FERC on Thursday approved LS Power’s acquisition of two generating facilities in PJM, rejecting the Independent Market Monitor’s request for behavioral mitigation measures to address market power.
The commission approved LS Power’s purchase of the Panda Hummel Station, a 1,096.5-MW natural gas-fired facility in Pennsylvania owned by several individuals and Siemens Financial Services, a subsidiary of Siemens AG (EC20-55).
Separately, the commission approved LS Power’s purchase of Jersey Central Power & Light Co.’s 50% interest in the Yards Creek Pumped Storage Station, a 420-MW facility in New Jersey (EC20-65). The commission had approved LS Power’s purchase of the other 50% share of Yards Creek from PSEG Fossil LLC, a subsidiary of Public Service Enterprise Group, on Sept. 1 (EC20-49).
The Market Monitor argued that the three purchases should be considered together, saying they would increase concentration in some locational energy markets, have a significant impact on PJM’s market for regulation and increase concentration in the capacity market. Concentration in the Eastern Mid-Atlantic Area Council and MAAC locational deliverability areas (LDAs) would drop.
The Monitor said generators with market power can avoid mitigation by using varying markups in their price-based offers and by offering different operating parameters or using different fuels in their price-based and cost-based offers.
Because of that, it said LS Power’s combined cycle and combustion turbine resources should be prohibited from submitting price-based incremental energy offer curves that include both positive and negative markup relative to the cost-based offer. It also said they should be barred from submitting price-based offers with higher economic minimum output megawatt limits than the cost-based offer and required to submit cost-based offers for all available fuel types for dual fuel units.
The Monitor also expressed concern over the concentration in the ownership of fast-start resources, which it said allows sellers with high market shares the ability to use physical operating parameters to exercise market power. It said LS Power should be required to submit operating parameters for its fast-start units that meet PJM’s parameter limits.
The Monitor said pumped hydro units in PJM are not mitigated when their owners fail the three pivotal supplier test, allowing them to strategically withhold economic energy or to produce excess, uneconomic energy. It said the company should be required to follow the day-ahead schedule produced by the PJM hydro optimizer in real-time operations for Yards Creek and Seneca Generation, a 484-MW pumped storage facility in Pennsylvania.
LS Power’s pump storage units should also be prohibited from submitting simultaneous dual offers for both RegA (slow regulation) and RegD (fast regulation) products in PJM because it can result in uneconomic solutions, the Monitor said.
Finally, the Monitor said, LS Power should be required to make capacity offers at no greater than the net avoidable cost rate (ACR) because structural market power in PJM’s capacity market is endemic.
The commission rejected all of the Monitor’s proposed restrictions. It said the Monitor failed to show that the transactions will increase market power and said its proposed restrictions on offers from LS Power’s combined cycle and combustion turbine units “relies on existing perceived limitations of PJM’s market power mitigation.”
FERC also dismissed the Monitor’s proposed mitigation on LS Power’s pumped storage units, saying it was “based on general concerns about certain elements of PJM’s market design that are not specific to the [Yards Creek] transaction. This Section 203 proceeding to evaluate the proposed transaction is not the appropriate venue for raising or addressing general concerns regarding market design.”
The commission said the transactions’ aggregate 1,517 MW is too small to have a material impact on the RTO’s ancillary services markets. It also rejected the Monitor’s call for limiting LS Power’s capacity offers to net ACR, noting that the company’s post-transaction market share in the MAAC LDA is 4.6%.
