By Michael Brooks
FERC last week denied American Electric Power’s request for a waiver of nonperformance penalties under PJM’s Capacity Performance construct for delivery year 2019/20.
AEP filed the request in November on behalf of four of its vertically integrated utilities that traditionally participate in PJM’s capacity market as fixed resource requirement entities rather than in the Reliability Pricing Model: Appalachian Power, Kentucky Power, Wheeling Power and Indiana Michigan Power. The company argued that the waiver would make it easier for its utilities to decide whether to remain FRR entities by the March 7 deadline.
“To be clear, if AEP makes the election to remain an FRR entity for the 2019/2020 delivery year … it will comply with the CP rules applicable to FRR entities, including submitting a capacity plan comprised of 80% Capacity Performance qualifying resources,” AEP said. “AEP seeks, simply for the sake of making that election in March 2016, a limited waiver of sections of the Tariff and [Reliability Assurance Agreement] imposing heightened nonperformance charges on FRR entities beginning in the 2019/2020 delivery year.”
AEP pointed to numerous factors making the decision more difficult:
- Capacity Performance has not yet been implemented, and neither PJM nor market participants have any experience with the new rules. (Delivery year 2016/17, the first to include Capacity Performance resources, begins June 1.)
- States in its service territories have yet to file compliance plans in response to EPA’s Clean Power Plan and EPA has not finalized its federal implementation plan, which would be imposed on states that do not file their own plans.
- Several cases before the U.S. Supreme Court regarding federal vs. state jurisdiction over market resources, including demand response. (The court has since ruled on the question of DR, reversing a lower court’s decision voiding FERC’s jurisdiction over DR resources. See Supreme Court Upholds FERC Jurisdiction over Demand Response.)
Last year, the commission approved PJM’s Capacity Performance proposal, including the provision that FRR entities would be subject to the same nonperformance penalties as those participating in the auctions. Under the new construct, the resources in FRR entities’ capacity plans must be at least 80% Capacity Performance. The decision to include FRR entities was opposed by state regulators, who saw it as infringing on state jurisdiction by effectively eliminating states’ choice to opt out of the capacity auction process. (See FERC OKs PJM Capacity Performance: What You Need to Know.)
FERC was not convinced. The uncertainties faced by AEP are not unique to the company, the commission said. It suggested that AEP’s utilities should simply elect to remain as FRR entities for now and reconsider its decision next year after gaining experience under Capacity Performance. “We disagree that AEP’s election requirements are different from other similarly situated resources deciding whether to select the fixed resource requirement alternative or to participate in PJM’s RPM capacity auction,” FERC said.
The commission was also unpersuaded by AEP’s claim that the waiver would not harm any other market participants. Granting the waiver would not be fair to other FRR entities who did face nonperformance penalties, FERC said.
AEP’s request was opposed by PJM, the Independent Market Monitor for PJM, the PJM Power Providers Group and the Electric Power Supply Association. The Indiana Utility Regulatory Commission supported the waiver, arguing that RPM participants had more flexibility than FRR entities, as the former are able to buy out of their future capacity positions in the RTO’s three Incremental Auctions.
The Base Residual Auction for delivery year 2019/20 is scheduled for May 11 to 17.
