Power Marketer Defaults in PJM Due to Marginal Line Loss Re-allocation

PJM Interconnection, L.L.C. has submitted to FERC a filing reflecting the permanent termination of City Power Marketing, L.L.C. as a PJM Member in accordance with Sections 15.1.6(c) and 4.1(c) of the Operating Agreement.

"PJM's determination to seek the permanent termination of City Power as a PJM Member is the result of two default notifications issued to City Power for failing to make timely payments when due twice during a 12 month period. In particular, City Power was declared in payment default (1) on July 17, 2012 for failing to pay its June 2012 monthly invoice in the amount of $17,139,172.05, when due, and (2) on September 18, 2012 for failing to make timely payment on its August 2012 monthly invoice in the amount of $972.24, when due," PJM said.

The June 2012 monthly invoice to City Power of $17 million arose from the re-billing of charges and credits associated with marginal line loss allocations as a result of FERC's determination on rehearing in Docket No. EL08-14-008.

In particular, PJM had previously distributed to City Power its share of marginal loss surpluses that the Commission had previously directed in Black Oak Energy, L.L.C., et al. v. PJM Interconnection, L.L.C., 128 FERC 61,262 (Sept. 17, 2009). However, parties sought rehearing of the Commission's allocation of charges and credits associated with marginal line losses. In its order on rehearing, the Commission reversed its prior holding and directed PJM to assess surcharges and credits to those affected by the rehearing determination. As a result of the orders on rehearing, the share of marginal line loss surpluses that PJM had collected and distributed to City Power and others had to be reversed, PJM said.

PJM said that it expects City Power to assert that the Commission has no power to order PJM to change a prior bill, and PJM may not seek to collect any re-billing amounts, more than two years after the initial bill to City Power concerning marginal line losses. PJM expects City Power to challenge on this basis both the termination of its membership and any effort of PJM to collect the amounts due and owing as a result of the Commission's orders in Docket No. EL08-14.

PJM argued that there is no merit to City Power's position, but said in any event, "it must be emphasized that even if City Power believed, or ultimately it is determined, that the amounts billed by PJM in the June and August monthly invoices were incorrect, improper or subject to reconciliation, City Power was still obliged to make payment of the June and August invoices without delay."

"To this point, Section 15.1.3 of PJM's Operating Agreement unequivocally requires that all Members make full and timely payment of all bills notwithstanding any disputed amount; recognizing that any payment thereof does not constitute a waiver to any claims to the contrary," PJM said.