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FirstEnergy Seeks FERC Waiver To Allow Centralized Unit To Receive Dispatch Offers From Both Regulated, Merchant Units, Communicate Offers To PJM ("Ministerial" Functions)

October 11, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

FirstEnergy Service Company ("Service Company"), filed a petition at FERC requesting that the Commission waive specified portions of 18 C.F.R. §§ 35.39 and any other rules and regulations as may be necessary, to allow Service Company to establish a centralized RTO interface services group to provide services to certain franchised public utilities and market-regulated power sales affiliates within the FirstEnergy Corp. holding company system ("FirstEnergy")

FirstEnergy Service Company said that, "the proposed centralized RTO interface services group will function as an interface between PJM Interconnection, LLC ('PJM') and the franchised public utility or market-regulated groups it services. The new RTO interface services group will receive day-ahead and real-time generation dispatch offers from its franchised public utility and market-regulated power sales affiliates, and then will communicate these offers and availability to PJM. The centralized RTO interface services group also will receive and communicate dispatch instructions from PJM back to its franchised public utility and market-regulated power sales affiliates, as the case may be. While the individuals performing this interface function will be PJM certified dispatchers (due to PJM requirements), they will provide purely ministerial functions, and will not make dispatch decisions or perform 'market functions' as such functions are described in the Commission's regulations and orders."

FirstEnergy Service Company said that granting the waiver, "will not harm captive customers or otherwise result in the transfer of non-public market information among market-regulated and franchised public utility affiliates within the FirstEnergy holding company structure."

FirstEnergy Service Company said that FERC has explained that regulated utilities with captive customers and their market-regulated power sales affiliates may rely on shared support personnel and field and maintenance employees, subject to the no-conduit rule, because such employees simply, "perform purely manual, technical or mechanical duties that are supportive in nature and do not have planning or direct operational responsibilities."

FirstEnergy Service Company said that FERC has held that companies may share, "personnel engaged in generation-related activities, provided that such employees do not themselves: (1) buy or sell energy; (2) make economic dispatch decisions; (3) determine (as opposed to implement) outage schedules; or (4) engage in power marketing activities."

FirstEnergy Service Company said that the Commission's standards of conduct regulations relating to separation of transmission function personnel from marketing function personnel define a "marketing function employee" as one, "who actively and personally engages on a day-to-day basis in marketing functions," such as the submission of offers to sell energy and other products for resale in interstate commerce.

"[T]he centralized RTO interface services group that is described in this filing will not include marketing function personnel or persons actively and personally making generation dispatch decisions and will not present the opportunity for affiliate abuse. Accordingly, Service Company believes the Commission can waive the restrictions on affiliate relationships codified in 18 C.F.R.§ 35.39 and any other rules and regulations as may be needed to permit the FE Franchised Public Utilities and Solutions [FirstEnergy Solutions Corp] to realize the benefits that can be achieved through consolidation of their respective RTO interface functions as discussed herein," FirstEnergy Service Company said

FirstEnergy Service Company said that, today, personnel engaged in the development of offers for the FE Franchised Public Utilities and for Solutions, respectively, to sell energy and ancillary services into markets administered by PJM already are separate and discrete from personnel responsible for interfacing with PJM, with limited exceptions. At the FE Franchised Public Utilities, the Regulated Generation Market Function employees make all substantive generation dispatch decisions and those decisions then are communicated to the "generation desk" personnel who interface with PJM. The generation desk personnel input the Franchised Utilities' unit offers of availability into the PJM systems and receive information from PJM and follow the PJM instructions.

FirstEnergy Service Company said that, similarly, at Solutions, substantive generation dispatch decisions are made by Competitive Generation Market Function personnel, and then are communicated to the generation desk personnel who input those dispatch decisions into the PJM systems and who in turn follow the signals PJM sends in response to these same decisions. The Solutions generation desk personnel likewise function as the interface to communicate unit offers of availability into PJM's day-ahead and real-time markets and receive information and follow instructions from PJM

FirstEnergy Service Company said that the diagram below illustrates the current practice:

FirstEnergy Service Company, "proposes to consolidate the two separate groups performing ministerial generation desk interface functions into a single support group to perform essentially the same ministerial generation desk RTO interface functions on behalf of both the FE Franchised Public Utilities and Solutions. This centralized RTO interface services group will be housed in Service Company and will be both physically and organizationally separate from the respective marketing dispatch functions of FE Franchised Public Utilities and Solutions."

Under this proposal, day-ahead dispatch price offers and real-time generation dispatch offers will continue to be developed independently by the respective business unit staff of the FE Franchised Public Utilities and Solutions, just as they are today. Once the substantive dispatch decisions are final, they will be communicated to the new centralized RTO interface services group for ultimate communication of unit dispatch offers and availability to PJM. The centralized RTO interface services group will also follow the dispatch instructions of PJM and communicate relevant information from NM back to the FE Franchised Public Utilities or to Solutions, as appropriate

FirstEnergy Service Company said that the personnel staffing the centralized RTO interface services group will receive additional training on, and be subject to, the "no conduit" rule which has been codified in Section 35.39(g) of FERC's regulations, and thus will be prohibited explicitly from sharing marketing-related information regarding one business unit with the marketing personnel of the other business unit.

FirstEnergy Service Company said that the diagram below illustrates the proposed new practice:

FirstEnergy Service Company said that RTO interface personnel will be situated physically in a location that is separate from the locations where economic marketing dispatch functions are performed by the respective FE Franchised Public Utilities' and Solutions' business unit personnel. Access to the RTO interface service facility will be key card restricted, and appropriate communications access controls and firewalls will be implemented and maintained between the computer networks of the FE Franchised Public Utilities, Solutions, and the RTO interface services group. Moreover, the RTO interface staff will receive additional training on compliance with respect to the "no conduit" rule and the prohibition against functioning as a conduit for communication of offers and/or other non-public market-related information between the FE Franchised Public Utilities and Solutions

FirstEnergy Service Company said that it will provide the RTO interface services discussed herein on behalf of both the FE Franchised Public Utilities and Solutions at its cost, with no mark-up. The costs of the new consolidated group will be allocated by Service Company among the FE Franchised Public Utilities and Solutions based on the existing Service Company Agreement allocation process and accounting principles. "Therefore, the use of a centralized RTO interface services group will not result in any cross-subsidization, improper transfer of benefits, or other harm to captive ratepayers of the FE Franchised Public Utilities," FirstEnergy Service Company said

FirstEnergy Service Company said that the proposal is prompted, in part, by attrition and the inability to attract qualified personnel to its Solutions unit. "Today, in light of the public information about Solutions' financial difficulties and FirstEnergy's announced plans to withdraw from the competitive generation business in the near term, Solutions faces a significant challenge in retaining qualified personnel for its generation desk, and attracting and training qualified replacement personnel," FirstEnergy Service Company said

Docket EL18-6

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