Commissioner James Danly Statement
July 27, 2023
Docket Nos. ER23-729-001 and EL23-19-001
PJM Interconnection, L.L.C.’s (PJM’s) filed tariff provides that PJM “shall determine the PJM Region Reliability Requirement and the Locational Deliverability Area Reliability Requirement for each Locational Deliverability Area for which a Variable Resource Requirement Curve has been established for such Base Residual Auction . . . prior to the conduct of the Base Residual Auction . . . .”[1] This is not a complicated provision, but to restate it in less technical terms, PJM must determine the quantity of capacity each area needs prior to running the capacity auction. Nothing in the tariff permits PJM to revise this determination during or after “the conduct” of the auction except in narrow circumstances that are not at issue in this proceeding.
After conducting the most recent auction, PJM determined that the prices in Southern Delaware were too high. PJM did not post the auction results—which the tariff requires “as soon thereafter as possible”[2]—but instead sought the Commission’s blessing to recalculate the quantity of capacity it had “determine[d] . . . prior to the conduct” of the auction—with the effect of reducing auction prices in Southern Delaware by a factor of four. The majority granted PJM’s request over numerous protests and my dissent,[3] and upholds that result in this order.
This is a plain violation of the filed rate doctrine and the rule against retroactive ratemaking. I incorporate my dissent here and, rather than repeating all those arguments, focus on the novel reasoning regarding the filed rate doctrine and rule against retroactive ratemaking that the majority adds in its order on rehearing .[4]
Nearly every line of the majority’s “Determination” sections in the Rehearing Order constitute gross legal error.[5] I am tempted to annotate these sections line by line to refute each legal flaw in detail, but will instead focus on three broad categories of errors: the majority’s misunderstandings about (1) how time works, (2) how words work, and (3) how FERC works. I address these categories in turn.
Time Is a Constant[6]
The majority’s primary defense against retroactive ratemaking is its claim that it is only making prospective changes. Even though PJM was required to—and did—“determine” the capacity requirement “prior to the conduct of the auction,”[7] “the Commission determined that the filed rate doctrine did not apply to PJM’s prospective Tariff revisions” which changed PJM’s capacity requirement determination after the auction had run.[8]
The first obstacle to the majority’s assertion that nothing retroactive is happening here is the simple fact of how time works. I cannot believe I have to keep explaining time, but if something happened in the past, it has already happened. The fact that it happened cannot be undone. Thus, for example, if a tariff includes a fixed deadline for an action, and the date of the deadline has passed without the action, the Commission has no power to waive the lapsed deadline and excuse the failure to take the action. To do so is retroactive ratemaking.[9]
The relevant tariff provision in this case includes a simple time requirement. PJM must “determine” the capacity requirement “prior to the conduct of the auction.” It did so. The majority changed that determination after the fact. This constitutes a retroactive change.
This is not a complicated concept. If parents issue a rule that their toddler must eat dinner before ice cream, the toddler understands. The Federal Energy Regulatory Commission is baffled. What if dinner is bland? What if scientists discover ice cream cures cancer? What if the toddler throws a temper tantrum? What if dinner is too expensive? But none of this is relevant to the rule, which is “dinner before ice cream.” PJM’s rule is “determine capacity requirements before auction.” Anything that changes that determination once the auction has started is a retroactive change.
The majority alludes to an allegedly “fact-specific analysis courts have used for decades to determine retroactivity,” but fails to cite any cases discussing this “fact-specific analysis.”[10] The majority further “conclude[s] that it ‘need not determine the precise point in time at which a change to [auction] procedures would be retroactive,’” like this is some great mystery.[11]
But retroactivity is only as complicated as you need it to be to bypass filed rates you do not like. The fact-specific analysis is as follows: Has it already happened? And the precise point in time it started happening is irrelevant so long as it is before now.
Now let us apply this searching inquiry to the relevant filed rate, that PJM must determine capacity requirements before the conduct of the auction:
Has the auction already started?
Yes.
Well, then, we can rest assured that any change to this filed tariff provision applying to the past—or even ongoing—auction would be retroactive. So much for the complicated, fact-specific analysis.
