Katherine O'Konski

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On February 4, 2022, the United States Court of Appeals for the District of Columbia Circuit (“DC Circuit”) issued a per curiam order granting NTE Connecticut, LLC’s (“NTE”) petition for issuance of a writ under the All Writs Act to stay a FERC order issued January 3, 2022 (“January 3 Order”). The January 3 Order terminated the Killingly Energy Center’s capacity commitments in the ISO-New England, Inc. (“ISO-NE”) capacity market. The DC Circuit’s order stays FERC’s January 3 Order until 30 days after FERC resolves NTE’s pending request for rehearing of the January 3 Order. The DC Circuit’s order also states that an opinion will follow in due course.  As a result of the DC Circuit’s order, ISO-NE ran its Forward Capacity Auction on February 7, 2022 as scheduled but after “unwind[ing] the actions it had taken to terminate Killingly.” ISO-NE has stated that it will update the auction results if FERC confirms Killingly’s termination. 

On January 20, 2022, FERC issued an order on remand from the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) directing PJM Interconnection, L.L.C. (“PJM”) to remove provisions from its Tariff that applied a 10 percent adder to the energy and ancillary services (“E&AS”) offset in PJM’s net Cost of New Entry (“CONE”) calculation. FERC acknowledged that energy market rules permit generators to increase their offers into the energy market by 10 percent above estimated costs. That fact alone, FERC concluded, does not justify application of the 10 percent adder to the E&AS offset in the Net CONE calculation used to establish the Variable Resource Requirement Curve (“VRR Curve”). Moreover, FERC concluded, PJM failed to present sufficient evidence to support inclusion of the 10 percent adder. FERC directed PJM to remove the 10 percent adder from its VRR Curve determination for the 2023-2024 Base Residual Auction (“BRA”) and subsequent auctions. FERC previously directed PJM to delay the start of the 2023-2024 BRA (see January 18, 2022 edition of the WER). In the January 20 order, FERC stated its expectation that PJM propose an amended BRA schedule that would provide it adequate time to remove the 10 percent adder from its Tariff. Commissioner James Danly issued a separate dissenting statement.

On December 22, 2021, FERC issued an order on voluntary remand from the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) directing changes to PJM Interconnection, L.L.C.’s (“PJM’s”) reserve market design. FERC’s December 22 order reverses certain changes it previously ordered in May 2020 (“May 2020 Order”). The December 22 order affirmed FERC’s decision in the May 2020 Order to accept PJM’s proposal to consolidate its Tier 1 and Tier 2 Synchronized Reserve Products. However, the December 22 order required PJM to revert back to its currently-effective Reserve Penalty Factors, two-step Operating Reserve Demand Curve (“ORDC”), and a backward-looking Energy and Ancillary Services (“E&AS”) Offset. FERC directed PJM to apply the backward-looking E&AS Offset to the 2023/24 Base Residual Auction (“BRA”), which was previously scheduled to run in January 2022, notwithstanding any resulting delay to the auction schedule. FERC required PJM to submit a revised BRA schedule on compliance. Commissioner Christie issued a concurring opinion, and Commissioner Danly dissented in part.

On November 26, 2021, FERC issued a notice stating that it would not review a Notice of Penalty filed by the North American Electric Reliability Corporation (“NERC”) against Ohio Valley Electric Corporation (“OVEC”). FERC’s November 26 notice effectively approves a $300,000 settlement between OVEC and the regional reliability entity, ReliabilityFirst Corporation (“RF”), for violations of NERC reliability standards FAC-003-4 R2 and FAC-003-4 R6, which address vegetation management. The settlement followed a 4.5-hour outage to one of OVEC’s 345 kV transmission lines in September 2018 that resulted when contact with a cedar tree growing in close proximity tripped the line out of service. OVEC neither admitted nor denied the violations, but agreed to the assessed $300,000 penalty.

On November 29, 2021, FERC issued a notice stating that the requests for rehearing on PJM Interconnection, L.L.C.’s Focused Minimum Offer Price Rule (“Focused MOPR”) policy, which went into effect by operation of law on September 29, 2021 (see October 29, 2021 edition of the WER) were deemed denied by operation of law. FERC’s notice triggers a 60-day clock under the Federal Power Act for parties to petition for appellate review. The November 29 notice followed rehearing requests filed by parties including the Pennsylvania Public Utility Commission, Public Utilities Commission of Ohio, Electric Power Supply Association, Old Dominion Electric Cooperative, Vistra Corporation, and the New Jersey Board of Public Utilities. In addition to the rehearing requests, the PJM Power Providers Group has already appealed the Focused MOPR to the United States Court of Appeals for the Third Circuit, and submitted comments responding to Chairman Glick’s and Commissioner Clements’ joint statement in support of the Focused MOPR.

On September 29, 2021, FERC recognized that PJM’s Minimum Offer Price Rule (“MOPR”) replacement proposal, previously filed with FERC on July 30, 2021, went into effect by operation of law after the Commission failed to act on PJM’s filing within the 60-day statutory deadline. FERC’s notice stated that FERC did not act on PJM’s filing because the Commissioners are divided two-to-two as to the filing’s lawfulness. Consistent with the Federal Power Act (“FPA”), the Commissioners each issued a statement explaining his or her view on PJM’s MOPR replacement proposal. Going forward, PJM’s MOPR replacement proposal has already been appealed based on an emergency request for rehearing of FERC’s September 29 notice. Additional requests for rehearing continue to be filed prior to the October 29 deadline.

On September 2, 2021, FERC accepted a new Market Seller Offer Cap (“MSOC”) in the PJM Interconnection, L.L.C. (“PJM”) capacity market that will require all capacity market sellers that fail PJM’s market structure test and offer above $0/MW-day to, at their election, obtain approval for their offer from PJM’s Market Monitor or utilize a default MSOC equal to the resource’s applicable net Avoidable Cost Rate (“ACR”)—i.e., its annual operating costs—less the resource’s net energy and ancillary services (“E&AS”) revenues (“ACR Proposal”). Commissioner James Danly issued a separate dissenting statement in which he argued that the ACR Proposal will lead to over-mitigation, in part because it will require the Market Monitor to review a higher number of capacity offers than under PJM’s previously-effective MSOC. In a compliance filing on FERC’s September 2 order, PJM asked for a 55-day delay of its upcoming capacity auction (currently scheduled to begin December 1, 2021) in order to allow time for the Market Monitor to perform the required unit-specific review under the new MSOC. As of this writing, FERC has not yet acted on PJM’s request.

On August 27, 2021, in Oklahoma Gas and Electric Company v. FERC, Case No. 20-1062, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) denied petitions for review of FERC’s orders involving the Southwest Power Pool, Inc. (“SPP”) process for reimbursing certain of its customers for transmission system upgrades that those customers paid for pursuant to Attachment Z2 of SPP’s Open Access Transmission Tariff (“Tariff”). The D.C. Circuit’s order upheld FERC’s decision to deny retroactive waiver of Section I.7.1 of SPP’s Tariff—which provides that any billing adjustments must be made within one year after the charges were incurred—thus preventing SPP from implementing the Attachment Z2 revenue crediting process retroactively from 2008-2016. The court also upheld FERC’s orders requiring SPP to refund any charges it previously collected for the 2008-2016 period. Basing its decision on the filed rate doctrine, the court concluded that “the filed rate requirements are a formidable obstacle for entities regulated by FERC that wish to obtain retroactive relief from the terms of their tariff.”

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.

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.