I agree with this Order’s denial of the Federal Power Act (FPA) section 206 complaint filed by the Public Service Commission of West Virginia (PSC WV), because I agree that the PSC WV has failed to meet its burden of proof for a section 206 complaint. I cannot join all of the various rationales offered in the Order to support this denial, however, so I concur only with the result, as explained more fully below.
I dissent from the Order’s denial of the complaint filed by the PJM Independent Market Monitor (IMM) alleging a violation of Attachment M of the PJM Open Access Transmission Tariff (OATT) because I think the Order misses the vital purpose of the IMM in PJM operations, which is embodied in Attachment M.
First, turning to the West Virginia complaint: The PSC WV complains about the exclusion of its representative from observing and attending meetings of the “Liaison Committee” in PJM. There exists a much broader issue concerning RTO governance and decision-making that deserves attention, however, that unfortunately is not teed up in this proceeding, which I regard sadly as a missed opportunity. That broader issue resonates across all RTOs under Order No. 2000,[1] and with regard to the states is much more significant than whether a representative of a state commission can attend a particular committee meeting.
Specifically, that broader issue is the very real and compelling need to redefine and elevate the roles and authorities of state regulators in all RTOs. State regulators regulate the retail rates paid by consumers, the rates that actually determine the monthly power bills that consumers must pay. Even though this retail rate authority is specifically reserved to state regulators under the FPA, it is undeniable that FERC-regulated RTOs have a huge impact on those retail monthly bills. The power markets that RTOs operate, while wholesale, obviously impact retail bills in every state in an RTO, not to mention that FERC over the years has intruded on state retail rate-making authority through orders such as Order No. 2222.[2] The transmission costs from RTO-planned transmission projects flow right through FERC formula rates into retail rates – and transmission costs in many states are frequently the fastest growing part of the consumer’s monthly power bill.[3]
Yet since Order No. 2000 created the world of modern RTOs, state regulators have been largely frozen out of any serious role in RTOs’ actual decision-making,[4] even when those decisions have a direct and material impact on retail rates paid by their states’ consumers. Order Nos. 719[5] and 1000,[6] as well as other relevant FERC orders, continued the essential exclusion of state regulators[7] from such critically important decisions as regional cost allocation for transmission projects. The practical exclusion since Order No. 2000 of state authorities from serious decision-making roles in RTOs on matters that directly affect the power costs paid by consumers, is an issue that merits its own section 206 complaint or other proceeding.[8]
I would note that simply allowing state regulators or their staff to sit in the room during “stakeholder” meetings (along with a cast of hundreds) or otherwise be “consulted” on some decisions, simply does not represent an adequate role for the states.[9] States are constitutional entities with inherent police-power regulatory authority over utilities and rates. In the field of utility regulation, state regulators are the true representatives of the public interest within their states. I would further add that empowering states in RTO decision-making provides no justification for giving the myriad of RTO “stakeholders” an even greater role in RTO governance and decision-making than they already have. In RTO parlance and practice, except for state consumer advocates, “stakeholders” is typically a euphemism for rent-seeking special interests, including organizations pursuing the interests of their donors and members. One of the fundamental flaws in RTO processes since Order No. 2000 has been the enabling of rent-seeking special interests effectively to influence through RTO “stakeholder” processes the rules and practices that affect their own monetary and other interests.
As to why I do not join all the reasons offered in today’s Order for denying the PSC WV complaint, I believe it goes into too much detail as to, among other things, whether the Liaison Committee is a “Standing Committee” under the PJM OATT or not, whether it is part of the RTO’s “decision-making” process under Order No. 2000 or not, whether the exclusion of the PSC WV representative violates the so-called “responsiveness” criteria of Order No. 719[10] or not, and generally engages in too much procedural parsing of this Commission’s various orders governing RTO procedures and governance, as well as textual provisions of the OATT, that frankly, I regard as so much “how many angels can dance on the head of a pin,” legalistic hairsplitting. While I will concede the need to comply with the Administrative Procedure Act (APA), which frequently drives such over-analysis, too much of the reasoning and conclusions expressed therein I find simply unnecessary or not compelled by logic.