Unable to keep time, the majority next resorts to distorting precedent. It states that it can revise filed auction procedures any way it likes “consistent with longstanding precedent permitting pipelines and utilities to revise rates prospectively before the rate has been charged and the obligation incurred.”[12] They claim this precedent affirms that “rate changes are permissible where, as here, regulated entities or customers have not yet incurred commitments or been awarded rights pursuant to the relevant filed rate.”[13] Since “no service has yet been provided and no obligation or commitment has yet been incurred,” any change to the auction procedures is prospective.[14]
The only problem with this argument is that there is no such precedent. The first case in history that found that tariff auction rules and procedures can be changed up until obligations are incurred or services rendered was this one. As petitioner the PJM Power Providers Group (P3) explains it,
Although the Order cites several cases in support of [the assertion that changes to a rate are impermissibly retroactive only where regulated entities or customers have already transacted pursuant to the rate], the Commission reads those cases for more than they are worth. To be clear, the cases cited by the Order do support the conclusion that a rate change is ‘impermissibly retroactive’ if ‘regulated entities or customers have already transacted pursuant to that rate—i.e., where purchases or sales have occurred.’ Unfortunately, that is not the conclusion the Commission drew from those cases; the Commission went much further, concluding that those cases show that rate changes are impermissibly retroactive ‘only’ where a transaction has already been consummated. None of the precedents the Order cites proscribes the filed rate doctrine and rule against retroactive ratemaking to only those circumstances. Further, the Order’s conclusion to the contrary ignores court precedent clearly explaining that the filed rate doctrine and rule against retroactive ratemaking applies before a transaction has actually occurred pursuant to the filed rate.[15]
Nor would any such precedent withstand judicial scrutiny. Why have auction rules in a filed rate if they are non-binding until the auction has concluded and obligations have been consummated? In the face of such uncertainty, a “filed rate” would be pointless. In fact, let me save everyone the trouble and draft that new tariff for PJM:
PJM will hold an annual capacity auction—or not—based on whatever rules it deems appropriate before or during the auction, including after PJM determines preliminary auction results. All generators must offer and can never increase their offers during an auction no matter how the rules change. Once auction clearing prices are to PJM’s liking and the Commission has approved the results, and transactions have been consummated, charges billed and collected, and capacity delivered,[16] the auction will be considered finished and no further changes to the auction rules will be entertained. Happy offering and good luck!
The tariff does not yet say this, of course, but it may as well under the majority’s new retroactivity rule.
Words Mean What They Mean
If the majority is correct that the change to the capacity requirement determination in this proceeding is truly prospective, then they would not need another word to describe what the relevant tariff provision means, or the purported purpose of the tariff, or any of the other analyses they offer to bypass what the tariff plainly says. But the majority cannot help themselves and advances argument after argument for alternative tariff interpretations. None of them work.
The Majority Muddles the Relevant Tariff Provision
When it can be bothered with the relevant tariff provision itself, which again is a straightforward requirement that PJM must “determine” the area capacity requirement “prior to the conduct of the auction,” the majority claims that:
“Determine” does not mean “determine.” The majority is “not persuaded . . . that the use of the word ‘determine’ . . . connotes that the [capacity requirements] are incapable of adjustment when read in the broader context of Attachment DD.”[17] To “determine” something now means something akin to “put in a placeholder number.”
“Prior” does not mean “prior.” The majority asserts that “[t]he fact that section 5.10(a) of Attachment DD requires PJM to establish the [capacity requirement] that will be used in the BRA prior to the BRA, does not contradict” its conclusion that the capacity requirement can be re-determined up until the time the capacity obligations and rights have “actually been awarded.”[18] So what the tariff really meant to say was that PJM will put in a placeholder number for the capacity requirement prior to the conduct of the auction but not finalize it until capacity obligations and rights have actually been awarded.
“Conduct” does not mean “conduct.” The majority claims that “[t]he Tariff does not define the word “conduct” in terms of PJM running the capacity auctions,” and instead offers up a smorgasbord of all PJM’s auction-related responsibilities up to and including when PJM “determin[es] the clearing price that reflects all [auction] inputs,” which is at some uncertain point potentially long after the auction has concluded.[19]
“Auction” does not mean “auction” unless, like the verb “conduct,” we mean only in the broad sense of when PJM “has completed its evaluation and posted the auction results, for which there is no set deadline.”[20] As part of its textual contortionism, the majority also writes the requirement that PJM post auction results “as soon thereafter [after conducting the auction] as possible” out of the tariff.[21] And thus “the conduct of an auction” is transformed into a nebulous event that does not begin or end until the majority says it does.[22]
As a result of the simple exercise of calling into doubt the plain meaning of every operative word in it, the tariff requirement to determine the capacity requirement prior to the conduct of the auction is transformed into unlimited discretion for PJM to adjust capacity requirements whenever it wants until it gets the prices it prefers.
