On November 3, 2020, FERC upheld its May 2020 order finding PJM Interconnection, L.L.C.’s (“PJM”) reserve market design to be unjust and unreasonable, and establishing a replacement market design including, among other elements, a downward-sloping Operating Reserve Demand Cure (“ORDC”) and a $2,000/MWh price ceiling (see May 28, 2020 edition of the WER). FERC also upheld its prior finding that PJM should implement a new, forward looking energy and ancillary services offset (“E&AS Offset”). FERC’s November 3 order addressed rehearing requests filed by PJM’s Independent Market Monitor (“IMM”), the Maryland Public Service Commission, and Old Dominion Electric Cooperative and the PJM Load/Customer Coalition. Commissioner Richard Glick issued a separate dissenting statement in which he concluded that FERC failed to show that PJM’s existing reserve market design is unjust and unreasonable, and that FERC “rubber stamp[ed]” PJM’s proposed replacement ORDC. Commissioner Glick echoed his dissent in the May 2020 order, explaining that the downward-sloping ORDC will force customers to pay billons of dollars in scarcity pricing when no shortage exists and will produce a windfall for generators.

Importantly, the November 3 order was limited to addressing arguments raised on rehearing of the May 2020 order. PJM’s August 5, 2020 filing, proposing tariff revisions to implement a forward-looking E&AS offset in compliance with the May 2020 order (“August 2020 Compliance Filing”), remains pending before FERC. In the proceeding addressing PJM’s revisions to its Minimum Offer Price Rule (“MOPR Proceeding”), FERC recently stated that the revisions proposed in the August 2020 Compliance Filing will have an impact on the default offer price floors and E&AS Offsets that will be used in the Base Residual Auctions (“BRAs”) and Incremental Auctions for Delivery Year 2022-23 and going forward. FERC therefore stated in the MOPR Proceeding that PJM cannot conduct the BRA for the 2022-23 Delivery Year until FERC has issued an order on PJM’s August 2020 Compliance Filing (see October 22, 2020 edition of the WER).
Continue Reading FERC Upholds Changes to PJM Reserve Market Design and E&AS Offset Calculation

On November 5, 2020, President Donald Trump designated sitting FERC Commissioner James Danly to assume the Chairmanship of the Commission. Chairman Danly joined FERC as general counsel in 2017, and served as a Commissioner from March through November 2020. Chairman Danly replaces Neil Chatterjee in the role, who will remain a Commissioner. Commissioner Chatterjee’s term expires June 30, 2021.
Continue Reading Danly Named FERC Chairman

On October 27, 2020, FERC accepted Midcontinent Independent System Operator, Inc.’s (“MISO’s”) proposal to require conventional, non-intermittent capacity resources with Energy Resource Interconnection Service (“ERIS”) to secure firm transmission service in the amount of the resource’s full Installed Capacity (“ICAP”) in order to meet its capacity market deliverability requirements. In addition, if a capacity resource obtains firm transmission service in an amount less than the resource’s full ICAP, MISO will prorate the amount of capacity credits that resource receives.
Continue Reading MISO Beefs Up Deliverability Requirements for Conventional Capacity Resources

On October 16, 2020, FERC issued a number of orders at its open meeting that addressed unrelated requests for retroactive waiver of various Regional Transmission Organization and utility tariff provisions. Commissioner James Danly issued a separate statement in each proceeding. Commissioner Danly dissented from many of the orders granting waiver and concurred in the result when the orders dismissed the requests for waiver or granted waiver in certain specific circumstances. In his dissent from an order granting Sunflower Electric Power Cooperative’s (“Sunflower’s”) petition for waiver of certain Southwest Power Pool, Inc. Tariff provisions, Commissioner Danly stated his belief that FERC has no legal discretion to grant retroactive waivers unless the waivers meet certain well-defined exceptions: first, if the parties had notice that tariff provision could be waived retroactively, or second, if the tariff provision is embodied in a private contract between parties who have agreed in the contract to make the rate effective prior to filing the contract with the Commission.
Continue Reading Commissioner Danly Objects to FERC’s Continued Practice of Granting Retroactive Waivers

On October 7, 2020, FERC affirmed its prior determination that certain demand response resources participating in the New York Independent System Operator, Inc. (“NYISO”) capacity markets—termed Special Case Resources (“SCRs”)—should be subject to an offer floor, and required revenues from some retail-level demand response programs to be included in the offer floor calculations. Specifically, FERC: 1) addressed requests for rehearing of its February 2020 Order directing NYISO to apply its buyer-side mitigation (“BSM”) rules to all SCRs that participate in NYISO’s Installed Capacity (“ICAP”) market; 2) accepted NYISO’s compliance filing clarifying the offer floor price calculation for SCRs and directed NYISO to submit a further compliance filing; and 3) found, on the basis of a paper hearing established in the February 2020 Order, that payments received under the Distribution Load Relief Programs (“DLRP”) qualify for exclusion from the calculation of SCR offer floors, but that payments received under the Commercial System Distribution Load Relief Programs (“CSPRs”) do not. Commissioner Richard Glick issued a strenuous dissenting opinion to FERC’s order.
Continue Reading FERC Subjects NYISO Demand Response Resources to Buyer-Side Mitigation Rules

