By Rich Heidorn Jr.

State regulators and other PJM stakeholders last week expressed dismay over the announcement last week that PJM Vice President Denise Foster, head of the RTO’s State and Member Services Division, was resigning and that her unit would be “realign[ed].”

The decision was announced Sept. 9 in a letter to members from interim PJM CEO Susan Riley, who said Foster will resign effective Oct. 31 and that her unit will be reorganized under Associate General Counsel Jen Tribulski.

“With Denise’s decision to step down, we have decided to realign the State and Member Services Division to further demonstrate the organization’s willingness to listen to key stakeholders and provide a more direct line of communication between the executive team, the states and members,” Riley said.

The news was greeted with surprise and sadness.

“I love Denise. Everyone loves Denise,” said Greg Poulos, executive director of Consumer Advocates of the PJM States (CAPS), calling Foster’s departure “very much a surprise.”

“I thought everyone thought highly of Denise. I would say it’s definitely a loss for advocate relations,” Poulos said.

“No, I didn’t see it coming,” said Glen Thomas, a former Pennsylvania regulator and president of the PJM Power Providers Group (P3 Group). “I generally had very good experiences” with Foster’s division, he said. “There are a lot of things we were complaining about and focused on — and this was not one of them.”

“If Denise leaving is the answer, I’d like to know what the question is,” West Virginia Consumer Advocate Jackie Roberts said. “She created PJM’s outreach to members, especially advocates and the states. … There are very few lawyers with a combination of creative interpersonal skills and an understanding of the technical nature of PJM’s business. It’s a really hard thing to do for lawyers. Most of them are not wired that way.”

“I think she’s incredibly intelligent. I think she’s an effective communicator,” said Maryland Public Service Commissioner Michael T. Richard, president of the Organization of PJM States Inc. (OPSI). “PJM and the states were very well served by Denise Foster’s work. … I don’t think we’ve ever felt we’ve not been heard.”

Diminished Voice for Stakeholders?

PJM declined to say who initiated the discussion about Foster’s departure and whether it was voluntary. Foster also declined to comment.

Nor would PJM explain the need to “further demonstrate the organization’s willingness to listen to key stakeholders” or why Riley is making the changes now, while the board is conducting a search for a new CEO.

Under the changes announced Sept. 9, Tribulski will become senior director of member services, with oversight of stakeholder affairs, member relations, and state and member training. Former Ohio regulator Asim Haque, who joined PJM in February, will continue as executive director of strategic policy and external affairs.

Haque and Tribulski will report to Vince Duane, general counsel and senior vice president of law, compliance and external relations. Under the old structure, Haque reported to Foster.

PJM also declined to explain how the changes would result in a “more direct line of communication between the executive team, the states and members.”

Poulos and Roberts said it does exactly the opposite.

“Why was Denise’s role diminished in this reorganization?” Roberts asked. “An important voice is now absent on the executive team. Everything now has to come through Vince. Before, she’d be sitting at the same table. That voice is gone because neither Asim nor Jen are on the executive team. So, I find the role being diminished as really upsetting.”

Poulos said that although CAPS has a “really good relationship” with Haque, Foster’s departure is a loss. “Denise was an executive. From a consumer perspective, we lost a voice on the executive team.”

Did She Jump or Was She Pushed?

PJM’s refusal to provide more details and the fact that Riley announced the organizational changes at the same time as Foster’s resignation led to speculation among stakeholders over whether Foster was being forced out.

“She had to be asked to leave,” one stakeholder said. “She’s committed to the organization, and she’s too young to retire.”

Among stakeholders and PJM staff there was discussion over whether she was leaving to care for her partner, who has a serious illness. There was also a rumor that former CEO Andy Ott is starting his own venture and wants to bring Foster on board.

Poulos said he would like PJM to offer more information on the reason for the changes. “When you don’t give us the information, people are trying to fill in the blanks,” he said.

Roberts acknowledged that it is not common for corporate boards to discuss the reasons behind their personnel decisions.

“However, in this specific case, where PJM has admitted that it needs changes to its culture and how it operates, it would be best to explain how this change is consistent with that,” she said. “Given how well-liked [Denise] is, it would behoove them to give us some explanation.”

Second Stint at PJM

A graduate of Dickinson Law School, Foster worked for three years as an assistant consumer advocate for Pennsylvania before joining PJM as senior counsel in 2000. After five years in that post, she moved to Exelon, where she spent another five years, rising to become director of policy development. She returned to PJM, taking her current post, in 2009.