Rather than a long and detailed analysis on whether PJM has complied with FERC’s many efforts over the years to exert control, often to a micromanagement level, over RTO governance and operating procedures, I believe the focus should be on the statute itself. On that score I agree with the Order’s determination that the PSC WV has simply not met its burden of proof to show either that PJM violated its tariff or otherwise has acted in a manner that results in unjust and unreasonable rates, or is unduly discriminatory or preferential. I would add that even if the PSC WV complaint were granted, that would not address the much more significant issue of the states’ proper role in RTO decision making, in contrast to the IMM complaint which goes to the very purpose of the IMM.
So now turning to the IMM complaint: I dissent because the IMM has met its section 206 burden in this complaint. The core issue here involves Attachment M of the PJM OATT, which explicitly provides for the IMM’s right – exercised by the IMM in its sole discretion – to select and attend stakeholder working groups, committees or other PJM stakeholder processes that the IMM deems appropriate and necessary to perform its vitally important duties.[11] On this complaint, while an examination of Attachment M’s text is necessary, even more important to consider is the purpose of Attachment M with regard to the IMM’s vital role, and on this point we should not miss the forest for the trees.
While today’s Order nominally recognizes the language in Attachment M, it wrongly insists that because the Liaison Committee does not identify, review, or make any decisions concerning the PJM tariffs or markets it cannot be a stakeholder process and therefore the IMM has no right to attend.[12] This explanation offers no basis at all for the majority’s finding here. First, the IMM’s discretion to attend PJM events is not just as to a stakeholder process, but as to “stakeholder working groups, committees or other PJM stakeholder processes” – a very broad array of events to say the least.[13] Second, I think we can all agree that a process is series of actions leading to an end result.[14] So the fact that one step in a Board decision-making process may involve meeting with the Liaison Committee, which Committee does not make any decisions, is of no consequence. It is a process.[15] Third, the idea that the Liaison Committee does not identify or review any issues related to, inter alia, the PJM tariff or markets seems non-sensical to say the least and would undoubtedly be a surprise to those members of the Liaison Committee who undoubtedly believe that they are addressing and identifying issues of consequence to the PJM tariff and markets to the PJM Board. Moreover, it is contrary to the evidence presented by the IMM.[16]
Next, the Order goes on to note that the IMM has “ample opportunities” to meet with the PJM Board and engage with other stakeholders.[17] Perhaps. And also not surprising given the IMM’s authorities and obligations under Attachment M. But this statement actually ignores the IMM’s complaint rather than answers why it is being denied. The IMM does not disagree that it has these other opportunities.[18] Instead, the IMM seeks to enforce its right under Attachment M to attend the Liaison Committee meetings. And, in answer to that allegation, we come full circle to the notion that somehow the Liaison Committee does not “identify, review, and make decisions regarding proposed revisions to PJM’s governing documents, processes, market and reliability design and operations” which, see my immediately preceding paragraph, we know is incorrect.
In particular, I agree with the Organization of PJM States, Inc. (OPSI) which argues in favor of the Commission granting the IMM’s complaint:
One key aspect of retail regulator decision making involves understanding the perspective of the IMM. The IMM notes that “[e]xcluding the Market Monitor from stakeholder meetings compromises the ability of the Market Monitor to perform its function by depriving it of information exchanged in such meetings and the opportunity to state its independent views. The Market Monitor cannot effectively perform its function when it is excluded from stakeholder meetings.” When the PJM stakeholder process denies the IMM the ability to understand stakeholder perspectives, it not only impacts the IMM’s ability to carry out its responsibilities, it also affects everyone that relies on the PJM markets and impacts retail regulators’ ability to carry out their responsibilities. For these reasons, the Commission should grant the Complaint.[19]
I cannot emphasize strongly enough how much state regulators in OPSI rely upon the IMM for unvarnished, incisive and comprehensive analyses on PJM market operations and policies, as well as about planned changes to operations and policies. It is no exaggeration to say that without access to the IMM’s information and analyses, state regulators would be woefully under-informed about what is happening in PJM that affects their state’s consumers.
