By Christen Smith

FERC on Monday upheld penalties levied against a New Jersey power plant for violating its fuel cost policy, saying the company acted in bad faith and ignored advice from PJM staff and its Market Monitor (ER19-1083).

Competitive Power Ventures (CPV) requested two waivers regarding its decision to bid its Woodbridge Energy Center, a 725-MW combined cycle plant in Middlesex County, into the energy market on Jan. 5, 2018, using its revised — but not yet approved — fuel cost policy. The company wanted FERC to waive the rules and reverse the penalty, given what it called the rare circumstances that led to the changes, or retroactively approve its revised policy.

During a discussion one week prior to the January auction, PJM and the Independent Market Monitor told CPV to submit energy offers based on its existing policy until its revisions were approved — which didn’t happen until Jan. 29.

The company said it ignored the recommendation because it “does not believe it would have been selected to operate given the overall unit offers.” CPV said it was faced with the choice of making a cost-based offer using its approved policy, which no longer reflected its true costs, or using the unapproved but more accurate policy reflecting “in some cases lower” costs.

“CPV argues the purpose of imposing a penalty for submitting an offer inconsistent with an approved fuel cost policy is to prevent the ‘deliberate misrepresentation of fuel costs,’ and CPV had no intent to misrepresent its fuel costs,” the company wrote. ” … This situation will not repeat itself because CPV’s revised fuel cost policy is now approved, and the unique circumstances are unlikely to arise again.”

The Monitor argued granting either of the waivers would undermine the enforcement of fuel cost policies, market power mitigation and customers’ confidence.

“It would undermine the entire process of ensuring accurate cost-based offers and would provide precedent for requests for any participant that wanted to modify its fuel cost policy after-the-fact,” the IMM wrote. “CPV’s waiver requests represent a broad attack on the approved rules that ensure fuel cost policies are verifiable and systematic.”

The commission said it rejected the waiver because CPV failed to show it had acted in good faith.

“CPV does not dispute this timeline and admits it knowingly offered pursuant to the pending revised fuel cost policy, as opposed to its then-effective initial fuel cost policy as required by the Operating Agreement,” the commission wrote, noting CPV never explained why it waited until January to revise its policy or why it took nearly a month to provide a copy of its fuel supply agreement when the Operating Agreement allows just five business days to pass. “We find that these facts do not support a finding that CPV acted in good faith, and its waiver request fails.”

The amount of the penalty assessed on CPV was not disclosed.

A PJM stakeholder-crafted package pending before the Market Implementation Committee would create a “safe harbor” provision for sellers who violate their fuel-cost policies for unforeseen reasons. (See PJM Stakeholders Still Divided on Fuel-cost Policies.)