On June 5, 2018, FERC granted the PJM Interconnection, L.L.C. (“PJM”) independent market monitor’s (“IMM”) request to compel the American Electric Power Services Corporation (“AEP”) to provide certain information related to cost-based offers to the IMM.  The IMM stated in its petition that it needed the information to determine whether AEP’s total costs of variable operations and maintenance (“VOM”) included in its capacity offer raise any market power concerns in the PJM Energy Market.  FERC determined that because the IMM had broad authority under PJM’s Open Access Transmission Tariff (“Tariff”) to request such information, it would grant the IMM’s petition.

Attachment M to PJM’s Tariff sets forth the IMM’s authority to request certain information from electric utilities.  It provides that the IMM can “review all proposed sell offers for a determination of whether they raise market power concerns” and “determine whether the level of offer or cost inputs raise market power concerns.”  The IMM formally requested data from AEP on October 28, 2016.  Specifically, the IMM requested the total costs of VOM used in the development of the AEP Ceredo units’ cost-based offers for September 1, 2016, including identification of costs by category.  The IMM stated in its petition that a competitive offer level is the marginal cost of operating a generating unit and offers that exceed that level raise market power concerns.  On November 22, 2016, the IMM filed the petition with FERC requesting an order directing AEP to respond with the requested data.

On December 9, 2016, AEP filed an answer, comments, and a motion to dismiss the IMM’s petition to compel it to submit information on its VOM for the Ceredo unit.  On August 31, 2017, FERC issued a letter order, directing the IMM to: (1) explain whether and why the requested data is necessary to ensure correct application of PJM’s current Cost Development Guidelines, or otherwise probe the IMM’s market power concerns with respect to the Ceredo units’ September 1, 2016 offer; (2) clarify whether any of the units at issue were mitigated on September 1, 2016; and (3) state whether the Hourly Offers Order (FERC proceeding that required PJM to revise its Tariff provisions governing market participants’ Fuel Cost Policies) has any impact on the IMM’s need for the requested data.  On September 29, 2017, the IMM supplemented its petition to provide responses to the three questions.

In response to FERC’s first question, the IMM stated that it cannot carry out its responsibility to “validate the VOM costs used by AEP in the calculation of its cost-based offers” if such information is not provided, and its request is “routine.”  In response to the second question, the IMM argued that “AEP performs VOM calculations yearly, and those calculations are “issues for all 2016 VOM and therefore issues with cost-based offers on all days of the year.”  In answering FERC’s third question of whether the Hourly Offers proceeding alters the IMM’s need for the information, the IMM responded that “the Hourly Offers Order neither affected its need for data nor altered the IMM’s responsibilities under Attachment M to review market behavior.”

In the order granting the IMM’s request, FERC concluded that the IMM’s request for cost information was within the scope of its authority under Attachment M to the PJM Tariff.  FERC stated that under Attachment M, the IMM is allowed to “petition the Commission for an order that the information is necessary and direct[] its production.”  In addition, FERC found that Attachment M stipulates that the IMM “may review upon its own initiative at any time, the incremental costs…of a generating unit in order to ensure that the Market Seller has correctly applied the Cost Development Guidelines and that the level of the Offer Price Cap is otherwise acceptable.”  FERC also reasoned that because the IMM retains its ongoing authority and responsibility set forth in Attachment M, it could request from AEP the total costs of VOM used in the Ceredo units’ cost-based offer for September 1, 2016.  FERC directed AEP to provide this information to the IMM within 15 days from the date of its June 5, 2018 order.

FERC’s order addressing the IMM’s request can be found here.