The Majority Minimizes the Relevant Tariff Provision
The majority does not limit itself to warping every word of the relevant tariff provision. They also do everything they can to minimize its importance. They call into question whether auction procedures are truly worthy of the status of a “filed rate.”
Of course, the majority has no choice but to acknowledge the obvious truth that the tariff’s auction procedures are the rate on file, which it does by comparing (and then contrasting) auction procedures and formula rates: “[t]he two are analogous for purposes of the filed rate doctrine to the extent that the rate on file is not the actual price produced but the set of rules that produces the price.”[23] But some rates apparently are more worthy of filed rate protection than others:
Formula rates, however, usually involve a method to calculate the initial charge based on projections (rates calculated in advance based on projected cost inputs for the upcoming year) as well as a true-up mechanism (procedures to recalculate the final charge after the close of the year to reflect actual costs), whereas PJM’s capacity auction rates only set forth procedures used to calculate prices to be paid once the auction process is complete.[24]
The majority underscores this point by repeatedly emphasizing that the capacity requirement determination PJM must make prior to the auction—one of those pesky auction “procedures” the tariff purports to mandate—is merely a “discrete requirement.”[25] Never mind that this “discrete requirement” in fact settles the quantity of capacity to be bought in each area and is therefore the single most important input to the capacity auction along with the seller offers.[26]
The majority further belittles the tariff’s auction procedures as an “optimization algorithm,” and nothing more,[27] asserting that PJM’s vaunted role goes beyond mechanically running the “optimization algorithm.”[28] The majority thus “reasonably construed the Tariff to find that applying the [optimization] algorithm is one step in the auction process, which does not determine when the auction was completed for the purposes of the filed rate doctrine.”[29] According to the majority, the “optimization algorithm” is just a “step” toward the ultimate filed rate, and “posting the entire panoply of [auction] parameters” merely “provides general transparency to the market participants.”[30]
What is the point of these arguments? Either the requirement to determine capacity requirements prior to the conduct of the auction is in the filed rate or it is not. If it is, the Commission must give it effect. No tariff provision states that the “optimization algorithm” or other auction procedures are not part of the filed rate until auction rates are finalized.
If the “optimization algorithm,” including the determination of how much capacity an area needs, is as trivial as the majority makes it out to be, why is it in the filed rate in the first place? Why does the tariff require it to be determined at all? And why was there so much record evidence of reliance interests on the capacity requirement determination? The majority recites petitioner Constellation’s argument “that parties look to the parameters to make bilateral and hedging arrangements or, in the case of resources with a must-offer requirement, to decide whether and how to participate,” but the majority discounts this reliance.[31] I do not know how much more reliance has to be demonstrated for a filed rate term to be considered important, nor do I understand the premise that “inputs,” “algorithms,” or any one of the “panoply of parameters” are lesser parts of the filed rate.
The majority’s next attack on the auction procedures as filed rates is the claim that seller “[o]ffers into PJM’s capacity market . . . are not ‘rates made, demanded, or received’ under FPA section 205(a)” but “in actuality, a ‘demand’ to sell at the clearing price—i.e., the capacity rate charged by PJM—and not at the price in the seller’s offer, and thus [an offer] is not a rate ‘demanded’ by the seller.”[32] Instead, “[s]eller offers are ‘request[s] to receive the market price,’[33] and do not, by themselves, constitute capacity commitments reflecting that a transaction has been consummated for purposes of the filed rate doctrine.”[34] Thus, auction procedures in the tariff that might implicate seller offers—such as determining the amount of capacity an area needs to buy—apparently are also less worthy of protection under the filed rate doctrine than the eventual clearing prices.
The problem with all these arguments is that the tariff never states which of the auction procedures can be ignored and which cannot, nor is there any precedent for finding some parts of the tariff more entitled to protection under the filed rate doctrine and rule against retroactive ratemaking than other parts of the tariff. The simple rule is that if it is part of the filed rate, it is the filed rate.[35] Maybe on compliance the majority should require PJM to annotate its tariff so market participants can tell which parts of it are filed rates and which parts are not.
