On July 9, 2021, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) denied in part and granted in part a petition for review of FERC’s orders accepting revisions to PJM Interconnection, L.L.C.’s (“PJM”) Forward Capacity Market (“FCM”). The Petition was filed by the Delaware Division of the Public Advocate, Maryland Office of the People’s Counsel, and the Office of the People’s Counsel for the District of Columbia (“Petitioners”). The Court upheld FERC’s use of a Combustion Turbine (“CT”) plant as the Reference Resource in approving the net Cost of New Entry (“net CONE”) calculation, and found that FERC’s approval of a 10 percent adder on Reference Resource’s assumed energy market offer was arbitrary and capricious. The Court remanded the case for proceedings consistent with its decision on the 10 percent adder.
Continue Reading D.C. Circuit Upholds Use of Combustion Turbine as Reference Resource in PJM Capacity Market, Finds 10% Net CONE Adder Arbitrary and Capricious

On June 23, 2021, FERC accepted in part and rejected in part the New York Independent System Operator’s (“NYISO”) February 2021 proposal to revise its process for procuring operating reserves throughout the New York Control Area (“NYCA”). FERC accepted NYISO’s proposed revisions to its Operating Reserves Demand Curve (“ORDC”), including revisions to certain shortage pricing values, subject to a compliance filing providing at least two weeks’ notice of the actual effective date of the revisions. NYISO subsequently submitted that compliance filing on June 29, 2021 noting an effective date of July 13, 2021. The June 23 order also rejected NYISO’s proposal to establish a process for procuring reserves in excess of quantities required by minimum reliability standards, without prejudice to NYISO submitting a more specific proposal in the future.
Continue Reading FERC Accepts NYISO Operating Reserve Pricing Proposal, Rejects Proposal for Procuring Supplemental Reserves

On June 17, 2021, FERC set aside its previous decision in Order No. 2222-A that allowed state regulatory authorities to prohibit demand response resources from participating in distributed energy resource (“DER”) aggregations in wholesale energy markets when the DER aggregation contains only demand response resources. As a result, upon the effective date of Order No. 2222-B, state regulatory authorities will be able to prohibit demand response resources from participating in all wholesale DER aggregations. However, FERC also stated that it will further consider the issue in the Notice of Inquiry (“NOI”) proceeding established in Order No. 2222-A to consider whether to revise its regulations to remove the demand response opt-out established in Order Nos. 719 and 719-A. FERC also extended the comment period in the NOI proceeding to ensure an adequate opportunity for interested parties to comment on these issues. Finally, Order No. 2222-B clarified the appropriate restrictions to avoid double counting of services and the compensation of demand response resources that participate in DER aggregations. Commissioners Neil Chatterjee and James Danly wrote separate concurring opinions; Commissioner Mark Christie concurred in part and dissented in part.
Continue Reading FERC Issues Order No. 2222-B, Setting Demand Response Opt-Out for Further Consideration

On May 20, 2021, FERC issued a Show Cause Order directing GreenHat Energy, LLC (“GreenHat”) and its owners to show why they did not violate the Federal Power Act, FERC’s regulations, the PJM Interconnection, L.L.C. (“PJM”) Tariff, and the PJM Operating Agreement by manipulating PJM’s Financial Transmission Rights (“FTR”) market, generating $13 million in unjust profits and imposing $179 million in losses on PJM members. FERC also directed GreenHat and its owners to file an answer with FERC within 30 days showing why they should not be required to disgorge $13 million in unjust profits, plus interest, and to pay civil penalties totaling $229 million. FERC’s order is accompanied by a report from FERC’s Office of Enforcement (“OE Report”). Commissioner James Danly issued a separate concurring statement.
Continue Reading FERC Issues Show Cause Order Directing GreenHat Energy to Respond to Market Manipulation Claims

On April 30, 2021, FERC rejected PJM Interconnection, L.L.C.’s (“PJM”) proposed revisions to both its Tariff and its Reliability Assurance Agreement (“RAA”) to implement an Effective Load Carrying Capability (“ELCC”) construct for determining capacity values for Variable Resources, Limited Duration Resources, and Combination Resources. PJM also proposed to update its capacity value analysis annually based on variations in resource deployment and load. To account for changes in capacity values from one year to the next, PJM had proposed a transition mechanism that would establish ELCC floor values for resources on a rolling annual basis for 13 years after they enter the PJM capacity market. FERC rejected PJM’s ELCC proposal, finding the proposed transition mechanism to be unjust and unreasonable. However, FERC found that aside from the transition mechanism, other portions of the ELCC framework appear to be just and reasonable for determining accredited capacity values. FERC lifted its previously-established abeyance on the paper hearing procedures addressing PJM’s capacity valuation method, and established a briefing schedule. FERC acknowledged that PJM is under no obligation to implement its ELCC proposal prior to the next Base Residual Auction (for Delivery Year 2022/2023), but emphasized that it “specified an expedient paper hearing schedule to investigate the justness and reasonableness of PJM’s existing capacity valuation methods as soon as possible.” Commissioner Christie issued a separate concurring statement.
Continue Reading FERC Rejects PJM ELCC Proposal Based on Transition Mechanism; Establishes Paper Hearing Procedures

