On March 12, 2024, the U.S. Court of Appeals for the Third Circuit upheld a prospective rule change to PJM Interconnection, L.L.C.’s (“PJM”) annual capacity auction but struck down attempts by PJM and FERC to apply the rule change to the ongoing auction held in December 2022.  Although the rule change permits PJM to adjust the Locational Deliverability Area (“LDA”) Reliability Requirement downward to reflect the lack of participation in the December 2022 auction by certain resources to correct for distortions to the auction results, the Third Circuit held that FERC could not permit the change to go into effect in the middle of an ongoing auction.Continue Reading Third Circuit Upholds PJM Capacity Market Change but Prevents Retroactive Application

Executive Summary

On March 21, the Federal Energy Regulatory Commission (FERC or the Commission) issued Order No. 2023-A (Final Rule), which reaffirmed aspects of Order No. 2023 — the Commission’s landmark order updating its generator interconnection procedures. As detailed further in this summary, the Commission largely upheld Order No. 2023, including some of the more controversial aspects of the order, such as penalties and the transmission capacity “heat map,” and provided further clarity on other aspects.Continue Reading Troutman Pepper Summary of FERC Order No. 2023-A on Generator Interconnections

On February 21, 2023, FERC accepted PJM Interconnection, L.L.C.’s (“PJM”) proposed tariff revisions governing the Locational Deliverability Area Reliability Requirement (“LDA Reliability Requirement”) calculation, effective December 24, 2022, and applicable to the 2024/2025 Base Residual Auction (“BRA”), which was in progress at the time that PJM submitted its filing. Specifically, FERC accepted tariff changes that would allow PJM, during the BRA process, to exclude Planned Generation Capacity Resources from the LDA Reliability Requirement calculation if the addition of such resources materially increases the reliability requirement and such resources do not participate in the capacity auction. The February 21 Order also dismissed as moot a complaint filed by PJM challenging the justness and reasonableness of the existing LDA Reliability Requirement. Finally, the February 21 Order stated that FERC would soon convene a forum to examine the functioning of the PJM capacity market. Commissioner Danly issued a separate dissenting statement.Continue Reading FERC Accepts PJM Capacity Market Revisions to Locational Deliverability Area Reliability Requirement, Sparks Strong Dissent from Commissioner Danly

On January 19, 2023, FERC issued an order upholding its decision to exercise primary jurisdiction over emergency energy sales between Southwest Power Pool, Inc. (“SPP”) and Associated Electric Cooperative, Inc. (“AECI”) during Winter Storm Uri and FERC’s decision that SPP properly compensated AECI pursuant to its Open Access Transmission Tariff (“Tariff”).Continue Reading On Rehearing, FERC Upholds Jurisdiction over AECI Emergency Energy Transactions in SPP Market During Winter Storm Uri

On November 17, 2022, FERC issued three orders intended to address the reliability impacts of the rapid integration of inverter-based resources (“IBRs”), including solar, wind, fuel cell, and battery storage resources, on the Bulk-Power System (“BPS”). Specifically, in the first proceeding, FERC directed the North American Electric Reliability Corporation (“NERC”) to develop a plan to register the entities that own and operate IBRs so that NERC may monitor their compliance with NERC’s Reliability Standards. In the second proceeding, FERC issued a Notice of Proposed Rulemaking (“NOPR”) to direct NERC to develop new or modified Reliability Standards that address reliability gaps related to IBRs. Lastly, in the final proceeding, FERC approved revisions to two of NERC’s Reliability Standards.Continue Reading FERC Issues Proposals Regarding Inverter-Based Resources to Improve Grid Reliability