The Majority Makes Up Superseding Tariff Provisions
We next turn to other provisions in the tariff—whether in the tariff or not—that the majority claims supposedly supersede the actual governing tariff provision. For this analysis, the majority informs us that “[i]n applying the filed rate doctrine, the Commission takes into account the circumstances of the proceeding and, in particular, the nature of the rate on file.”[36] Again, there is no precedent that the “circumstances of the proceeding” or the “nature of the rate on file” overcome the actual words of the rate on file, but here we go.
The majority’s primary argument here is that the “purpose” of the tariff supplants its actual provisions. According to the majority, “[t]he purpose of the BRA is ‘to secure commitments of Capacity Resources’ and the price that suppliers will receive in exchange.’”[37] It is, moreover, “PJM’s distinct responsibility to ensure that the BRA fulfills its purpose of securing capacity commitments to meet PJM’s reliability requirements and that clearing prices meet the standards in the Tariff.”[38] And, according to the majority, “[t]he filed rate doctrine ensures market participants have notice of what they are going to pay, or be paid, before they take or provide service. In this case, sellers will know the accurately calculated VRR Curve and resulting rates before they receive capacity commitments or provide service.”[39]
The error of the majority’s “purpose of the tariff” talk is its blatantly unlawful conclusion that accomplishing these virtuous tariff purposes “could require adjusting certain parameters, such as the [capacity requirement] of a specific [area], to ensure that PJM fulfills its responsibilities.”[40] No. This is not how the filed rate doctrine and rule against retroactive ratemaking work. The majority does not get to retroactively “adjust[] certain parameters” of the filed rate to accomplish its own—or anyone else’s—conception of the “purpose” of the filed rate. The filed rate would have to say when the filed rate does not apply, not merely point to some other “purpose.”
And that brings us to the next attack. The majority cites tariff provisions that provide express notice that the capacity requirement is subject to adjustment during the conduct of the auction, specifically to account for Price Responsive Demand and to correct errors in the initial posting of parameters.[41] You know where this is headed—the majority asserts that “the notion that the [capacity requirements] are not permitted to be modified is contradicted by the fact that the Tariff expressly contemplates reasons why they might be changed.”[42] But that is the trick: exceptions to the filed rate must be expressed. The fact that the tariff calls out two narrow circumstances when capacity requirements can be adjusted does not open the door for capacity requirements to be adjusted whenever PJM or the majority want.
The majority finds otherwise. It extols the “exercise of the minor flexibility built into Attachment DD section 5.11(e) under the circumstances here, flexibility that we trust PJM will use only in similarly exigent circumstances.”[43] By “minor flexibility,” the majority means PJM’s (and its own) alleged ability to retroactively revise auction procedures, including the determination of capacity requirements prior to the conduct of the auction. There is no such flexibility. The only adjustments PJM can make to the auction parameters are those expressly set forth in the tariff.
Finally, we get to the rub of the majority’s misapprehension of the filed rate doctrine: the majority wants the power to change any auction parameter in the PJM tariff to minimize costs, meaning to reduce auction prices. “Indeed, the Tariff requires PJM to apply the optimization algorithm to calculate a clearing result that minimizes the cost of satisfying the reliability requirements across the PJM Region.”[44] But this is another broad tariff ideal that—no matter how admirable—cannot usurp the plain terms of the auction parameters on file.
The majority retorts that “apply[ing] the optimization algorithm to minimize reliability costs does not usurp—but rather harmonizes—the terms of PJM’s filed rate.”[45] In support, it cites standard tariff interpretation cases[46] that hold:
First, the Commission must consider whether the [tariff] “unambiguously addresses the matter at issue.” If the language is unambiguous, the issue is resolved. . . . To determine ambiguity, the Commission considers whether a provision “‘could suggest more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated [tariff] and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business.’”[47]
The issue thus is whether “a reasonably intelligent person” as characterized in the Commission’s longstanding precedent would find the relevant tariff provision in this proceeding to be ambiguous. Only in those circumstances would the Commission need to resort to the general “purpose” of a capacity auction to decipher ambiguous auction parameters.
I respectfully submit that no “reasonably intelligent person” would find ambiguity in the tariff provision that PJM “shall determine the PJM Region Reliability Requirement and the Locational Deliverability Area Reliability Requirement for each Locational Deliverability Area for which a Variable Resource Requirement Curve has been established for such Base Residual Auction . . . prior to the conduct of the Base Residual Auction . . . .”[48] So the majority is stuck with the words of the relevant tariff provision, and its conception of the true cost-minimizing “purpose” of the capacity auction is irrelevant.