Foster had been reporting to Andy Ott, then executive vice president of markets, in June 2015 when Ott was named CEO-elect to replace Terry Boston. Foster then began reporting to COO Mike Kormos. (See Boston Retirement Prompts Additional Promotions at PJM.)

When Kormos left PJM in March 2016, his position was not filled, and three months later, Ott announced Duane would head a newly formed Law, Compliance and External Relations Division, with Foster as a direct report.

OPSI President Richard said he was informed of the restructuring shortly before it was announced Sept. 9 but not given an explanation of why PJM was making the changes or how it would affect OPSI and state regulators.

Richard said he was contacted by Stu Widom, manager of regulatory and legislative affairs under Haque, who joined PJM from Calpine in July.

“They told me that Denise was resigning and that they’re making these changes. It seems like they’re moving people around.”

Richard said “there’s been a desire [by OPSI] to have better communication with the [PJM] board” and said he was “very encouraged” by Riley’s comments on the subject.

The OPSI board meets twice yearly with the PJM Board of Managers, Richard said, and will have an “extended meeting” at their next face-to-face in October.

The Real Source of the Friction

Asked whether he had any problems in his dealings with Foster, Richard said, “None whatsoever.”

Richard also said he had not suggested any changes to PJM’s structure. “Generally, they have a good shop in keeping states apprised of what’s happening. … How the organization works I don’t think is key to having a good relationship.”

New Jersey Board of Public Utilities President Joseph L. Fiordaliso, who has been highly critical of PJM for failing to communicate with his state, said he didn’t hold Foster responsible. And he said he knew of no other regulators who had difficulties with her. “Denise and I have always had a cordial relationship,” he said.

At the Mid-Atlantic Conference of Regulatory Utilities Commissioners annual meeting in July 2018, Fiordaliso threatened to pull the state from the RTO, saying “it’s not rocket science to make people feel a part of the process, … Pick up the phone. … That’s all we want.” (See NJ Regulator Threatens to Exit PJM Amid States’ Complaints.)

Regulators’ criticism was frequently directed at Ott.

“I think you would find a number of states that certainly would have the same concerns that [Fiordaliso] has,” Illinois Commerce Commissioner John Rosales, then president of OPSI, said at the same conference. “I’ve made this clear to Andy that the communication could be better.”

Former FERC Commissioner and Pennsylvania regulator Robert Powelson had similar criticism at a PJM issues workshop in D.C. last year. “You talk to certain state commissioners; you talk to consumer advocates; there’s a concern that voices are not being heard,” he said. “I think PJM — Andy has heard me say this — has to do a better job with their state outreach. … A lot of states right now are not happy.”

Ott declined to comment Monday.

Rosales and Pennsylvania Public Utility Commission Vice Chairman Andrew Place, who also spoke at the workshop, agreed with Powelson’s characterization.

“It becomes very frustrating for us because they’ll say they listen, they’ll tell us about the stakeholder process, they’ll tell us everything that they’ve done … and then they’ll just throw it out the door and say, ‘We’re going to go with this anyway,’” Rosales said.

“PJM is swimming and drowning in capacity. … And [PJM’s] capacity repricing [proposal] only worsens that,” Place said. (See Powelson: ‘Erosion of Confidence’ in Stakeholder Process.)

Place was referring to PJM’s April 2018 “jump ball” filing that asked FERC to choose between RTO staff’s capacity repricing proposal or the Independent Market Monitor’s plan to extend the minimum offer price rule to existing resources in addition to new entries (ER18-1314). (See PJM Capacity Proposals Widely Panned.) PJM said changes were needed to insulate its capacity market from state-subsidized generation, and FERC agreed, ruling the RTO’s current rules not just and reasonable in June 2018. (See related story, Glick Recusal May Mean No MOPR Ruling Before December.)

PJM further angered states with its energy price formation proposal, which the RTO filed unilaterally in March after a yearlong discussion with stakeholders produced no consensus. In a letter to stakeholders in December, PJM Chairman Ake Almgren had pledged that a “comprehensive” energy price formation proposal would include six elements, including a transitional offset in the capacity market to prevent ratepayers from being overcharged because of increased energy and ancillary services revenue.

But the proposal PJM ultimately filed lacked the transition, OPSI complained, meaning consumers would be overcharged for seven years, from implementation in June 2020 to completion of energy and operating reserve revenue increases being fully reflected in capacity prices in 2027.

PJM’s proposal, which was backed by utilities, independent power producers and wind, solar and nuclear generators, is pending. (See Gens Back PJM Pricing Proposal; Md., IMM Oppose.)

