PJMOn May 28, 2010, FERC conditionally accepted a new Joint Operating Agreement (“JOA”) between PJM Interconnection, L.L.C. (“PJM”) and Carolina Power & Light Company (“Carolina Power” together “PJM/Carolina”). 

PJM/Carolina filed the Proposed JOA on February 2, 2010 to replace the 2005 JOA previously accepted by the Commission.  PJM/Carolina stated that the Proposed JOA incorporates the 2005 JOA but makes the following changes: (1) the exchange of energy through a dynamic schedule; (2) the management and coordination of congestion between PJM and the Carolina Power eastern balancing authority; (3) pricing refinements consistent with the PJM Open Access Transmission Tariff (“PJM OATT”); and (4) make-whole provisions which ensure that Carolina Power does not lose money under the dynamic schedule. 

The Commission rejected the PJM Market Monitor’s request for PJM/Carolina to impose a more comprehensive solution to congestion management, finding that PJM/Carolina’s approach to congestion management is just and reasonable.  The Proposed JOA allows quick responses to the changes in the conditions on the PJM/Carolina Power eastern balancing authority area interface. 

The Commission also found that the Proposed JOA’s provision that allows for the 50 MW ramp rate limitation is reasonable.  The Proposed JOA provides that Carolina Power will alter its generation to support the dynamic schedule by a maximum of 50 MW every five minutes and the actual power exchange will rely on current PJM conditions and congestion. 

The Proposed JOA provides that the import price into PJM from Carolina Power will be the minimum locational marginal price (“LMP”) that is less than the marginal cost for any unit with output of more than 0 MW.  If this price does not exist, the price will be the average of the bus LMPs that are identified as the units that move to support an import to PJM.  The Commission found that these pricing provisions were not unduly discriminatory, but required PJM/Carolina to make a compliance filing within 30 days of the May 28, 2010 Order giving further information about the reasonableness of excluding hydro and nuclear from the calculation of prices paid to PJM for exports into North Carolina.

Finally, the Proposed JOA includes a make-whole provision which insulates Carolina Power from losing money if they follow PJM’s dynamic signal.  PJM will give Carolina Power Balancing Operating Reserves if the total daily cost of imports into PJM exceeds its total daily revenue or if the total daily cost of exports from PJM exceeds Carolina Power’s avoided costs for receiving the export.   The Commission held that in order to rule on this particular point, they needed additional information.  They accepted the make-whole provisions on the condition that PJM/Carolina makes a compliance filing within 30 days of the date of the order.

The Commission suspended the JOA for a nominal period, to be effective on June 1, 2010, subject to refund.  They also directed PJM/Carolina to respond to questions in the order, make a compliance filing within one year of the JOA effective date, and post the implementation document on the website within 30 days of the order.

A copy of the Commission’s Order can be found here.