Two incumbent transmission owners have called on PJM to take a more active role in policing stakeholder sector selections after the disclosure that LS Power had an affiliate improperly voting in the RTO’s senior committees.

“Generally, we think that PJM’s ruleset is a little lax, and some greater oversight of the process may be warranted,” Sharon Midgley, Exelon’s director of wholesale development, said during the Stakeholder Process Forum on May 26.

Exelon had previously raised questions about the propriety of two LS Power subsidiaries, West Deptford Energy and Riverside Generating, voting at the Jan. 23 Members Committee meeting in support of an LS Power resolution. The resolution, which was approved by the MC, objected to a Tariff attachment filed by the TOs to create a new confidential process to mitigate critical infrastructure on NERC’s CIP-014-2 list. FERC approved the revision in March (ER20-841). (See FERC OKs PJM TOs’ Critical Tx Process.)

During PJM’s Annual Meeting on May 4, Dave Anders, director of stakeholder affairs, said the RTO had determined that the two companies are under common control and that West Deptford has been recategorized as an affiliate of Riverside, which is listed as the “parent” for 15 members in the Generation Owner, TO and Other Supplier sectors.

Midgley said LS Power “had been voting with two affiliates at the MRC and MC for many years.”

An LS Power spokesman said Friday that “when notified of a challenge, LS Power cooperated with PJM to provide supporting information, but some of the additional information requested could not be provided prior to the PJM Annual Meeting, when PJM took action. LS Power has decided not to challenge PJM’s decision.” The company declined to comment further.

Under PJM rules, companies with multiple members are entitled to a vote for each of them at lower committees. But they only get one vote at the MC and Markets and Reliability Committee, where votes are sector weighted.

Those rules meant that Pepco Holdings Inc., which had been a strong voice for consumers within PJM as a member of the Electric Distributor sector, lost its independence and its MRC and MC votes when it was acquired by Exelon in 2016. Exelon Business Services, the parent for Exelon’s 14 affiliates, votes in the TO sector. (See Pepco to Lose its PJM Voice; Consumers Lose Frequent Ally.)

A 2017 study by the University of Pennsylvania’s Kleinman Center for Energy Policy found that generation and transmission owners with multiple affiliates can dominate the voting at PJM’s lower committees on proposed solutions. The power dynamic is reversed during votes at the MRC and MC, the report said, because sector-weighted voting often results in buyer-side stakeholders (the Electric Distributor sector and End-Use Customer sectors) exercising veto power over proposals resulting from the lower committees. (See Can RTO Stakeholders Find Consensus on Big Issues?)

Annual Sector Certification

At the May 26 forum, Midgley noted that PJM members are required to recertify or make changes to their sector assignments annually, with changes announced at the Annual Meeting. After sector changes are announced, stakeholders have 30 days to request PJM to investigate any questionable sector selections.

Midgley said that before this year’s Annual Meeting, Exelon identified a member of American Municipal Power attempting to join the TO sector “when they weren’t qualified to do so.” Midgley declined to identify the company.

AMP votes at the senior committees as a member of the Electric Distributor sector, although it has affiliates in the TO and Other Supplier sectors. “That was certainly concerning to us,” Midgley said.

Under section 8.1.2 of the Operating Agreement, companies considered a “related party” of a generation and transmission cooperative (i.e., one of its distribution cooperative members) or a joint municipal agency (joint agency members) are required to vote in the Electric Distributor sector.

Lisa McAlister, AMP’s general counsel for regulatory affairs, said the company learned of the issue after being contacted by RTO Insider for comment Friday.

“From a conversation this morning with PJM … we learned that one of our members was unaware of the related parties sector limitation and mistakenly requested membership in the TO sector, since they are a transmission owner. PJM contacted our member and the error was rectified,” McAlister said. “PJM administers its governing documents and quickly and correctly did so here. There was nothing nefarious about the member request, and we are uncertain as to Sharon’s concern.”

Rule Changes?

Midgley said PJM should consider whether members should be able to review proposed sector changes before they are implemented and if members challenged on their sector change should be required to vote in their old sector until the challenge is resolved by the RTO. She said existing rules allow members to vote in their new sector until a challenge is resolved, a process that can take up to three months to determine.

Exelon would also like a process to examine incorrect sector selections at any time of the year and to allow members to challenge sector selections rather than just during the annual review process, Midgley said. “We think this is a fertile ground for discussion.”

FirstEnergy’s Jim Benchek said his company also would like PJM to take a greater role in overseeing the process. Benchek said the “know your customer” procedures that came out of the special report on the GreenHat Energy default should be implemented by PJM regarding sector selections.

Anders said the RTO is implementing updates to the member onboarding process and know-your-customer efforts as a result of actions taken by the Financial Risk Mitigation Senior Task Force. Anders said some of the issues deal directly with sector selection, and PJM may formulate a report to present to stakeholders later this summer on some of the changes.

Midgley said she was “happy to hear this is on [PJM’s] radar screen.”

Susan Bruce, representing the PJM Industrial Customer Coalition, said her members would be more comfortable having the RTO rather than stakeholders look at “individual business activities” of members, citing confidentiality issues.

20 Sector Changes

During this year’s Annual Meeting, PJM announced that 20 stakeholders had changed sectors, more than double the number of sector selection changes in recent years. For comparison, five sector changes were announced at the Annual Meeting in 2019, six changes in 2018 and eight in 2017.

PJM spokesman Jeff Shields told RTO Insider that “there doesn’t appear to be much out of the ordinary” in the sector changes.

“These new sector classifications reflect changes in corporate structures or the natural evolution of businesses within PJM,” Shields said. “The decisions to make these changes are up to the individual members, in accordance with the Operating Agreement.”

Several PJM stakeholders who changed sectors in May were contacted to determine what prompted their moves.

FirstEnergy’s The Illuminating Co. moved from the TO sector to the Electric Distributor sector. Jennifer Young, manager of external communications for FirstEnergy, said the sector change reflected that the subsidiary does not own or operate transmission assets.

Young said FirstEnergy’s transmission assets in Ohio are owned by another of the company’s subsidiaries, American Transmission Systems Inc.

“The sector change was not prompted by any changes to asset ownership, but rather just to better reflect the type of operations performed by The Illuminating Co.,” Young said.

The Northern Illinois Municipal Power Agency (NIMPA) moved from the Electric Distributor sector to the Generation Owner sector. Gary Holm, president of NIMPA, said the company has been filing as a Generation Owner since 2018 after filing as an Electric Distributor in 2016 and 2017.

Holm said he received an inquiry from PJM in early May about the sector selection, and he informed the RTO that the company had been filing as a Generation Owner since 2018 and wished to be filed in that sector.

“I cannot comment on any change in sector status because, according to our records, our status has remained constant since 2018,” Holm said.

CPV Three Rivers, an affiliate of CPV Power Holdings, updated its sector from Generation Owner to Other Supplier. Tom Rumsey, CPV’s senior vice president of external and regulatory affairs, said to qualify as a Generation Owner, an entity must have cleared a Base Residual Auction or have signed an interconnection service agreement, which Three Rivers has not done.

Rumsey said that when CPV Three Rivers’ membership application was originally approved, the company was told they were being placed in the Other Supplier sector, but they were later notified by PJM that they had been placed in the Generation Owner sector.

“We both agreed that the project should really be in the Other Supplier sector until the project achieves either of those milestones,” Rumsey said.

Energy Harbor, which emerged from the bankruptcy of FirstEnergy Solutions, switched from the TO to the Generation Owner sector, reflecting its separation from former parent FirstEnergy.