On April 15, 2021, FERC issued a Notice of Proposed Rulemaking (“NOPR”) to supplement the March 2020 NOPR regarding its electric transmission incentive policy under Federal Power Act (“FPA”) section 219 (see March 23, 2020 edition of the WER). While FERC’s March 2020 NOPR proposed to provide all utilities that turn over their wholesale transmission facilities to a Regional Transmission Organization (“RTO”) a fixed 100 basis-point increase in return on equity (“ROE”) (“RTO Participation Incentive”), the Supplemental NOPR proposes instead to codify its current practice of granting a 50 basis-point RTO Participation Incentive for utilities that join an RTO. In addition, FERC proposes that a utility will only be eligible for the incentive for the first three years after transferring operational control of its facilities to an RTO. The Supplemental NOPR also seeks comment on whether the RTO participation adder should be available solely to utilities that join an RTO voluntarily, and if so, how FERC should determine that the decision to join was voluntary. Commissioner Mark Christie issued a separate concurring statement, and Commissioners Neil Chatterjee and James Danly each issued separate dissenting statements.
Continue Reading FERC Proposes Reforms to RTO Participation Incentive in Supplemental NOPR

On March 30, 2021, FERC accepted the New York Independent System Operator’s (“NYISO”) proposed Co-located Storage Resource (“CSR”) Participation Model to enable energy storage resources (“ESRs”) paired with wind or solar resources to share a common point of injection and participate in the NYISO-administered markets. FERC’s order accepted revisions to NYISO’s Energy and Ancillary Services (“E&AS”) market rules, its metering rules, its Interconnection Process, its Installed Capacity Market participation rules, and its market power mitigation measures to accommodate the interconnection and participation of an ESR that is co-located with a wind or solar resource. Chairman Glick issued a concurring statement addressing NYISO’s application of existing buyer-side market power rules to co-located ESR and intermittent resources, urging NYISO “to move expeditiously to replace those rules with a model that moves beyond the minimum offer price rule as a means for mediating the interaction between state policies and wholesale markets.”
Continue Reading FERC Accepts NYISO Co-Located Storage Resource Participation Model

On March 18, 2021, FERC granted two consolidated complaints alleging that the default offer cap in PJM Interconnection, L.L.C.’s (“PJM”) capacity market is unjust and unreasonable because the Expected Performance Assessment Intervals input, set at a value of 360 12-minute intervals (30 hours), is too high. Ultimately, FERC found that the default offer cap is “incorrectly calibrated,” rendering PJM and its Market Monitor unable to ensure competitive market outcomes. FERC ordered additional briefing on a replacement rate, but concluded that PJM’s capacity auction for the 2022-2023 delivery year, scheduled for May 2021, should go forward under the current rules.
Continue Reading FERC Grants Complaints, Directs Further Briefing on PJM Capacity Market Default Offer Cap

On March 2, 2021, the United States Court of Appeals of the District of Columbia Circuit (“D.C. Circuit”) denied petitions for review of three FERC orders addressing cost allocation by PJM Interconnection, L.L.C. (“PJM”) for a high-voltage transmission line connecting three nuclear power plants on Artificial Island in New Jersey to the Delmarva transmission zone (“Artificial Island Project”). In a 2016 order, FERC upheld PJM’s use of a hybrid cost allocation method including the “Solution Based DFAX” method to assign 90 percent of the costs of the Artificial Island Project to PJM’s Delmarva transmission zone; FERC reversed its position in a 2018 rehearing order. In dismissing the petitions for review filed by certain PJM transmission owners including Public Service Electric and Gas Company (“PSE&G”), the New Jersey Board of Public Utilities, and the New Jersey Division of Rate Counsel, the D.C. Circuit’s March 2 opinion held that FERC reasonably concluded that assigning nearly 90 percent of the Artificial Island Project costs to the Delmarva transmission zone would not be commensurate with the benefits that zone received, and that FERC’s change in position was adequately explained and supported by substantial evidence.
Continue Reading D.C. Circuit Upholds FERC Cost Allocation Orders for PJM Artificial Island Transmission Project

On January 22, 2021, two Washington state irrigation districts, Quincy-Columbia Basin Irrigation District and East Columbia Basin Irrigation District (the “Districts”), filed a Petition for Declaratory Order (“Petition”) requesting that FERC find that Federal Power Act (“FPA”) section 211A does not grant FERC jurisdiction over an unregulated transmitting utility solely as a result of the utility establishing different transmission rates by customer class or by contract.
Continue Reading Two Northwest Irrigation Districts Request Declaratory Order on FERC’s Jurisdiction Under FPA Section 211A