By Rich Heidorn Jr.
Public Service Enterprise Group’s energy trading arm has agreed to pay $39.4 million to settle an investigation into violations of PJM’s energy market bidding rules over 9 years (IN18-4).
The commission’s April 25 order approving a consent agreement with PSEG Energy Resources & Trade, which markets the output of PSEG Power’s generation fleet, both praised and criticized the company’s actions in the matter.
The non-public investigation was disclosed earlier this month, when FERC’s Office of Enforcement issued a Notice of Alleged Violations charging PSEG with violating PJM’s Tariff and FERC regulations by submitting incorrect cost-based bids into PJM’s daily energy market between 2005 and 2014, when the company self-reported the violations to the commission. (See FERC Investigation Shows PSEG Violated PJM Bidding Rules.)
PSEG agreed to a civil penalty of $8 million and to pay PJM disgorgement of $26.9 million and $4.5 million interest. It also will submit annual reports to ensure future compliance. The company did not admit any wrongdoing.
In April 2014, PSEG told FERC of inaccuracies in the cost-based offers for some of its fossil units due to the inclusion of incorrect environmental adders for the prior two years. The company later provided the commission self-reports that identified incorrect cost-based offers dating to 2005.
Among PSEG’s “errors,” as FERC described them in its order approving the consent agreement, were: including CO2 adders in its cost-based offers after New Jersey withdrew from the Regional Greenhouse Gas Initiative; including seasonal NOx adders in offers outside the NOx compliance season; incorrectly stating the amounts of fuel required for minimum operations at Unit 2 of its 1229-MW natural gas and kerosene Bergen Generating Station; and providing inaccurate heat rate data for some units.
The commission said it decided on the $8 million penalty considering “that PSEG self-reported the violations, cooperated fully and comprehensively throughout the investigation and has no prior history of violations. The remedy also reflects that although PSEG had a compliance program in place, it was not sufficiently robust to detect or prevent the violations.”
“In addition to responding to Enforcement’s data requests, PSEG provided extensive data, conducted extensive data analyses regarding the cost-based offers and demonstrated exemplary cooperation during the investigation,” the commission added.
But the order also noted, “PSEG’s compliance program and existing compliance procedures did not detect the errors in the cost-based components of the offers, in some cases, for multiple years.”
After the self-report, FERC said PSEG adopted new procedures requiring that daily offers be double-checked for accuracy and revised its fuel policy “to more clearly articulate the calculation of cost-based offers in accordance with PJM’s rules.”
The company also added staff to its internal audit department and hired an independent audit company to help develop additional compliance procedures.
It also made unspecified personnel changes in the trading and asset optimization groups “to impose additional accountability and focus attention on compliance issues,” FERC said.
FERC directed PJM to disburse the disgorgement and interest pro rata to affected market participants.
