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Other Foot: Retail Supplier Says Filed Rate Doctrine Prevents PJM's Proposed Capacity Performance "Transition" Mechanism

March 10, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

PJM relied on the filed rate doctrine in opposing Champion Energy's request for a refund of what Champion said were unjust and unreasonable uplift charges during the polar vortex, but now it is retail suppliers who say PJM is ignoring the filed rate doctrine in seeking to impose a capacity performance "transition" mechanism on delivery years for which a base residual capacity auction was already run.

Under its capacity performance proposal, PJM proposes a transition period, "that would result in a modification of the already completed RPM Auctions for 2016/2017, 2017/2018 and 2018/2019," the Retail Energy Supply Association said in comments to FERC. During the transition, PJM would procure via incremental auctions capacity performance products for 60-80% of the reliability requirement

Most notably, RESA noted that, "With respect to the proposed transition auctions, PJM proposes to allow generators who already committed their resources in the particular Delivery Year (2016/2017 or 2017/2018) pursuant to the applicable RPM Auction, to voluntarily re-bid into the transition auction. If a resource is accepted in the transition auction, it will be released from its obligation to provide capacity pursuant to PJM's existing tariffs—at existing filed rates—and paid a different price for the provision of capacity. If it does not clear, it may remain in the BRA as a Base Capacity Resource and collect its already-cleared rate."

"By permitting resources to voluntarily re-bid to provide the new capacity product, PJM would be modifying a rate on file AND including a separate charge that is comprised of a resource that already cleared in a BRA. The harm to the market, to market certainty and fundamental fairness are at issue here and RESA's members bear the brunt of this unjust and unreasonable proposal," RESA said.

RESA notes that PJM (as well as Exelon) argue that there is no filed rate doctrine issue because the capacity performance procurement is a new charge, not an existing charge

"What PJM and Exelon ignore in their analysis is that the 'new' charge would be based on removing resources 'voluntarily' from the existing BRA that creates fixed, stated rates for the applicable Delivery Year. PJM proposes to expressly modify a rate on file. It may not be proposing to modify the dollar rate, but it is most certainly modifying the rate by virtue of permitting resources that comprised the prior-held and long-since closed BRA to voluntarily remove themselves from the resources that comprise such BRA and receive compensation via the CPR. PJM seeks this rate modification without making any showing that the existing rates -- derived from the results of the BRAs held for the 2016/2017 or 2017/2018 Delivery Years -- are unjust and unreasonable," RESA said

"The pernicious effects of PJM's proposal are evident. LSEs like RESA members, have reasonably relied on the BRA's rates for the 2016/2017 and 2017/2018 Delivery Years. Such LSEs are entitled to rely on those rates and did rely on those rates as being in effect for the applicable Delivery Year. LSEs, like RESA members, serve retail customers, often under long-term fixed price contracts. The capacity price is an important component of the LSE's fixed price. When the BRA clears and the capacity price is set for the Delivery Year, LSEs rely on that rate, to hedge the prices and to set prices to charge their retail customers. By approving the transition mechanism the Commission would be adding a new charge (the CPR) on top of the existing capacity charge, with the CPR being comprised of resources that were previously included in the capacity charge. Perhaps, even the marginal resource in that BRA setting the overall rate will voluntarily withdraw from the BRA. The prohibition against retroactive ratemaking is a protection against just this sort of rate change," RESA said.

Countering PJM arguments, RESA noted that examples of tariff changes approved by FERC cited by PJM related to prospective changes in the energy market, and did not disturb an existing capacity rate.

RESA further cited FERC's decision to accept the results of the controversial ISO-NE FCA 8 auction because the auction conformed to auction rules, and altering the outcome would amount to retroactive ratemaking.

Docket No. ER15-623

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