Three Utilities Seek To Compel Retail Suppliers To Transfer Certain PJM Price Responsive Demand Credits To Utilities

July 25, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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Baltimore Gas and Electric, Pepco, and Delmarva have each filed with the Maryland PSC tariff revisions to their Electricity Supplier Coordination Tariff to establish a process by which retail electric suppliers must transfer, to the utility, credits, which the suppliers receive from the PJM Interconnection, LLC (PJM), that are associated with each utility's participation in the PJM capacity market as a price responsive demand (PRD) resource.

As described in BGE's filing, "PRD was established in PJM in 2012, and eligible to participate in PJM’s capacity Base Residual Action (BRA) as of the May 2013 BRA. The PRD resource participates in the capacity auction as a reduction in the demand curve, rather than an addition to supply. If the PRD resource is accepted as a reduction to the demand curve and cleared as part of the capacity auction, the resource will have caused the demand curve to shift inward, generally resulting in a lower quantity of capacity cleared and at a lower cleared price. The PRD resource owner receives from PJM a financial credit representing the value of the avoided capacity purchase by PJM in the BRA in return for an obligation to PJM to reduce load under certain conditions throughout the delivery year. BGE participated in PJM’s capacity market as a PRD resource in the May 2017 and May 2018 BRAs for delivery years June 1, 2020 – May 31, 2021 and June 1, 2021 – May 31, 2022, respectively, and will likely continue PRD participation in future auctions. BGE’s PRD resource consists of its residential PeakRewards program. In the 2017 and 2018 BRAs, BGE achieved $12.1 million and $20.7 million, respectively, of value for residential customers due to its PRD resource participation."

BGE said that, "PJM’s creation of PRD contemplated that the PRD resource owner would participate on behalf of their electric supply customers and did not contemplate utilities engaging in PRD on behalf of their residential distribution customers, regardless of the customers’ electric supplier. Therefore, PJM’s rules only provide for the PRD credits to be given to the retail suppliers of the PRD customers. In BGE’s case, the PRD customers are BGE’s residential customers enrolled in the PeakRewards program. As of June 30, 2019, about 24% of BGE’s residential (and PeakRewards) customers were receiving their electric supply from third-party suppliers. All PRD financial value received by BGE will go toward offsetting the PeakRewards surcharge."

BGE said that, "Therefore, if the PRD crediting process goes unchanged, BGE’s residential customers will forego about 24% (about $8 million) of the value of the PRD resource in the delivery years 2020 and 2021. Instead, the $8 million of value will be a wrongful windfall of profit to the third-party suppliers of BGE’s residential customers."

Pepco said that, "Therefore, if the PRD crediting process goes unchanged, Pepco's residential customers will forego about 23% (about $4 million) of the value of the PRD resource in the delivery years 2020 and 2021. Instead, the $4 million of value will be a wrongful windfall of profit to the third-party suppliers of Pepco's residential customers."

Delmarva said that, "Therefore, if the PRD crediting process goes unchanged, Delmarva Power's residential customers will forego about 17% (about $665,000) of the value of the PRD resource in the delivery years 2020 and 2021. Instead, the $665,000 of value will be a wrongful windfall of profit to the third-party suppliers of Delmarva Power's residential customers."

BGE said that, "BGE has engaged in thorough conversations with PJM regarding this dilemma of PRD value receivership. BGE and PJM both agree that a simple way to transfer the value from the third-party suppliers to BGE, the owner of the resource, is to have the parties (BGE and each third-party supplier) execute a Billing Line Item Transfer (BLIT) with PJM that would cause PJM to transfer the financial credits associated with BGE’s PRD resource from the third-party supplier’s PJM bill to BGE’s PJM bill."

BGE said that, "BLITs are standard practice in PJM, and are executed completely within the PJM systems. The BLIT is a PJM tool found on the PJM member website that allows a party to transfer a specific line item of their PJM bill to another party under the condition that the receiving party confirms the transfer. No other agreements outside of the PJM system are required. In order to require third-party suppliers of BGE’s PeakRewards customers to execute the PJM BLITs, the proposed tariff revision will condition the supplier’s eligibility to supply retail electricity in Maryland."

BGE said that, "To garner all of the value of its PRD resource for its residential customers, BGE recommends that suppliers licensed to participate in Maryland’s retail energy market and registered with BGE as of March 31, 2020, execute the BLIT no later than May 1, 2020. For suppliers that become licensed to participate in Maryland’s retail energy market and registered with BGE after March 31, 2020, the BLIT will be executed by such suppliers as soon as practicable after the Commission grants the license and as a condition of the supplier being registered with BGE. The BLITs will be effective during the delivery years in which BGE participates in PJM as a PRD resource."

Pepco and Delmarva sought essentially the same relief.

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