FERC Issues Orders in Cases Involving Rates for Transmission Service, Wholesale Power Rates, and Competition in RTO Markets

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By: Gerit Hull, Gary Newell, and Andrea Sarmentero Garzon

The following are summaries of recent orders issued by FERC in four proceedings in which Jennings Strouss was involved.  The proceedings involve rates for transmission service, wholesale power rates, and competition in RTO markets.  The Commission denied a request for a transmission rate incentive, granted a complaint that alleged improper costs were included in a wholesale power formula rate calculation, ordered a technical conference to address seasonal resource participation in PJM Interconnection, L.L.C.’s (PJM) capacity market, and rejected Midcontinent Independent System Operator, Inc.’s (MISO) pro forma pseudo-tie agreement filing.  These orders are discussed in more detail below.

Ameren Transmission incentive rates.  The Commission rejected a request for a 100 basis point return on equity (ROE) incentive adder to apply to Ameren Transmission Company of Illinois’s (Ameren Transmission) investment in the 375 mile Illinois Rivers and Mark Twain 345 kV MISO-approved Multi-Value Projects.  The Organization of MISO States, Inc. and others argued that the ROE incentive was unwarranted.  The Commission agreed, noting that the project was largely complete and found that Ameren Transmission had not established a connection between the proposed incentive and particular risks (i.e., had failed the “nexus” test).  The Commission concluded that the project risks described by Ameren Transmission were already mitigated by previously approved incentives.  Docket No. ER18-463, 162 FERC ¶ 61,099 (Feb. 13, 2018)

Duke Energy wholesale power sales rates.  The Commission granted Piedmont Municipal Power Agency’s (PMPA) complaint against Duke Energy Carolinas, LLC (Duke Energy).  Piedmont alleged that Duke Energy assessed charges in violation of the parties’ service agreement.  Duke provides backup service to PMPA when PMPA’s share of output from the Catawba and McGuire nuclear stations is not available.  The Commission agreed with PMPA that Duke Energy had improperly included certain deferred costs in the formula rate because Duke Energy failed to file for approval in advance.  The Commission ordered refunds of amounts collected and set for hearing and settlement judge procedures matters relating to eliminating ambiguity in the contract.  Docket No. EL17-83, 162 FERC ¶ 61,109 (Feb. 15, 2018)

Seasonal resource participation in PJM capacity markets.  The Commission addressed complaints filed by the Advanced Energy Management Alliance and American Municipal Power, Inc., et al., challenging the requirement to offer a flat year-round capacity commitment in order for resources to participate in PJM’s capacity market.  The complainants argued that this requirement is unduly discriminatory toward seasonal resources (such as demand response and wind) because PJM’s system is summer-peaking.  The Commission rejected PJM’s argument that the complaints should be dismissed as collateral attacks on FERC’s prior Capacity Performance orders.  The Commission ordered a technical conference that will explore issues related to: (i) PJM’s transition to procurement of 100 percent Capacity Performance Resources; (ii) the methodology by which load-serving entities’ peak-shaving actions are reflected in capacity procurement targets; and (iii) two related components of PJM’s resource aggregation rules.  Docket Nos. EL17-36 & EL17-32, 162 FERC ¶ 61,160 (Feb. 23, 2018)

MISO pseudo-tie exports.  The Commission rejected the pro forma pseudo-tie agreement and related tariff revisions filed by Midcontinent Independent System Operator, Inc. (MISO).  The Commission agreed with American Municipal Power, Inc. and others that the pro forma agreement contained suspension and termination provisions that are inconsistent with provisions filed by MISO and PJM in relation to their joint operating agreement, and are vague and open-ended. FERC determined that certain other provisions were unjustified and some provisions that MISO had included in its business practice manuals would have to be included in the tariff.  The Commission encouraged MISO to file a revised version that accounts for these concerns.  This docket is one of several filings relevant to capacity imports into PJM (particularly from MISO) and stems from PJM’s requirement that external resources be pseudo-tied in order to participate in PJM’s capacity market.  A number of related complaint proceedings pending before the Commission allege that the RTOs overcharge pseudo-tied resources for congestion costs.  The resolution of these issues will determine how effectively external resources can participate in PJM markets. Docket No. ER17-1061, 162 FERC ¶ 61,165 (Feb. 26, 2018)

For more information on this topic or other energy matters, please contact any of the following attorneys at Jennings, Strouss & Salmon, P.L.C.

Gerit Hull, Member – ghull@jsslaw.com

Gary Newell, Member – gnewell@jsslaw.com

Andrea Sarmentero Garzon, Member – asarmentero@jsslaw.com

Debra Roby, Chair – droby@jsslaw.com

Joel Greene, Member – jgreene@jsslaw.com

Alan Robbins, Member – arobbins@jsslaw.com

Matthew Ross, Member – mross@jsslaw.com

Debbie Swanstrom, Member – dswanstrom@jsslaw.com

Omar Bustami, Associate – obustami@jsslaw.com

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