I also reject the claim that the majority is “minimizing costs” to consumers when it blatantly undermines the integrity of every FERC-regulated market.[49]
FERC Has Limited Powers
The other fundamental reason that I dissent from the majority’s action on rehearing today is because it is an unprecedented power grab. The Commission has no more authority to grant this retroactive rate change than to declare war on Texas.[50] Yet the majority barely flinches when granting itself nearly unlimited powers to retroactively revise any market or auction-related tariff provision up until the time that prices are paid and services rendered. Market tariffs are now whatever we say they were after the fact. The Commission can now overturn market auction outcomes for any reason.
Let there be no dispute that the majority’s new self-asserted powers deprive market participants of their rights.[51] The auction rules are no longer reliable. “Posting the entire panoply of parameters provides general transparency to the market participants,”[52] but generators must offer their capacity with no assurance about what rules may eventually be applied. This is the exact opposite of how rates are supposed to work—giving market participants notice of the rates, terms, and conditions that will be applied before their application.[53]
Yes, market participants will suffer for this order, but the real loser in this power grab is the energy consumer. All of the benefits of the Commission’s policy in favor of market-based rate regimes and bulk power markets have been sacrificed at the altar of saving an isolated subset of imprudent load-serving entities who (possibly) failed to hedge against predictable high prices in a small zone in a single auction.[54]
If the majority’s power grab is not reversed by an appellate court, the Commission will have largely extinguished the filed rate doctrine and rule against retroactive ratemaking’s heretofore “‘nearly impenetrable shield for consumers’ that the Commission may not circumvent even ‘for good cause or for any other equitable considerations.’”[55] The majority will have transformed the Commission into a court of equity to decide what the “fairest” rate should have been based on whatever considerations the majority-of-the-moment deems most important: minimizing short-term costs, propping up favored resources, or any other transient policy objective.
The majority further seeks to deputize PJM—and presumably other RTOs—and grant them similar “flexibility” and unfettered discretion to make up the rules as they go along. But PJM is nothing more than a utility with no ability to do anything beyond that which its tariff permits; it is not a free agent with unlimited discretion to run auctions however they want.[56] Just as the Commission is limited to the powers granted it by statute,[57] an RTO is limited to the powers granted it by tariff. The majority thinks itself unconstrained by such limitations.
The Commission should have granted rehearing. It should not have approved PJM’s section 205 rate change.[58] And it had no authority to permit the rate change to go into effect retroactively in the last auction in plain contravention of the filed rate doctrine and rule against retroactive ratemaking.
For these reasons, I respectfully dissent.
[1] PJM, Intra-PJM Tariffs, OATT, Attach. DD, § 5.10(vi)(B) (31.0.0) (emphasis added); see also id., Attach. DD, § 5.10(vi)(A) (“[t]he parameters of the Variable Resource Requirement Curve will be established prior to the conduct of the Base Residual Auction [(BRA)] for a Delivery Year and will be used for such Base Residual Auction.”); id., Attach. DD, § 5.11(a) (17.0.0); id., Attach. DD, § 15 (4.0.0).
[2] Id., Attach. DD, § 5.11(e), Posting of Information Relevant to the RPM Auctions (17.0.0).
[3] PJM Interconnection, L.L.C., 182 FERC ¶ 61,109 (2023) (February 2023 Order) (Danly, Comm’r, dissenting) (Dissent).
[4] PJM Interconnection, L.L.C., 184 FERC ¶ 61,055 (2023) (Rehearing Order); see id. PP 52-75 (filed rate doctrine determination section). I defer almost entirely to my Dissent on the majority’s new “settled expectations” test (see id. PP 84-90 (“settled expectations” determination section)) and PJM’s section 205 and 206 filings seeking a truly prospective tariff change (see id. PP 106-21, 125 (sections 205 and 206 determination sections)).
[5] See, e.g., Rehearing Order, 184 FERC ¶ 61,055 at PP 52-75.
[6] But see Albert Einstein, Annalen der Physik 891, 897 (1905). That time is uniform is, of course, not strictly true. Nevertheless, it is highly likely to be the prevailing condition under the circumstances typically encountered by humans engaged in the field of energy regulation generally, and Base Residual Auctions in particular. See also Ira Flatow, Resetting the Theory of Time, NPR: Talk of the Nation (May 17, 2023, 1:00 PM), at https://www.npr.org/2013/05/17/184775924/resetting-the-theory-of-time (“Albert Einstein once wrote: People like us who believe in physics know that the distinction between past, present, and future is only a stubbornly persistent illusion. Time, in other words, he said, is an illusion.”).
