provide capacity when dispatched by PJM are paid a rate determined by a capacity auction. The peak-hour availability charges and credits provide a means to assess whether generation resources committed as capacity actually are available at expected levels during peak periods. The charges are calculated by comparing actual availability during peak hour periods with expected availability. For any unit that has at least 50 service hours during peak-hour-period, a unit’s actual availability is determined by assessing its availability during the 500 peak hours of the delivery year. The charges and credits for infrequently-run units with fewer than 50 total service hours during peak periods are based on their forced outage rate for all 8,700 hours in the delivery year. Pepco alleged that under this calculation method, seldom-run units can incur substantial peak-period availability charges because of their unavailability during non-peak hours in the delivery year.
Pepco proposed separate remedies in three distinct time periods. For the 2007-2008 delivery year (which was to end on May 31, 2008), Pepco requested that the Commission find that generation resources with fewer than 50 service hours during peak hours in a delivery year should not be subject to charges and credits assessed under the peak-hour-performance market rules. For the 2008-2009 delivery year, which was to start on June 1, 2008, Pepco requested that the Commission require PJM to delete the special rules applicable to infrequently-run generation resources, and adopt the same metric for all generation resources. For the 2009-2010 delivery year and beyond, Pepco requested the Commission to direct PJM, to explore through its stakeholder process alternative methods for assessing peak-hour-period availability charges on infrequently-run generation resources, and to make a Federal Power Act (“FPA”) section 205 filing proposing a replacement methodology.
The Commission had held the complaint in abeyance while PJM stakeholders considered possible changes to the market rules governing the peak-hour-period availability metrics for infrequently-run generators. As a result of that process, PJM filed changes, in Docket No. ER09-412-000, to the peak-hour-availability provisions pursuant to section 205 of the FPA. These changes provide that the peak-hour-availability measure of an infrequently-run resource shall be the lower of the resource’s peak-period or yearly metric.
FERC found that this remedy addressed the issue going forward. The Commission stated that because the 2007-2008 period preceded the filing of the complaint, no relief could be granted. Consistent with that approach, the Commission determined that because the complaint was filed before the 2008-2009 delivery year, PJM and other parties were on notice and refunds, if necessary, were justified.
The Commission’s order is available at: http://www.ferc.gov/whats-new/comm-meet/2009/071609/E-29.pdf.