By Christen Smith

FERC last week reaffirmed the authority of PJM’s Independent Market Monitor to file complaints against the RTO over fuel-cost policies, dismissing concerns about hypothetical conflicts of interest and overly broad interpretations of the Tariff (ER16-372).

“As the commission found, the review of fuel-cost policies directly relates to the Market Monitor’s ability to review offers or cost inputs to ensure they are reasonable in the event market power mitigation is required,” FERC wrote. “The filing of a complaint on a market seller’s fuel-cost policy is a method of initiating a regulatory proceeding and therefore falls within the language of this provision.”

The fuel-cost policies that generators submit showing how they calculated their cost-based offers have been a repeated source of conflict between PJM and its Monitor.

In April, FERC shot down PJM’s attempt to prevent the Monitor from protesting policies other than market seller offers in capacity auctions, rejecting what the commission called the RTO’s “narrow” reading of Attachment M. (See FERC Upholds PJM Monitor’s Right to Protest Fuel-cost Policies.)

In its request for rehearing of the April order, PJM argued that Attachment M of the Tariff permits the Monitor to file complaints against market sellers over fuel-cost policy violations, but not against the RTO itself. It also said that its Board of Managers’ oversight of the Monitor’s budget creates a conflict of interest, an argument that FERC said it found “unconvincing.”

“PJM has failed to explain why the PJM board can fulfill its responsibilities in circumstances in which the Market Monitor makes filings with the commission, such as protests to PJM filings, but cannot do so with respect to complaints regarding fuel-cost policies,” the commission wrote. “In any event, PJM’s assertion of the potential for a hypothetical complaint to create a conflict of interest for the PJM board does not alter our interpretation of the Tariff, which is based on the text of the Tariff read in conjunction with other provisions addressing the role of the Market Monitor.”

The proceeding dates back nearly three years to when the Monitor filed a protest saying a proposed Tariff revision by the RTO was an attempt to usurp its authority to regulate the policies. (See PJM Attempting to Usurp Market Mitigation Role, Monitor Says.)

FERC sided with PJM on that dispute, saying the changes didn’t alter the fundamental roles of the RTO and the Monitor, “but rather codify the role of the IMM in advising and providing input to PJM in its determination of whether to approve a fuel-cost policy submitted by a market seller.”

Still, it agreed that the Monitor didn’t violate the Tariff by complaining and said such disputes between the two should only be resolved through the commission and its administrative law judges, not the Office of Enforcement as PJM’s Operating Agreement requires. In last week’s ruling, FERC ordered the RTO to submit a compliance filing within 30 days removing this language from the OA.

FERC also denied a rehearing request from the Electric Power Supply Association over the commission’s decision to allow PJM to assess penalties for a minimum of one day for failure to comply with its fuel-cost policy.

EPSA argued that the rule results in retroactive penalty circumstances — an issue that FERC contends was resolved when PJM submitted an amendment in July 2017 that clarified the penalty will be applied on a prospective basis after the market seller is notified.

“Although EPSA styles its pleading as a request for rehearing of the April 2019 order, its challenge to the commission’s acceptance of the penalty structure is, in essence, a late-filed request for rehearing of the February 2017 order and is thus statutorily barred,” FERC wrote.