[7] Supra P 1.
[8] Rehearing Order, 184 FERC ¶ 61,055 at P 53; see id. PP 60-61 (the majority need not determine whether exceptions to the filed rate doctrine apply because “the proposed Tariff revisions changed future rates”).
[9] The majority engages in this exact form of retroactive ratemaking all the time. See Dissent at P 17 & n.34.
[10] Rehearing Order, 184 FERC ¶ 61,055 at P 62 & n.207; see id. P 66 & n.227. The cited cases stand for other points related to the filed rate doctrine and the rule against retroactive ratemaking, all supporting the conclusion that the majority is engaged in retroactive ratemaking in this proceeding.
[11] Rehearing Order, 184 FERC ¶ 61,055 at P 65 (citing February 2023 Order, 182 FERC ¶ 61,109 at P 167).
[12] Rehearing Order, 184 FERC ¶ 61,055 at P 63; see id. P 67 (“continu[ing] to find that the Commission’s interpretation of the filed rate doctrine in the February 2023 Order ‘gives effect, in the context of auction procedures, such as those governing the BRA, to the long line of U.S. Supreme Court and D.C. Circuit cases on the filed rate doctrine’”) (citing February 2023 Order, 182 FERC ¶ 61,109 at P 168 & P 166 n.459 (citing Cogentrix Energy Power Mgmt., LLC v. FERC, 24 F.4th 677, 684 (D.C. Cir. 2022); Old Dominion Elec. Coop., 892 F.3d 1223, 1226-27 (D.C. Cir. 2018) (Old Dominion); Pac. Gas & Elec. Co. v. FERC, 373 F.3d 1315, 1320 (D.C. Cir. 2004); Associated Gas Distribs. v. FERC, 898 F.2d 809, 810-11 (D.C. Cir. 1990) (Williams, J., concurring); City of Girard v. FERC, 790 F.2d 919, 924 (D.C. Cir. 1986))).
[13] Rehearing Order, 184 FERC ¶ 61,055 at P 70; id. P 70 n.252 (citing February 2023 Order, 182 FERC ¶ 61,109 at PP 166, 168).
[14] Id. P 74.
[15] P3 Rehearing, Docket No. ER23-729-001, at 12-13 (citations omitted). The majority cites scores of cases, but none stand for the sweeping filed rate exception the majority makes up here, that auction rules are discretionary until the auction is finalized. See, e.g., Rehearing Order, 184 FERC ¶ 61,055 at PP 63, 67 (citing cases). What many of these Commission cases do represent is a long and continuing assault by the Commission on the filed rate doctrine and rule against retroactive ratemaking, but none go nearly so far as today’s ruling.
[16] See Dissent at P 11 (citing February 2023 Order, 182 FERC ¶ 61,109 at P 167).
[17] Rehearing Order, 184 FERC ¶ 61,055 at P 56 (citing Joint Parties Rehearing Request at 12-13 (asserting that the word “determine” is “commonly understood to mean ‘to fix conclusively or authoritatively,’” as distinct from a guess that the Commission can change later (citing Merriam-Webster Dictionary, definition of “determine,” https://www.merriam-webster.com/dictionary/determine))).
[18] Id. P 55 (emphasis added) (citations omitted); see also id. P 54 (stating the majority’s conclusion that the capacity requirement can be re-determined up until capacity rights and obligations are awarded).
[19] Id. P 58 & n.180 (emphasis added) (citing PJM, Intra-PJM Tariffs, OATT ATTACHMENT DD.3 Responsibilities Of The Office Of The (10.0.0), § 3.2; see also id., OATT ATTACHMENT DD.5.4 Reliability Pricing Model Auctions (7.0.0), § 5.4 (“PJM shall conduct for each Delivery Year a [BRA] to secure commitments of Capacity Resources as needed to satisfy the portion of the RTO Unforced Capacity Obligation not satisfied through Self-Supply of Capacity Resources for such Delivery Year.”)). It is unclear whether the majority means “determine” in this context as a final determination of capacity prices or prices still subject to subsequent adjustment, and there is no way to ever tell given the majority’s own textual arguments. See supra P 17 (discussion of what the majority thinks “determine” means in the relevant tariff provision).
[20] Rehearing Order, 184 FERC ¶ 61,055 at P 58.
