By Michael Brooks

The joint operating agreement between PJM and Duke Energy Progress should be revised to reflect the 2012 merger between Duke Energy and Progress Energy and eliminate Progress’ favored treatment on interchange pricing, according to the RTO’s Independent Market Monitor.

The Monitor filed a protest Oct. 24 urging the Federal Energy Regulatory Commission to reject PJM’s revisions to the agreement. The Monitor said PJM should terminate the existing agreement and negotiate a new one.

“The merger plainly creates material changes to the circumstances reflected in the PJM-Duke Progress JOA, yet there is no indication that any negotiation has occurred,” the Monitor said. “The assumptions reflected in the current PJM-Duke Progress JOA no longer apply, and the proposed revisions are not an adequate response.”

Progress Energy Carolinas (PEC) — now Duke Energy Progress — which serves the western portion of North Carolina, signed the JOA with PJM in 2005.

With the merger, Duke assumed control of most of North Carolina’s utility business, as its subsidiary Duke Energy Carolinas (DEC) already covered the state’s eastern portion. The two utilities signed a joint dispatch agreement as part of the merger.

This creates a conflict with PJM’s Operating Agreement, according to the Monitor.

PJM has a single pricing point for all transactions south of its territory that establishes default prices between the RTO and other balancing authorities. In 2010, however, PJM and Progress revised their JOA to allow for special dynamic pricing between them. PJM’s OA (Section 2.6A) allows dynamic pricing with a neighboring balancing authority as long the latter does not trade energy with other neighboring balancing authorities. The single pricing point was established to prevent market participants from gaming price differences between interface pricing points by scheduling transactions that do not reflect true system flows, the Monitor said.

“Because the [joint dispatch agreement] provides for joint optimization between the Duke Progress and DEC balancing authorities, there is, by definition, a continuous flow of energy transactions between the balancing authorities,” the Monitor said.

The Monitor urged FERC to direct PJM and Duke to create a new JOA and, in the meantime, apply OA rules concerning joint dispatch to transactions with the two utilities.

The Monitor’s complaint reprises an argument it has been making since at least 2010, when it criticized PJM for “singling out PEC for special treatment at the expense of movement forward to create a comprehensive approach to seams at PJM’s southern boundary.” (ER10-713) (See FERC Rebuff of Duke Could Mean Closer Ties with PJM.)

PJM’s revised JOA updates the name of Progress Energy Carolinas and adds an appendix that provides uniform transmission line identifiers for both parties, in compliance with a North American Electric Reliability Corp. reliability standard (TOP-002-2.1b, R18).