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They're At It Again: PJM, FERC Staff Attempting To Impose Retroactive Costs on Retail Suppliers

July 18, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

A settlement concerning the allocation of PJM transmission cost responsibility would inexplicably make rate changes effective back to January 1, 2016, imperiling retail suppliers who have already served load for such earlier periods.

The settlement was signed by various transmission owners (including Exelon), as well as PJM. Although not a signatory, FERC Trial Staff supports the settlement.

The settlement addresses the assignment of cost responsibility for Required Transmission Enhancement Projects operating at or above 500 kV that the PJM Board approved prior to February 1, 2013

Notably, the settlement would require that charges to be collected under the settlement be charged effective as of January 1, 2016 -- retroactively charging these amounts to responsible parties. It's not the first time transmission owners, PJM, and FERC have imposed retroactive rates on retail suppliers, as we think back to market-killing SECA charges

The Retail Energy Supply Association objected to the implementation of the settlement back to January 1, 2016. RESA said that the settlement should be effective, and that the rates collected thereunder should be effective, the later of the date FERC approves the settlement or January 1, 2017

"On its face, the Settlement would appear to apply only to those assigned cost responsibility and the state commissions that agreed to the Settlement. Yet, on further review, the Settlement affects directly LSEs like RESA members, that are not incumbent transmission owners/LSEs that will pay or receive credit for the amounts that are the subject of the Settlement Agreement. They were not represented during the negotiations and were not included in the Settlement but will undoubtedly be allocation a portion of these costs," RESA noted

"RESA members are harmed by retroactive implementation of the Settlement. RESA members cannot change their economic decisions made from January 1, 2016 to the date in which the Commission approves and PJM implements the Settlement. Many RESA members offer services and products that use as components, the rates for transmission and related charges. They relied on these charges and, if the Settlement is implemented as requested effective January 1, 2016, their reasonable expectations are lost," RESA said

"RESA Members rely on certainty provided by the rates, terms and conditions in Tariffs. Implementing the Settlement retroactive to January 1, 2016, would be inconsistent with RESA members' reasonable reliance on the PJM Tariff. Unlike investor-owned utilities, entities participating in retail access do not have the same mechanisms for deferring or recovering their costs. Retail suppliers often price their products and then enter into long-term contracts with customers. Charges that are unknown and sought to be recovered retroactively are not likely included in the RESA member's pricing, leaving the retail supplier exposed to being unable to recover these costs. Uncertainty such as that presented by the Settlement in this proceeding may cause the retail supplier to absorb these costs, because the customers served by the LSE today were not the same customers that the LSE served when the rates based on the prior rate design were collected," RESA said

"In fact, RESA members still do not know the full effects of the Settlement because there is no indication as to how the Responsible Parties will allocate these costs to other entities, including LSEs that participate in retail markets," RESA said

RESA further said that, "in light of the retroactive nature of the matters settled, and the billing that will take place for charges assessed during prior periods, PJM is prohibited from collecting these charges as proposed because the reconciliations fall outside the re-billing reconciliation period and, absent a waiver, which PJM has not sought, these amounts may not be collected or surcharged until such waiver is obtained."

Docket No. EL05-121-009

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