I would add that, like the states, the IMM is not just another “stakeholder” and is not acting in its own monetary self-interest. The IMM has explicit obligations and rights under the tariff to perform its duties. And, for this reason, I do not believe that granting access to the IMM to attend Liaison Committee meetings in any way would justify granting similar access to other groups or “stakeholders” who may want to attend. The IMM is given very specific and vitally important duties, both in Order No. 719, which devotes an entire section to the importance of independent market monitoring in all RTOs, as well as, more specifically, in PJM’s specific OATT Attachment M. If attending these meetings is “necessary or appropriate” to the IMM doing its job, then the IMM should be allowed to make that decision.
For these reasons, I respectfully concur in the result as to the denial of the PSC WV complaint and dissent as to the denial of the IMM complaint.
[1] Regional Transmission Orgs., Order No. 2000, FERC Stats. & Regs. ¶ 31,089 (1999) (cross-referenced at 89 FERC ¶ 61,285), order on reh’g, Order No. 2000-A, FERC Stats. & Regs. ¶ 31,092 (2000) (cross-referenced at 90 FERC ¶ 61,201), aff’d sub nom. Pub. Util. Dist. No. 1 of Snohomish Cty. v. FERC, 272 F.3d 607 (D.C. Cir. 2001).
[2] Participation of Distributed Energy Resource Aggregations in Markets Operated by Regional Transmission Organizations and Independent System Operators, Order No. 2222, 172 FERC ¶ 61,247 (2020), order on reh’g, Order No. 2222-A, 174 FERC ¶ 61,197, order on reh’g, Order No. 2222-B, 175 FERC ¶ 61,227 (2021); see, e.g., Order No. 2222-A, 174 FERC ¶ 61,197 (Christie, Comm’r, dissenting at PP 3, 5) (footnote omitted) (emphasis added) (available at https://www.ferc.gov/news-events/news/item-e-1-commissioner-mark-c-christie-dissent-regarding-participation-distributed) (“This order – and its predecessor – intentionally seize from the states and other authorities their historic authority to balance the competing interests of deploying new technologies while maintaining grid reliability and protecting consumers from unaffordable costs. . . . Order No. 2222-A is not ‘cooperative federalism,’ but its opposite. It undermines the overarching policy framework that Congress incorporated into the Federal Power Act decades ago: federal regulation of wholesale rates and the bulk power system; state regulation of retail rates and the local distribution grid.”).
[3] See, e.g., PJM IMM 2023 Quarterly State of the Market Report for PJM: January - September 2023 at 5, 20 (“Starting in the third quarter of 2019, the cost of transmission per MWh of wholesale power has been higher than the cost of capacity.”).
[4] There have been some minor exceptions. The Regional State Committee in SPP (SPP RSC) has historically had some degree of a decision-making role in transmission cost allocation, albeit subject to board control, and the Organization of MISO States, Inc. (OMS) may request that MISO make changes, pursuant to FPA section 205, to MISO’s transmission cost allocation. These examples, however, while welcome, do not give state regulators anywhere near the role in RTO decision-making they should have on matters that directly affect their consumers’ monthly power bills, such as transmission costs.
[5] Wholesale Competition in Regions with Organized Elec. Mkts., Order No. 719, 125 FERC ¶ 61,071 (2008), order on reh’g, Order No. 719-A, 128 FERC ¶ 61,059, order on reh’g, Order No. 719-B, 129 FERC ¶ 61,252 (2009).
[6] Transmission Plan. & Cost Allocation by Transmission Owning & Operating Pub. Utils., Order No. 1000, 136 FERC ¶ 61,051 (2011), order on reh’g, Order No. 1000-A, 139 FERC ¶ 61,132, order on reh’g & clarification, Order No. 1000-B, 141 FERC ¶ 61,044 (2012), aff’d sub nom. S.C. Pub. Serv. Auth. v. FERC, 762 F.3d 41 (D.C. Cir. 2014).
[7] While citing state regulators, I also include, as appropriate, other relevant electrical power regulatory authorities, such as self-regulating public power agencies and electric co-operatives.
