By Robert Mullin

American Electric Power must provide PJM’s Independent Market Monitor with requested cost data for a gas-fired plant the company owns in West Virginia, FERC ruled Tuesday (EL17-22).

In October 2016, the Monitor asked AEP to furnish the variable operations and maintenance (VOM) cost data the company used to develop its Sept. 1, 2016, cost-based offer for the 505-MW Ceredo generating station. The Monitor said it was seeking the data to determine whether the level of the cost inputs for the plant raised market power concerns in PJM’s energy markets.

Attachment M of PJM’s Tariff authorizes the Monitor to “review upon its own initiative at any time” the incremental costs included in a generator’s offer price cap to ensure the seller is complying with the RTO’s cost development guidelines. The Tariff also permits the Monitor to “make reasonable requests” for additional cost information from a seller after providing “an explanation of the need for the information and the [Monitor’s] inability to acquire the information from alternate sources.”

Attachment M also stipulates the Monitor can initiate legal or regulatory proceedings to compel disclosure, including petitioning FERC, if requested information is not provided within a reasonable amount of time. The Monitor filed its petition in November 2016.

AEP asked FERC to dismiss the Monitor’s petition, arguing it “is not about the exercise of market power or any violation of a Tariff provision or market rule” but instead focused on the Ceredo plant’s VOM calculation, which was then subject to a broader pending dispute before the commission regarding day-ahead offers that vary by hour (ER16-372, et al.).

Rather than probing market power concerns, AEP contended, the Monitor is really seeking to impose a VOM standard that differs from PJM’s current rules. The company noted the Monitor and PJM have taken opposing positions related to the appropriate calculation of VOM costs in the hourly offers docket. If the Monitor wishes to pursue changes to the calculation, it should pursue the FERC-approved process set out in Attachment M, the company argued.

But the Monitor “should not be permitted to make an example of AEP for purposes of advancing its agenda to impose the ‘short run marginal cost’ standard,” the company said.

AEP also argued the Monitor’s request for information was not reasonable given it had neither identified a potential market rule violation nor alleged the company had exercised market power. Furthermore, the burden of producing the request information outweighed any benefit, and the IMM’s effort is an impermissible audit, the company said.

Drift

In its comments to FERC, PJM largely sided with AEP’s position, contending that the Monitor is seeking to compel AEP to provide data supporting the exact type of costs the Monitor has called into question in the hourly offers docket. The ongoing conflict stemming from that proceeding prompted PJM to initiate a stakeholder process over the issue.

“To the extent the IMM would seek to refer AEP to the commission Office of Enforcement while the very matter itself is being contested before the commission on a generic basis, issues could arise as to the relationship of such referrals to the commission’s formal process, pursuant to [Federal Power Act] sections 205 and 206, to take comments on and ultimately rule on proposed tariff submittals based on a formal written record,” PJM said.

The RTO urged FERC to “provide guidance” on whether the Monitor’s request is reasonable “both in type and scope” to avoid future disputes and assure market participants “that the IMM’s authority to make requests for information is not boundless.”

The RTO also asked the commission to require the Monitor “to explain how the information it seeks relates to concerns other than the disagreement it has with how the PJM rules regard short-run marginal costs, adding it has concerns that the Monitor could “drift” into auditing market participants.

Commission Decision

But FERC’s ruling came down solidly in favor of the Monitor, noting that it has “broad authority” to review cost inputs and incremental costs and that its request for Cerredo’s total VOM costs — including identification of costs by category — was reasonable.

The commission also dismissed the concerns of both AEP and PJM regarding the potential conflict with the parallel hourly offers proceeding.

“The pendency of a PJM stakeholder process to clarify certain aspects of the PJM rules governing cost-based offers does not render unreasonable this specific request for cost data. The IMM retains its ongoing authority and responsibility set forth in Attachment M to review sell offers, cost inputs and incremental costs,” the commission said.

“In response to concerns that the IMM may be seeking to impose a cost standard that is inconsistent with the PJM Tariff or current PJM rules, we note that the IMM does not have the authority to enforce the PJM Tariff or PJM rules,” FERC concluded.

The commission directed AEP to provide the Monitor the requested cost information within 15 days of the order.