[21] See id. P 75; see PJM, Intra-PJM Tariffs, OATT, Attach. DD, § 5.11(e); see also Rehearing Order, 184 FERC ¶ 61,055 at P 73 (asserting that “the BRA had not ‘already run,’ but was ongoing at the time PJM submitted the Section 205 Filing”).
[22] The majority does note the Market Monitor’s assertion that “it is the posting of the final results that determines when the auction ends,” but this has no effect on a requirement to determine capacity requires “prior to”—which in commonly accepted English means “before”—the auction starts. See Rehearing Order, 184 FERC ¶ 61,055 at P 58 n.187.
[23] Id. P 74 (emphasis added).
[24] Id. P 74 (citing Midcontinent Indep. Sys Operator, Inc., 161 FERC ¶ 61,020 at P 7 (2017)).
[25] Id. P 55 (citation omitted).
[26] See Dissent at P 6 n.17 (“This . . . ‘single input’ is how much capacity the area needs to buy. Calling it a ‘single input’ is like calling the particular car I am purchasing a ‘single input’ in determining the price I pay for a car.”).
[27] Rehearing Order, 184 FERC ¶ 61,055 at P 58.
[28] See id. (casting aspersions on “the implication that PJM simply clicks a button to generate the final, immutable auction results”).
[29] Id.
[30] Id. P 87.
[31] Id. (citing Constellation Rehearing Request at 10, 18-19); see id. (the majority states that “a change in a single input . . . should not induce reliance that would render the Tariff revisions unjust and unreasonable”); see also Dissent at PP 18-20 (discussing reliance interests in the posted capacity requirement).
[32] Rehearing Order, 184 FERC ¶ 61,055 at P 62 (citing Indep. Mkt. Monitor for PJM v. PJM Interconnection, L.L.C., 178 FERC ¶ 61,121, at P 102 n.231 (2022) (citing 16 U.S.C. § 824d(a))).
[33] Id. P 65 (quoting February 2023 Order, 182 FERC ¶ 61,109 at P 170 (explaining that seller offers are not rates, and the obligations and rights associated with the rate paid by load and received by sellers have not been established until the auction is complete (citing IMM v. PJM Reh’g, 178 FERC ¶ 61,121 at PP 101-02))). In addition, the Commission explained in the February 2023 Order that a change prior to award of capacity supply obligations and the corresponding rights and obligations may not be retroactive does not mean that the Commission would accept any such change as permissible. Id. P 167 n.453 (“The Commission puts great weight on the importance of not disturbing settled expectations,” and will accept a change proposed under these circumstances only if it finds the proposed change just and reasonable and not unduly discriminatory, which includes considering any effects on settled expectations).
[34] Id. P 65 (citing P3 Rehearing Request at 13 (asserting that PJM had applied its BRA procedures and secured irrevocable capacity commitments through the 2024/2025 BRA before it submitted the Section 205 Filing)).
[35] Add this to the other truisms I keep having to repeat: the past is the past; words mean what they mean; the filed rate is the filed rate.
[36] Rehearing Order, 184 FERC ¶ 61,055 at P 66. In support, my colleagues cite Public Utility District No. 1 of Grays Harbor Count Wash. v. IDACORP Inc., 379 F.3d 641, 651 (9th Cir. 2004) which they states “examin[es] the nature of market-based rates in relation to the filed rate doctrine and confirming that the filed rate doctrine applied”, NSTAR Electric & Gas Corporation v. FERC, 481 F.3d 794, 801 (D.C. Cir. 2007), which they state “examin[es] the filed rate and determining that the ’text and structure’ supported a conclusion that certain agreements were not retroactive [because there was express notice in the tariff that the filed rates were subject to revision]” and AEP Appalachian Transmission Company, 164 FERC ¶ 61,180, at P 18 which they quote as stating “[R]etroactive approval of the formula rate change results in a violation of the filed rate doctrine and the prohibition against retroactive ratemaking.” Id. P 66 n.227. These cases all squarely support application of the filed rate doctrine and rejection of the majority’s retroactive ratemaking in this proceeding.
[37] Id. P 54 (citing February 2023 Order, 182 FERC ¶ 61,109 at P 167 (citing PJM, Intra-PJM Tariffs, OATT ATTACHMENT DD.5.4 Reliability Pricing Model Auctions (7.0.0), § 5.4(a)); PJM Capacity Market Manual, § 1.3 Definition and Purpose of the Reliability Pricing Model (“The [BRA] allows for the procurement of resource commitments to satisfy the region’s unforced capacity obligation and allocates the cost of those commitments among the [load-serving entities] through a Locational Reliability Charge.”); PJM, RPM Base Residual Auction FAQs, at 1 (Oct. 10, 2016) (same)).