[8] Whether in a section 206 proceeding or in one or more technical conferences, the issue of RTO governance and decision-making procedures is one that is timely for a FERC proceeding. The issue has brought forth various interesting ideas and proposals (“interesting” does not mean I endorse the ideas). See, e.g., Tony Clark & Vince Duane, Who Owns the RTO? Why RTO Governance is an Achilles Heel in the Clean Grid Transition, Nov. 2021, (available at https://www.wbklaw.com/news/white-paper-who-owns-the-rto/); see also Ari Peskoe, Replacing the Utility Transmission Syndicate’s Control, Energy Law Journal (2023), (available at https://www.eba-net.org/wp-content/uploads/2023/11/8-Peskoe547-618.pdf). Especially, given the continuing and growing debate over regional cost allocation for public policy transmission projects in multi-state RTOs, this issue is ripe for a thorough examination in a series of technical conferences or other general proceedings.
[9] To give credit where credit is due, I would note that, as a state commissioner in PJM for 17 years, I always found that it was never a problem for state regulators to meet with and discuss issues with PJM’s Board and senior management. The PJM Board and senior management always attended both fall and spring meetings of the Organization of PJM States, Inc. (OPSI) and OPSI members were regularly invited to attend the PJM annual meeting and occasional PJM Board meetings. Generally the OPSI and PJM Boards met together at least three times a year. Further, PJM senior staff and Board members were regularly available for individual phone calls and other means of one-on-one communications on specific issues. PJM staff held regular teleconferences with state staff. But while communication channels between OPSI states and PJM were robust, such opportunities do not constitute the type of decision-making role on matters that affect each state’s consumers, such as cost allocation, that states should have.
[10] The four “responsiveness criteria” required of an RTO’s governing board in Order No. 719 are: “(1) inclusiveness, (2) fairness in balancing diverse interests, (3) representation of minority positions, and (4) ongoing responsiveness.” See, e.g., Order No. 719, 125 FERC ¶ 61,071, at PP 7, 477. These sound more like the nebulous recommendations of an organizational management consultant, rather than serious requirements for RTO decision-making.
[11] Specifically, section IV.G of Attachment M states that “[t]he Market Monitoring Unit may, as it deems appropriate or necessary to perform its functions under this Plan [referring to Attachment M which is the PJM Market Monitoring Plan], participate (consistent with the rules applicable to all PJM stakeholders) in stakeholder working groups, committees or other PJM stakeholder processes.” ATTACHMENT M, OATT ATTACHMENT M (5.0.0), § IV.G.
[12] Order at P 85 (footnotes omitted) (“The Commission has previously explained that ‘[t]he stakeholder process is used to identify, review, and make decisions regarding proposed revisions to PJM’s governing documents, processes, market and reliability design and operations.’ Moreover, the Commission has consistently discussed stakeholder processes as elements of a decision making process. . . . The Liaison Committee is not, on its face, an element of the decision making process regarding proposed revisions to tariff provisions, governing documents, processes, or market design and operations.”).
[13] See ATTACHMENT M, OATT ATTACHMENT M (5.0.0), § IV.G (emphasis added).
[14] If needed, I’d cite you to Webster’s Dictionary which provides as one of its definitions that a process is “a series of actions or operations conducing to an end.” https://www.merriam-webster.com/dictionary/process?src=search-dict-box.
[15] Indeed, as the IMM points out: “PJM and Indicated Members ignore the obvious potential for the Liaison Committee to affect Board decisions, including decisions that affect the markets. A cursory review of agendas at the Liaison Committee shows the topics always include PJM markets and sometimes include the market monitoring function. The Board has significant authority over PJM regulatory filings, including filings that do not require a PJM stakeholder process or majority vote, per PJM governance rules.” IMM May 2, 2023 Answer at 4-5 (footnotes omitted) (emphasis added).
[16] See, e.g., supra n.15 (noting a review of the Liaison Committee agendas demonstrates the that topics “always” include PJM markets). In short then, not only has the IMM met its burden of proof under section 206, but this Order’s arguments to the contrary are nothing short of unsatisfying.
[17] Order at P 86.
[18] IMM May 2, 2023 Answer at 5 (emphasis added) (“PJM argues . . . and Indicated Members argue . . . that the Market Monitor has alternative means to communicate with the Board. Alternative means for the Market Monitor to communicate with the Board are irrelevant. Section IV.G does not include an exception to enforcement based on the existence of alternative stakeholder processes.”).
[19] OPSI Apr. 17, 2023 Comments on Market Monitor Complaint at 2 (emphasis added) (footnotes omitted) (quoting IMM Complaint at 3-4).