Ratepayer advocates challenged the PJM Board of Managers on Wednesday to take action against two stakeholders accused of bribing legislators in Illinois and Ohio, urging them demonstrate their independence from two of the RTO’s biggest members.
West Virginia Consumer Advocate Jackie Roberts questioned board members at the Public Interest and Environmental Organizations User Group meeting, asking what PJM plans to do about FirstEnergy and Exelon and the criminal charges and allegations leveled against them.
Exelon subsidiary Commonwealth Edison agreed to pay a $200 million fine to settle allegations that it bribed Illinois House Speaker Michael Madigan (D) in return for legislation that increased the company’s earnings and bailed out its money-losing nuclear plant.
FirstEnergy was alleged to have spent $61 million in bribes and “dark money” campaign contributions and advertising to elect Ohio House Speaker Larry Householder (R) and his associates, who supported $1.5 billion in subsidies for the company’s struggling nuclear plants. (See ComEd to Pay $200 Million in Bribery Scheme and Feds: FE Paid $61 Million in Bribes to Win Nuke Subsidy.)
Although federal prosecutors said most of the alleged bribes were paid by FirstEnergy Solutions (FES), FirstEnergy CEO Charles Jones has said that the parent company contributed only one-quarter of the $61 million. FirstEnergy gave up ownership of the nuclear plants when FES emerged from bankruptcy in February as a new company, Energy Harbor. (See FirstEnergy, AEP CEOs Deny Wrongdoing.)
Roberts said the incidents went beyond mere wrongdoing, resulting in outcomes that “completely wreaked havoc” with the PJM markets.
She said the current stakeholder discussions about resource adequacy could mostly be attributed to state legislation resulting from the bribery scandals.
“This is something that has a direct impact on PJM and its members, and PJM really needs to look into this,” Roberts said. “Any member charged with this kind of wrongdoing should be assessed and investigated by PJM. And if there’s clear wrongdoing affecting PJM’s operations, there should be repercussions for that.”
As the two scandals started unfolding this summer, Roberts said she was reminded of when GreenHat Energy in 2018 defaulted on 890 million MWh of FTRs and racked up hundreds of millions of dollars in losses.
Roberts said PJM executives have indicated to stakeholders they didn’t know GreenHat executives were “bad players” before doing business in the RTO, and that having knowledge of their past would have impacted how the RTO handled the situation from the onset. (See Report: ‘Naive’ PJM Underestimated GreenHat Risks.)
“Now you know some members are bad players, and we need to address it and see what to do about it,” Roberts said. “You can’t just ignore it. You need to take leadership on this issue.”
Roberts said she hoped her comments could be used to start a constructive conversation with the PJM board that will “lead to positive outcomes” for all stakeholders. An open dialogue could lead to a discussion of independence, balance of power and transparency in the stakeholder process, she said.
She and other advocates agree with the commitment to independence by PJM and its board, she said. Her goal was to start a conversation about the complexity of independence in PJM’s stakeholder process.
“PJM’s expertise in markets and transmission planning is an asset to the process,” Roberts said.
‘Reprehensible Conduct’
Tyson Slocum, Public Citizen’s energy program director, eschewed giving a presentation at Wednesday’s meeting and instead sought dialogue with the board members.
Public Citizen and the Union of Concerned Scientists (UCS) sent a letter earlier this month to PJM board Chair Ake Almgren calling on the board to censure Exelon for its dealings in Illinois. The request called for suspending Exelon’s rights in the stakeholder process for three years.
“PJM has made expressly clear that legislation that is the subject of Exelon’s bribery scheme directly impacted PJM market design,” the letter said. “The establishment of zero-emission credits in Illinois legislation is repeatedly cited by PJM as an initiating cause for PJM to pursue the extension of the minimum offer price rule (MOPR) to existing generation [and] policy-supported generation.”
No one from FirstEnergy or Exelon spoke during the meeting with the board, but Exelon on Sept. 18 urged the board to take no action in response to the letter from Public Citizen and UCS, saying it “contains factual errors, misleading characterizations, and a misunderstanding of PJM’s Operating Agreement.”
“Exelon and all of its affiliates are deeply remorseful for the events that transpired at ComEd,” wrote Kathleen Barrón senior vice president of government and regulatory affairs and public policy. “… The PJM board should and must operate in accordance with the PJM governing agreements, which provide no basis for board action or authorization for the requested remedies.”
Slocum said Exelon, in its deferred prosecution agreement with the Department of Justice, admitted to engaging in “reprehensible conduct.” (See How ComEd Got its Way with Ill. Legislature.) He said PJM board members have “pledged their independence” but have remained silent on the issues surrounding Exelon.
“The company admitted that it engaged in a decade-long bribery scandal that has significantly impacted policies and operations of the PJM markets and Tariff design,” Slocum said. “We need to hear from the PJM board how you’re going to deal with such reprehensible conduct by a member.”
Almgren said the board has met to discuss Slocum’s letter after it was sent to the RTO on Sept. 14 and plans to further discuss the matter. He said the board will officially respond to the letter but didn’t give an exact timeline.
“The board is dismayed regarding the conduct of ComEd as set forth in the deferred prosecution agreement’s statement of facts,” Almgren said. “These activities contravene our values as found in our Code of Conduct.”
Almgren said the board recognizes its role in ensuring no member “exercises undue influence” over the operations of PJM and that the RTO is “very keen” on staying independent and continuing to take actions to protect markets.
Slocum asked if the board would agree to a public posting of the synopsis of its private meetings, similar to the posted proceedings of the Federal Reserve’s Board of Governors. “Public disclosure always improves market functions, and I think that applies to the operations of the Board of Managers,” he said.
PJM CEO Manu Asthana said the RTO values transparency and encouraged Slocum to present a specific proposal on meeting transparency for the board to examine. He also said he respects the views of the advocates and that listening to stakeholders was one of his most important goals upon taking the helm at PJM, citing the fact that the RTO held nine different listening sessions for members before its FERC filing in the MOPR docket.
The listening sessions help inform PJM’s perspectives on the MOPR issue, Asthana said.
“Obviously we applied our independent judgment, but we are putting a lot of time into listening, and we’re not getting it right 100% of the time,” Asthana said.