[38] Rehearing Order, 184 FERC ¶ 61,055 at P 58.
[39] Id. P 61 (emphasis added); see also id. P 64 (“the rate on file is a set of procedures for producing an obligation to supply power and the rate received in exchange for that obligation”).
[40] Id. P 56 (citing PJM, Intra-PJM Tariffs, OATT ATTACHMENT DD., § 5.10 Auction Clearing Requirements (31.0.0), § 5.10(a)).
[41] Id. P 56 n.170(citing PJM, Intra-PJM Tariffs, OATT ATTACHMENT DD., § 5.11 Posting of Information Relevant (17.0.0), §§ 5.11(a)(v), (e)); see also id. PP 58-59 (same).
[42] Id. P 56.
[43] Id. P 75 (citing id. P 58 (discussing the provisions in Attachment DD requiring PJM to apply mitigation and permitting adjustments for Price Responsive Demand and errors in the initial posting of auction results prior to the final determination and posting of clearing prices)).
[44] Id. P 58 & n.181 (citing PJM, Intra-PJM Tariffs, OATT ATTACHMENT DD.5.12 Conduct of RPM Auctions (22.0.0), § 5.12(a)).
[45] Id. P 58 n.183.
[46] Id. (citing PJM Interconnection, L.L.C., 176 FERC ¶ 61,053, at P 14 (2021)).
[47] PJM Interconnection, L.L.C., 176 FERC ¶ 61,053 at P 14 (quoting Transmission Agency of N. Cal. V. FERC , 628 F.3d 538, 547 (D.C. Cir. 2010); Xcel Energy Servs. Inc. v. Am. Transmission Co., LLC, 140 FERC ¶ 61,058, at P 60 (2012)) (emphasis added).
[48] PJM, Intra-PJM Tariffs, OATT, Attach. DD, § 5.10(a)(vi)(B) (emphasis added).
[49] See Dissent at PP 28-30.
[50] Most of Texas is in the ERCOT region, which purposefully takes measures to bypass the jurisdiction (and thus avoid the regulatory interference) of the Federal Energy Regulatory Commission.
[51] Contra Rehearing Order, 184 FERC ¶ 61,055 at P 57.
[52] Id. P 87.
[53] Contra id. P 61 (stating the half-truth that “[t]he filed rate doctrine ensures market participants have notice of what they are going to pay, or be paid, before they take or provide service,” but omitting that this protection also covers rate terms and conditions such as auction procedures).
[54] See id. PP 18-20.
[55] Id. P 53 (citing Okla. Gas & Elec. Co. v. FERC, 11 F.4th 821, 829 (D.C. Cir. 2021) (citing Old Dominion, 892 F.3d 1223, 1230 ); Ark. La. Gas Co. v. Hall, 453 U.S. 571, 578 (1981) (explaining that not even “the Commission itself” has authority to contravene the prospective application of rates); Pub. Utils. Comm’n of Cal. v. FERC, 894 F.2d 1372, 1383 (D.C. Cir. 1990) (“the Commission [does not have] the authority to ignore the law [to achieve] an equitable result”); Clean Energy Associations Rehearing Request at 5; Constellation Rehearing Request at 6; Leeward Rehearing Request at 4, 6-7).
[56] Contra Rehearing Order, 184 FERC ¶ 61,055 at PP 58, 75. And, it should be stated, private parties conducting auctions as they see fit would have to adhere to the rules of the auction as described before the auction took place. To change the rules afterward would be to invite what I would expect to be a successful suit by the aggrieved auction participants under contract law. Why would a private auctioneer be under less of an obligation to adhere to its rules than a public utility?
[57] “As a federal agency, FERC is a ‘creature of statute,’ having ‘no constitutional or common law existence or authority, but only those authorities conferred upon it by Congress.’” Atlantic City Elec. Co. v. FERC, 295 F.3d 1, 8 (D.C. Cir. 2002) (quoting Michigan v. EPA, 268 F.3d 1075, 1081 (D.C. Cir. 2001)) (emphasis in Atlantic City Elec. Co.).
[58] See Dissent at PP 34-36.