By Christen Smith

FERC on Monday released the disputed fuel-cost policy (FCP) at the center of a redacted complaint that PJM’s Independent Market Monitor filed last year against the RTO for not assessing a penalty against a generator (EL19-27).

The commission posted a mostly unredacted version of Tenaska Power Services’ response to the Monitor’s complaint, including the FCP in use Jan. 5-6, 2018, when the alleged violations occurred at the dual-fuel Brandywine Power Facility in Prince George’s County, Md.

The Monitor protested the release after FERC’s notice last month proposing to sunshine the docket, arguing that the confidential filings contain information that would undermine the markets and potentially give other participants insight into how Tenaska structures its energy offers.

FERC was unconvinced by that argument.

“While the fuel-cost policy details how the market seller develops its fuel cost, the fuel-cost policy lacks specific information that would be necessary for other competitors to estimate its actual energy offer,” FERC said Dec. 12 in its order approving the release. “The majority of the relevant cost data at issue here is not competitively sensitive information, but information available from a publicly available source. Moreover, these data are no longer current, as the data relate to a specific event that occurred nearly two years ago on Jan. 6, 2018.”

Tenaska Defends Actions

Tenaska’s unredacted response — originally filed in January — shows the company insisting it didn’t violate its FCP when it used third-party quotes for natural gas prices after no applicable trades became available on the Intercontinental Exchange in time to calculate day-ahead market offers.

The Monitor interpreted the language of Brandywine’s FCP to prohibit Tenaska from making offers in such an event — a choice that would leave the capacity resource facility subject to nonperformance penalties should extreme weather conditions disrupt its fuel oil supply, Tenaska said.

“In short, there is no reasonable basis for limiting PJM’s dispatching options, or for putting generators in a position where they are potentially subject to severe penalties or are unable to recover their costs, simply because the Market Monitor is taking an overly restrictive view of a PJM-approved FCP,” Tenaska said.

Houston-based KMC Thermo owns Brandywine and maintains a contract with Tenaska that allows the company to sell energy and ancillary services in PJM’s markets. KMC authored the disputed FCP using a standardized template available on Monitoring Analytics’ website, approved by PJM and subsequently reviewed by the Monitor before implementation, Tenaska said.

In defense of its actions, the company pointed to a statement from the FCP that says, “under a set of defined market conditions, natural gas costs may be based on independent third-party quotes.”

“At the end of the day, the broad language in the FCP permitting the use of third-party quotes was provided to both the Market Monitor and PJM and, absent any objections by the Market Monitor, was properly accepted by PJM,” Tenaska said. “Regardless of the Market Monitor’s hindsight dissatisfaction, there is no basis for claiming that the FCP must now be read in such a manner that it ‘does not allow the use of offers from ICE or estimates from an affiliate company or from an independent third party.’”

Market Power Precedent

The Monitor, in its initial complaint against Tenaska filed in December 2018, said the case “presents an important precedent for the role of fuel-cost policies in protecting the PJM energy market from market power abuse.”

“If PJM accepts market sellers’ unreasonable after-the-fact arguments to justify developing fuel costs using a method not defined in the fuel-cost policy, fuel-cost policies become meaningless and fail to serve the functions that the commission identified,” the Monitor said.

The Monitor first alerted Tenaska and PJM to the alleged violation in February 2018. Tenaska defended its actions to PJM the following April, with the RTO notifying the Monitor four months later that it would not penalize the company.

PJM asked FERC to dismiss the complaint in January 2019 on the grounds that the Monitor lacked the authority to override the RTO’s interpretation of Tenaska’s FCP. Ultimately, in a separate docket, FERC reaffirmed the Monitor’s right to protest FCPs. (See FERC Upholds Monitor’s Right to Protest Fuel-cost Policies and Another Win for PJM Monitor on Fuel-cost Policies.)

Collusion Concern

The Monitor reiterated its confidentiality concerns to FERC on Nov. 27, after the commission notified it of its intent to release documents in the proceeding.

“Release of such information could damage the efficient and competitive operation of PJM markets by facilitating tacit collusion and disseminating substandard fuel cost policy provisions,” the Monitor wrote. “The release of market sensitive information harms the public interest in maintaining competitive PJM wholesale power markets. That Tenaska Power Services Co. consents does not change the harm to the public interest. … In fact, Tenaska has a conflict of interest because it could benefit from the release of information that harms the public interest by weakening fuel-cost policy standards.”