On September 30, 2020, FERC accepted the California Independent System Operator Corporation’s (“CAISO”) proposals to: 1) permit electric vehicle charging stations to participate in CAISO’s demand response program separately from their host facilities (“EV Proposal”); and 2) incentivize behind-the-meter energy storage in CAISO’s demand response programs to “load shift” by consuming energy during over supply conditions and returning that energy to the system during times of need (“Load Shifting Proposal”). FERC held that CAISO’s proposals would enhance its demand response programs, which compensate load, storage, and generation resources for curtailing their demand in response to CAISO’s instructions. FERC also found that the proposals would ensure that CAISO’s policies keep pace with rapidly evolving electric vehicle and behind-the-meter storage technologies, and would permit these resources to participate in the CAISO market under rules that capture their unique characteristics and benefits.
Continue Reading FERC Accepts CAISO Rules Enhancing Demand Response Program for Electric Vehicle Charging Stations and Behind-the-Meter Energy Storage Resources

On September 17, 2020, FERC addressed the American Wind Energy Association’s (“AWEA”) request for rehearing of a December 2019 order finding that Generator Interconnection Agreements (“GIAs”), Facilities Construction Agreements (“FCAs”) and Multi-Party Facilities Construction Agreements (“MPFCAs”) entered into between June 24, 2015 and August 31, 2018 (“the interim period”) should be revised to allow Midcontinent Independent System Operator, Inc. (“MISO”) transmission owners and affected system operators to unilaterally elect to provide the initial funding for interconnection-related network upgrades. FERC’s September 17 order modified the discussion in the December 2019 order but continued to reach the same result. The order also accepted MISO’s proposed tariff sheets allowing transmission owners and affected system operators to elect transmission owner initial funding for network upgrades for GIAs, FCAs, and MPFCAs that became effective during the interim period. Commissioner Richard Glick issued a dissenting opinion in which he concluded that FERC’s order failed to meaningfully address concerns of undue discrimination and ignored evidence that allowing transmission owners and affected system operators to retroactively elect to self-fund network upgrades would result in substantial harm to interconnection customers and could lead to project terminations.
Continue Reading FERC Upholds Orders on Transmission Owner Funding for Network Upgrades in MISO

On September 17, 2020, at FERC’s Virtual Open Meeting, FERC Staff presented an overview of changes to its rehearing practices following the United States Court of Appeals for the District of Columbia Circuit’s (“D.C. Circuit”) recent decision in Allegheny Defense Project v. FERC, 963 F.3d 1 (D.C. Cir. 2020) (en banc) (“Allegheny”), which rejected FERC’s practice of issuing “tolling orders” to grant itself more time to consider requests for rehearing (see July 1, 2020 issue of the WER). Staff explained that the changes to FERC’s rehearing practices are intended to allow appeals of FERC orders to proceed in a timely manner and on a complete administrative record. While the D.C. Circuit granted FERC’s motion to stay the court’s mandate in July (see July 29, 2020 edition of the WER), Staff explained in response to questions from FERC Chairman Neil Chatterjee that Staff expects the D.C. Circuit to issue its mandate in early October.
Continue Reading FERC Staff Clarifies Changes to Rehearing Practices Following Allegheny Decision

On September 4, 2020, FERC rejected the New York Independent System Operator, Inc.’s (“NYISO”) proposed revisions to its buyer-side mitigation (“BSM”) rules that sought to prioritize storage, wind, solar, and other zero-emitting resources (“Public Policy Resources”) in NYISO’s Installed Capacity (“ICAP”) Market, rather than prioritizing new resources purely on a least-cost basis. While NYISO argued the state’s carbon and nitrogen oxide emissions reduction goals mean that a resource’s cost structure is no longer the best predictor of whether it will ultimately be developed, FERC held that NYISO’s proposal was unduly discriminatory because it prioritized Public Policy Resources over other non-Public Policy Resources. The decision sparked a dissent from Commissioner Richard Glick, who characterized FERC’s order as appearing to stake out the “radical” position that it is improper for NYISO to design its Tariff in a way that acknowledges state public policies, and a departure from FERC precedent focused on balancing the effects of state policies with measures to address how those policies affect capacity market prices.
Continue Reading FERC Rejects NYISO Buyer-Side Mitigation Proposal Aimed at Clean Energy Transition

On August 27, 2020, FERC directed further briefing and established a technical conference in the proceedings arising from two complaints in which American Electric Power Service Corporation (“AEP”) and the City of Prescott, Arkansas each alleged that they were subject to overlapping or duplicative congestion charges on load that is pseudo-tied out of the Midcontinent Independent System Operator, Inc. (“MISO”) into Southwest Power Pool, Inc. (“SPP”). FERC’s August 27 order responded to additional briefing by the parties ordered in September 2019, and held that even after the additional briefing, the record was inadequate to determine whether: (1) mechanisms including virtual transactions, Financial Transmission Rights, and firm flow entitlements are sufficient to remedy any potential for overlapping congestion charges; or (2) the Regional Transmission Organizations (“RTOs”) must make changes to their Joint Operating Agreement (“JOA”) and/or their individual tariffs to remedy the causes of overlapping or duplicative congestion charges. The August 27 order therefore required additional briefing, and directed Commission staff to hold a technical conference after further briefs are filed.
Continue Reading FERC Directs Further Briefing and Establishes Technical Conference on Overlapping Congestion Charges for MISO/SPP Pseudo-Tie Transactions