On September 22, 2022, FERC denied a complaint filed on October 14, 2020 by Cricket Valley Energy Center LLC and Empire Generating Company, LLC. Complainants alleged that the New York Independent System Operator, Inc.’s (“NYISO’s”) capacity market offer floor rules—termed buyer-side market power mitigation rules (“BSM Rules”)—were unjust and unduly discriminatory because they failed to address price suppression in NYISO’s installed capacity (“ICAP”) spot market auctions. Complainants requested that FERC require NYISO to implement a minimum offer price rule (“MOPR”) that applies to all new and existing resources that receive out-of-market subsidies, with few or no exceptions. In denying the complaint, FERC relied on a May 2022 order accepting changes to NYISO’s BSM Rules to automatically exclude wind, solar, hydroelectric, geothermal, fuel cells that do not use fossil fuel, and demand response resources from adhering to an offer floor when bidding into NYISO’s capacity market. Commissioner James Danly issued a dissenting statement and Commissioner Mark Christie issued a concurring statement.Continue Reading FERC Denies Complaint Requesting Broadly-Applicable MOPR in NYISO

On September 16, 2022, a panel of three judges on the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) issued a decision in United Power, Inc. v. FERC affirming FERC’s exclusive jurisdiction over exit fees charged by Tri-State Generation and Transmission Association, Inc. (“Tri-State”), a Colorado generation and transmission cooperative.Continue Reading D.C. Circuit Holds that FERC Has Exclusive Jurisdiction Over Exit Fees Charged by a Colorado Electric Cooperative

On July 28, 2022, FERC upheld changes to PJM Interconnection, L.L.C.’s (“PJM”) Reserve Market that it first required in a December 2021 order on voluntary remand from the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”). FERC’s July 28 order continues to require PJM to: (1) consolidate its Tier 1 and Tier 2 Synchronized Reserve Products; (2) align reserve procurement in the day-ahead and real-time markets by establishing two 10-minute reserve requirements and one 30-minute reserve requirement in each market; (3) revert back to a stepped Operating Reserve Demand Curve (“ORDC”) and $850/MWh Reserve Penalty Factors; and (4) revert to a backward-looking Energy & Ancillary Services (“E&AS”) Offset in the Net Cost of New Entry calculation. The July 28 order also addressed challenges to the December 2021 order on the basis that the motion for voluntary remand was not filed in the D.C. Circuit pursuant to FERC’s tradition of polling the Commissioners for major litigation decisions. The order makes certain clarifications on the Chairman’s role to oversee the executive and administrative operation of FERC, including the direction of litigation. Commissioner James Danly filed a separate dissenting statement.
Continue Reading FERC Upholds PJM Reserve Market Changes, Clarifies Chairman’s Role to Oversee Major Litigation Decisions

On July 15, 2022, a FERC Administrative Law Judge (“Presiding Judge”) issued an initial decision in a proceeding involving the “threshold” issue of whether four solar generating facilities (collectively, “Facilities”) interconnected at the distribution level are eligible to receive reactive power compensation under Schedule 2 of the PJM Interconnection, L.L.C. (“PJM”) Open Access Transmission Tariff (“Tariff”). The Presiding Judge concluded that the Facilities are ineligible to receive reactive power rates because the facilities in question did not satisfy the so-called capability requirement, as explained further below.
Continue Reading FERC Judge Rules that Four Solar Generators Interconnected at the Distribution Level Are Ineligible to Receive Reactive Power Compensation Under PJM’s Tariff

On June 24th and 27th, 2022 FERC approved two stipulations and consent agreements between FERC’s Office of Enforcement (“Enforcement”) and two separate project developers. First, sPower Development Company, LLC (“sPower Devco”) agreed to a civil penalty of $24,000 after Enforcement determined that sPower Devco violated PJM Interconnection, L.L.C.’s (“PJM’s”) Tariff by submitting inaccurate information in PJM’s interconnection process. Second, Salem Harbor Power Development LP (“Harbor Power Devco”) agreed to a civil penalty of $17 million, to disgorge $26.7 million in profits, and to submit to compliance monitoring after Enforcement found that it collected capacity revenues on a project that had not yet been built nor was in commercial operation.
Continue Reading Generation Project Developers Agree to Pay Civil Penalties, Disgorge Profits, after FERC Enforcement Investigations