OPSI also has repeatedly clashed with PJM’s management and board over the independence of the Monitor. The Monitor’s independence has been a recurring source of contention since IMM Joe Bowring accused then CEO Phil Harris at a FERC technical conference in 2007 of attempting to muzzle it, an allegation that ultimately led to Harris’ resignation.

Improvements Seen

In an interview on Friday, Fiordaliso said PJM’s communication with the state has improved with the addition of Haque in February and the July 1 appointment of Riley — a member of the board since 2005 — as interim CEO.

“I think they’re making a concerted effort to keep a line of communication open with the states,” he said. Riley is “a very outgoing person and a person who is more than willing to communicate and keep the member states up to date on things. My encounters with her thus far have been beyond pleasant.”

Haque was the chair of the Public Utilities Commission of Ohio when he took a newly created position as PJM’s executive director of strategic policy and external affairs. PJM said Haque would report to Foster, who in turn reported to Duane.

“It’s always encouraging when you have someone you know well being brought into the inner circle,” Maryland’s Richard said of Haque. “He’s a known entity and has a great deal of credibility [with the states]. He understands the issues of importance to the state. He’s very easy to reach.”

“I think everyone’s really happy with him. He’s a breath of fresh air,” West Virginia’s Roberts said. “He’s objective, and he’s openminded, and he’s willing to hear different views and try to understand those views. He seems open to new and novel solutions to the problems that PJM has had.

“I don’t see Asim coming in as any kind of force-out” of Foster, she added.

Culture Problem?

One stakeholder who declined to be identified said that Riley is attempting to address a “cultural problem” identified in the report on the GreenHat Energy default: “the idea that we’ve got it [under control], we don’t have to tell the stakeholders anything.”

A report by independent consultants on the fiasco concluded that “an unwarranted air of confidence facilitated GreenHat’s ability to grow” and recommended PJM “create a culture and environment that encourages staff to challenge internal assertions and test their own assumptions.”

The stakeholder said the culture stems from PJM’s early years as an RTO under Harris, who “controlled the board” and saw stakeholders as “an irritant and a hindrance.”

The “pendulum swung” toward greater stakeholder engagement under CEO Terry Boston, who “understood the need to be member-driven,” the stakeholder said. (See Retiring PJM CEO Boston Lauded for Efficiency Improvements, Management Style.)

But under Ott, who was mentored by Harris, “it switched back to what it was under Phil,” the stakeholder said.

“These are the type of crux issues that lead to mistakes like GreenHat. Sue Riley is really committed to improving the culture.”

Riley has said little publicly since becoming interim CEO. Earlier this month, however, she took steps to defuse the latest clash between PJM and the Monitor. In January, PJM made a FERC filing arguing that the Monitor should not be permitted to file complaints under Federal Power Act Section 206 without a change in the RTO’s governance structure (EL19-27). On Sept. 5, PJM indicated it was abandoning that request, with Riley and Bowring issuing a statement that reaffirmed their “relationship of mutual respect.” (See PJM Content with IMM Role after Fuel-cost Policy Ruling.)

Threading the Needle

Some observers worry that PJM’s board is not attuned to the real reasons for the RTO’s often fractious relations with its stakeholders and wonder what that means for the search for a new CEO.

In July, state consumer advocates and regulators said the new CEO should support state environmental goals to address climate change and a stronger partnership with the Monitor. (See States, Regulators: Look Outside PJM for Next CEO.)

But East Kentucky Power Cooperative COO Don Mosier said the search committee should not overlook internal candidates and the “successes of the PJM leadership team.”

“The new CEO must have a vision for threading the needle between state and federal authority on market issues, while maintaining a strong rapport with both authorities, the Market Monitor and PJM members, taking into account what is best for the majority of market participants,” Mosier said.

PJM spokeswoman Susan Buehler said Monday that the RTO’s search committee is scheduling interviews with both internal and external candidates. “To my knowledge, [Riley] is not” a candidate, Buehler said.

One stakeholder who thinks Riley could end up the permanent CEO said she will “either be the best CEO or the worst CEO.”

“Frankly, I think the board in its ignorance thought the commissioners’ and advocates’ and other stakeholders’ objections to what PJM’s doing [was because of] a lack of a relationship with them. The real problem was Andy wouldn’t do it any other way than his way, and Vince was driving the car for him,” the stakeholder said. “The board’s culpable in all this GreenHat stuff they’re trying to fix now. They believed senior management and didn’t ask questions.

“I’m really concerned that the PJM board has mistaken a problem with their relationship with certain stakeholders with Denise’s oversight of that. Because they’re two different things. … As engaging as she is, that’s not going to stop people from being disappointed in what PJM is doing.”

Christen Smith contributed to this article.