I believe it was right for the Commission to attempt to protect consumers by allowing PJM’s Tariff amendments to apply to the 2024/2025 BRA, but the Court of Appeals for the Third Circuit determined otherwise,[1] and we are now compelled to follow that decision.
I emphasize that while the impacts to consumers of the court’s decision in this specific case relate to the operation of PJM’s capacity market, the court’s interpretation of the filed rate doctrine creates a potential for inequitable results in a much broader array of contexts. The risk of harm occurring where after-the-fact adjustments are impossible stems not from the unique rules of capacity markets, but from human fallibility more generally. And while today’s decision is the most significant in my time at the Commission in which the filed rate doctrine has driven an inequitable result, it is only the latest in a string of unjust outcomes stemming from the courts’ narrow view of that doctrine.[2]
The courts have taken a rigid view of filed rates, but they have also been clear that the ultimate purpose of the rule against retroactive ratemaking is to ensure that there is adequate notice of the rate that customers will be charged.[3] Utilities may provide notice to affected parties that rates may be adjusted, which “changes what would be purely retroactive ratemaking into a functionally prospective process by placing the relevant audience on notice at the outset that the rates being promulgated are provisional only and subject to later revision.”[4] I join the Chair in urging PJM and other public utilities to take steps, such as including appropriate notice provisions in their tariffs, to ensure that similar inequitable results do not occur again.
Indeed, as the Chair suggests, existing tariffs, when considered in light of the court’s broad reading of the filed rate doctrine, create the potential for trillion dollar mistakes that would be uncurable.[5] In my view, exposing consumers to such potential unredressable harms is very likely unjust and unreasonable. Should PJM and other public utilities fail to affirmatively update their tariffs to provide notice that adjustments can be made, where appropriate, to prevent inequitable outcomes, then it will fall to the Commission to cure this failure pursuant to its authority under section 206 of the Federal Power Act.
For these reasons, I respectfully concur.
[1] PJM Power Providers Grp. v. FERC, 96 F.4th 390 (3d Cir. 2024).
[2] See, e.g., Okla. Gas & Elec. Co. v. FERC, 11 F.4th 821 (D.C. Cir. 2021).
[3] See, e.g., NSTAR Elec. & Gas Corp. v. FERC, 481 F.3d 794, 801 (D.C. Cir. 2007) (“[T]he filed rate doctrine and bar on retroactive ratemaking are satisfied, in keeping with their functions, when parties have notice that a rate is tentative and may be later adjusted with retroactive effect, or where they have agreed to make a rate effective retroactively.”) (internal citations and quotes
[4] Id.
[5] See PJM Interconnection, L.L.C., 187 FERC ¶ 61,065 (2024) (Phillips, Chairman, concurring, at P 5).