Viridity Files Complaint Regarding PJM Compensation for Customers Using Multiple Curtailment Service Providers

Viridity Energy, Inc. has filed a complaint at FERC regarding the compensation provided to customers registering with one curtailment service provider (CSP) in PJM's capacity program, but who use a different CSP for energy and ancillary services (EL12-54).

Viridity said:

"Under PJM's current Tariff, two end-use electricity customers who provide precisely the same capacity service to PJM at the same time and place can be compensated differently. A customer who registers with one Curtailment Service Provider (CSP) in PJM's capacity program, and uses that same CSP for energy and ancillary services, earns full compensation for the capacity service it provides to PJM. However, the same customer would lose a substantial part of that compensation simply by registering with one CSP for capacity, and a second CSP for energy and ancillary services. The current rules force the customer to forfeit much of the compensation it would have earned had it limited itself to one CSP for all markets.

"In other words, the customer cannot earn full compensation for the capacity service unless it ties itself to the same CSP for capacity, for energy, and for ancillary services -- even though the capacity CSP has no obligation to represent the customer in markets for energy or ancillary services or even to advise the customer that those markets exist. If the customer desires to work with one CSP that specializes in capacity and a second CSP that specializes in energy and ancillary services, the lesser compensation applies -- even if the customer and both CSPs all agree that the customer would be served best by two CSPs rather than one and all are willing to accept that arrangement.

"The difference in compensation to two virtually identical customers performing identical services is discriminatory on its face. There is no justification for the discriminatory compensation. No burden on the market participants arises when the customer and the two CSPs all agree on a two-CSP solution. No burden on PJM arises when the customer chooses to work with two CSPs, because PJM already allows a customer to be represented by two CSPs (although only if the customer foregoes substantial capacity revenue).

"The relief that Viridity requests at this time is simply to allow a customer to register with one CSP for capacity and a second CSP for energy and ancillary services -- without the customer forfeiting emergency energy payments -- when the customer and both CSPs all agree to this arrangement. The complainant requests such narrow relief in the hope that relief can be granted in time for the upcoming summer, so that customers can quickly begin providing services to the grid in the manner that the Commission contemplated in Order 745 (to be implemented in PJM beginning April 1, 2012) as well as in Order 755."

The impact on load serving entities from the requested relief was not immediately clear.

However, Matters would note that in a separate proceeding, Viridity is seeking to impose on LSEs a higher capacity obligation when the customer uses a third-party CSP to enroll the customer in PJM's proposed price responsive demand program, and a credit is created to account for the capacity reduction, since the capacity obligation is still included in the RPM market. Specifically, the PJM proposal would flow the credit to the LSE (to compensate the LSE for the higher amount of mandated capacity they must purchase for the customer under the capacity market), while Viridity is seeking to have the credited provided to the CSP, even where the CSP does not serve the load and therefore was not responsible for the initial capacity obligation assigned to the customers (see previous story).

It is unclear whether granting the relief sought by Viridity in its instant complaint would implicate similar issues.