Media Statements & Speeches
Commissioner Moeller Statement
June 9, 2015
Docket No. EL14-45-000 and EL15-73-000
Duke Energy Corporation vs PJM Complaint
“I am troubled that, notwithstanding its recognition that PJM’s existing tariff may be unjust and unreasonable, the majority is unwilling to provide any corresponding relief to Duke. PJM is the only regional transmission organization that does not allow market participants to submit day-ahead offers that vary by hour or to update their offers in real time, including in emergency situations. This inflexibility contributed to the inability of generation units, like those of Duke, to recover legitimate fuel costs incurred during the polar vortex of January 2014. PJM also recognizes the need to provide cost recovery and supports granting the waiver requests in the extraordinary circumstances presented by this case. At the very least, this matter should have been set for hearing and settlement judge procedures to consider potential avenues for providing appropriate compensation to Duke and to enable the relevant parties to explore a settlement that could have amicably resolved this dispute.
“Duke acted in good faith to preserve system reliability during a time of extraordinary system stress and deserve appropriate compensation. Duke seeks to recover costs incurred to secure natural gas following instructions from PJM that it needed to secure gas without regard to economics, in order to ensure availability during the cold weather events of 2014. The majority supports placing Duke in a no-win situation where it acquired natural gas consistent with PJM’s instructions, but was unable to recover the associated costs when PJM chose not to dispatch its units. 1
“In finding that third parties would be harmed by granting waiver, the majority fails to apply consistently the Commission’s standard test for considering tariff waiver requests and, thus, largely ignores Duke’s arguments as to why this test has been satisfied. The majority should have applied the Commission’s waiver standards, which would have enabled consideration of the potential harm to third parties due to the costs of appropriately compensating Duke against the reliability benefits received when generators are available to provide service during periods of system stress. For instance, when applying its waiver standards to approve a tariff waiver to ensure appropriate compensation to generators in NYISO during the polar vortex of 2014, the Commission found that “although granting waiver may result in increased costs to load and increase cost to certain market participants…it is appropriate to allow generators to recover such costs in this exigent circumstance.” ”2 The same reasoning and exigent circumstances that justified allocating costs to third parties in that proceeding are also present here.
“Instead of applying the Commission’s standards for considering tariff waivers, the majority applies an overly-narrow reading of the prior notice rule and prohibition against retroactive ratemaking to find that ratepayers somehow lacked adequate notice that they would, in fact, be responsible for paying the cost of services provided to them to ensure resource availability during system emergencies. The Commission can waive – and has waived – the prior notice requirement to ensure that resources are compensated for providing a reliability service. For instance, the Commission rightly waived the prior notice rule to grant a retroactive effective date to ensure compensation of the provision of reliability must-run service by the City of Escanaba, Michigan, prior to the execution and filing of the underlying agreement based on the finding that resources acting to preserve system reliability must be compensated. 3 The majority claims that the Commission’s decision to grant waiver of prior notice in MISO is inapposite because the Commission determined that prior notice had been given to ratepayers that they would be responsible for the costs. However, the Commission granted waiver in MISO notwithstanding the fact that: (1) the tariff provisions on file describing the applicable rate could apply only upon the execution of the agreement, 4 (2) those provisions were not sufficiently detailed to constitute a filed rate mechanism that could provide ratepayer notice,5 and (3) ratepayers lacked notice that they were, in fact, receiving service. 6
“Nonetheless, I fully support the Commission’s action to remedy any defects in PJM’s current market construct that do not provide adequate supply offer flexibility, in order to prevent the circumstances faced by Duke from recurring. As the Commission previously recognized during the polar vortex of 2014, requiring generators “to provide service to support reliability but without being able to recoup the incremental operating costs that they incur…would discourage generators from offering service at a time when they are needed.”7 It is similarly imperative that generators in PJM are able to recover legitimate, actual fuel costs incurred to ensure that they can provide service during emergency conditions. I encourage PJM to implement any necessary tariff changes as quickly as possible.
“Accordingly, I respectfully dissent in part”
- 1 Montaup Elec. Co. and Pub. Serv. Co. of N.H., 46 FERC ¶ 63,007 (1989) (“it would be just as imprudent or unreasonable for this Commission to place utilities in a no-win situation”).
- 2 New York Indep. Sys. Operator, Inc., 146 FERC ¶ 61,061, at P 20 (2014) (NYISO).
- 3 Midwest Indep. Transmission Sys. Operator, Inc., 142 FERC ¶ 61,170, at PP 84, 85 (2013) (MISO).
- 4 In MISO, the Commission stated that MISO’s tariff provided that a resource would qualify as a System Support Resource (SSR), and thus be eligible for associated compensation, during the period that that the resource is subject to an executed SSR agreement. However, the Commission waived the prior notice rule to grant an effective date of June 15, 2012, which was prior to the September 5, 2012 execution date of the SSR agreement. Midwest Indep. Transmission Sys. Operator, Inc., 142 FERC ¶ 61,170, at PP 76, 85 (2013) (MISO).
- 5 The Commission previously found that MISO’s tariff provisions describing the rate of SSR service lacked sufficient detail to constitute a filed rate mechanism, which led to the Commission’s determination that separate agreements and associated rate
schedules must be filed to provide the rates associated with SSR service. Midwest Indep. Transmission Sys. Operator, Inc., 140 FERC ¶ 61,237, at P 372 (“We accept [MISO]’s negotiated approach to determining SSR costs. Accordingly, because the tariff contains no rate mechanism, we will require [MISO] to file under section 205 of the FPA for cost recovery at the time it seeks to charge customers for SSR costs.”), reh’g denied, 109 FERC ¶ 61,157 (2004). However, in MISO, the Commission waived the prior notice rule to grant an effective date of June 15, 2012, which was prior to the October 5, 2012 filing date of the proposed SSR agreement and associated rate schedule. MISO, 142 FERC ¶ 61,170, at PP 1, 85.
- 6 The MISO tariff’s confidentiality provisions prevented the disclosure of the fact that an SSR had been designated and commenced providing service on June 15, 2012. MISO, 142 FERC ¶ 61,170 at P 44. Thus, ratepayers were likely unaware that they were even receiving a service until the agreement and rate schedule associated with the provision of that service were filed with the Commission on October 5, 2012.
- 7 NYISO, 146 FERC ¶ 61,061, at P 20 (2014).