On April 17, 2020, FERC denied Potomac Economics, Ltd.’s (“Potomac Economics”) complaint against PJM Interconnection, L.L.C. (”PJM”), which alleged that PJM’s rule requiring external generation resources to obtain a pseudo-tie in order to participate in PJM’s capacity market was unjust and unreasonable (“Complaint”). FERC found that Potomac Economics failed to show that PJM’s pseudo-tie requirement had caused market inefficiencies or harmed reliability and that any arguments regarding potential future harms to the New York System Operator, Inc. (“NYISO”) by the pseudo-tie requirement were speculative. FERC also denied PJM’s motion to dismiss the Complaint, finding that market monitors may file complaints under Federal Power Act (“FPA”) section 206, provided that such market monitors satisfy the requirements of FERC’s relevant regulations.

A pseudo-tied resource is a resource that is physically located in one balancing authority area (“BAA”) but treated electrically as if it were in another BAA. PJM currently requires that all external generating resources desiring to sell PJM’s “capacity performance” product must be pseudo-tied to PJM. Changes to PJM’s capacity market rules have increased the number of pseudo-tied resources, particularly those located in the Midcontinent Independent System Operator, Inc. (“MISO”) region that are pseudo-tied into PJM. In the Complaint, Potomac Economics argued that PJM’s requirement imposes economic and reliability costs on surrounding Regional Transmission Organizations, including MISO and potentially NYISO (see April 18, 2017 edition of the WER for more background on the Complaint).

FERC found that Potomac Economics failed to show that PJM’s pseudo-tie requirement was unjust and unreasonable because it was unable to demonstrate that the requirement had increased market inefficiency. FERC reviewed three different analyses provided by Potomac Economics but rejected each as unconvincing. FERC further found that Potomac Economics failed to show that the pseudo-tie requirement caused operational or reliability harms in MISO because Potomac Economics neither refuted that the requirement is a reasonable method of ensuring reliability under NERC TLR-5 procedures, nor that the requirement is necessary to assess resource performance. FERC contended that, to the extent that MISO believes that a pseudo-tied resource compromises reliability, MISO could take steps to address the issue, such as suspending or terminating the pseudo-tie. Finally, FERC dismissed Potomac Economics’ assertion that the pseudo-tie requirement could negatively impact NYISO, finding the assertion to be speculative, as NYISO, at the time of the order, did not have any resources pseudo-tied with PJM.

FERC also rejected PJM’s motion to dismiss Potomac Economics’ Complaint, wherein PJM alleged that the Complaint was an inappropriate demand by a market monitor. FERC instead held that market monitors may file complaints under FPA section 206, provided they meet the additional requirements for filing in FERC’s regulations, which Potomac Economics had met in this instance.

A copy of FERC’s order is available here.