On April 21, 2016, FERC issued an order denying Viridity Energy, Inc.’s (“Viridity”) complaint alleging that PJM Interconnection, L.L.C.’s (“PJM”) Open Access Transmission Tariff (“OATT”) and the parallel provisions of the PJM Operating Agreement are unduly discriminatory as applicable to end users that register under PJM’s Emergency Load Response Program’s Capacity Only option, as opposed to the Full Program Option, because Capacity Only resources do not receive the guaranteed energy payment that Full Program Option participants receive despite being similarly situated. In the order, FERC found that the distinctions between the program participants are justified by the need to avoid errors in measurement and verification that may be caused by Capacity Only participants inadvertently submitting duplicate offers.
Under the Full Program Option in PJM’s Emergency Load Response Program, an end user that registers with one Curtailment Service Provider (“CSP”) in PJM’s capacity program and uses that same CSP for energy and ancillary services will receive both full compensation for the capacity service it provides and a guaranteed energy payment for load reductions during an emergency event. End users that elect to use the Full Program Option also set the floor price for their energy payment during an emergency event without the need to make and clear an offer in the energy market. Alternatively, under the Capacity Only option, an end user may register with one CSP for capacity and may choose to register with a second CSP to provide energy and ancillary services. A second CSP that registers this same resource for energy and ancillary services receives an energy payment only if that CSP makes and clears an offer in the energy market. CSPs representing end users for energy and ancillary services only may not set a floor price for their bids in the energy market.
In its complaint, Viridity alleged that PJM’s compensation provisions, as applied to a Capacity Only resource, are unduly discriminatory because an end user that registers with one CSP for capacity and a second CSP for energy does not receive a guaranteed energy payment when called to reduce load in response to an emergency, whereas a Full Program Option participant receives a guaranteed energy payment. Moreover, Viridity argued that Capacity Only resources and Full Program Option participants deserve similar treatment because they are similarly situated. Specifically, Viridity argued that both types of resources are (i) obligated to curtail load in response to PJM’s request during an emergency, (ii) entitled to no more than two hours prior notice; (iii) required to submit their load reduction meter data to PJM within 60 days after the emergency event; (iv) required to forego payment for their participation if they fail to submit such data; and (v) pay the same penalty if they fail to perform. To address these concerns, Viridity requested that FERC require PJM to revise its OATT and Operating Agreement to permit end users to register with separate CSPs for capacity and energy and ancillary services without forfeiting compensation.
In its order, FERC found that the distinctions in compensation accorded to a Full Program Option and a Capacity Only resource under PJM’s Emergency Load Response Program are justified by the need to avoid errors in measurement and verification by preventing end users represented by two different CSPs from submitting duplicate offers for the same energy covering the same time period. FERC stated that such duplicate offers could create reliability problems and could require market participants to pay twice for the same reduction. In addition, FERC stated that, because PJM does not know in real time which CSP represents which customer, PJM must be able to rely on a rule that, absent a Capacity Only arrangement, allows that there will be only a single CSP. Further, FERC stated that this requirement protects against gaming and promotes successful integration of demand response resources into the PJM market. Moreover, FERC held that there is not necessarily undue discrimination simply because an end user is permitted to choose between using one CSP and using two CSPs. Accordingly, FERC found that a legitimate basis for the distinction exists and held that Viridity had not shown that PJM’s OATT is unduly discriminatory.
A copy of the order is available here.