On October 23, 2019, FERC issued twin orders denying rehearing of the PJM Interconnection, L.L.C. (“PJM”) Phase 1 and Phase 2 Revisions, which sought to resolve overlapping congestion charges on pseudo-tied generation in Midcontinent Independent System Operator, Inc. (“MISO”) and PJM. American Municipal Power (“AMP”) requested rehearing, arguing that FERC engaged in impermissible piecemeal ratemaking, failed to evaluate the ultimate end result of the revisions, and did not fully address overlapping congestion charges. FERC rejected AMP’s arguments, confirming that it fully considered the proposed revisions and found them just and reasonable.
These overlapping congestion charges arise from the interaction of PJM and MISO’s congestion-management software and result in pseudo-tied resources paying both entities during certain congestion events. In October 2017, and supplemented in January and May 2018, PJM and MISO proposed what they characterized as simple software changes in the Phase 1 Revisions and explained that more complex software changes would be made in Phase 2 after additional stakeholder input. Five separate complaints were also filed regarding these charges (see September 25, 2019 edition of the WER). On July 31, 2018, FERC issued twin orders approving both PJM and MISO’s proposed Phase 1 Revisions and PJM’s Phase 2 Revisions without consolidating any of the various proceedings. AMP sought rehearing of both orders.
AMP alleged, among other things, that FERC erred by accepting the phased approach, which constitutes impermissible “piecemeal” ratemaking and does not satisfy FERC’s “end result” standard, which requires that FERC consider the end result of a proposed rate rather than rate components in isolation. FERC disagreed, explaining it is not required to wait for a perfect or total solution to be presented to accept a just and reasonable improvement, especially as a component of a multi-phased solution for large and complex issues. FERC also noted when considering revisions under section 205, it need not consider whether the unrevised portions were still just and reasonable. FERC described its decision not to consolidate the various proceedings addressing these congestion charges as a reasonable exercise of its discretion.
AMP also argued that the Phase 2 revisions were discriminatory because they only address pseudo-tied resources exporting from PJM into MISO, and not for resources importing from MISO to PJM. FERC explained that PJM filed under section 205 to address congestion for its own customers, that AMP’s pseudo-tie transactions coming from MISO (and into PJM) are outside the scope of PJM’s mechanism, and that PJM’s filing does not become unjust and unreasonable simply because it does not address congestion on the MISO system. According to FERC, its section 205 authority is limited to questioning whether a proposed rate is just and reasonable and does not extend to determining whether a proposed rate is more or less reasonable than alternative rate designs.
A copy of the MISO and PJM Phase 1 order is available here.
A copy of the PJM Phase 2 order is available here.