By Suzanne Herel

FERC last week dismissed a complaint by Southern Maryland Electric Cooperative alleging that it has the right to a Capacity Performance credit from J.P. Morgan Ventures Energy Corp., saying the contractual dispute would be better resolved by a court (EL16-35).

In 2011, the parties executed a capacity purchase and day-ahead heat rate call option on physical electricity for the Brandywine Generation Facility from Jan. 1, 2014, through Dec. 31, 2021. The power purchase agreement provides SMECO a 225-MW Reliability Pricing Model capacity credit in exchange for a monthly payment to JPMVEC.

SMECO said that it did not believe JPMVEC intended to transfer the credit under PJM’s new Capacity Performance model and instead treat the product as base capacity.

“Determination of the dispute between SMECO and JPMVEC depends upon whether the parties contracted to sell and purchase capacity specifically from the Brandywine facility with the intent to allow SMECO to meet its RPM obligation, as SMECO claims, or whether the parties contracted for the transfer of any type of capacity from any source without regard to SMECO’s RPM obligation, as JPMVEC argues,” the commission ruled in declining to exercise primary jurisdiction in the case. “The outcome of this matter appears to turn on interpretation of the parties’ intentions and construction of the relevant clauses in the Brandywine PPA rather than any determination requiring our special expertise.”

Commissioner Cheryl LaFleur dissented from the opinion, saying the decision “effectively consigns SMECO to a potentially lengthy and costly court proceeding to resolve what is, in my view, a clear and easily resolved contractual interpretation that is squarely within the commission’s jurisdiction and expertise.”

Not only would she have supported exercising primary jurisdiction in the matter, she said, she would “find that the parties’ contract requires JPMVEC to provide SMECO with capacity credits to meet SMECO’s obligations under the RPM.”

In addition, LaFleur said, FERC erred by “failing to frame the dispute between these two parties in the proper context of the broader transition underway in the PJM capacity market.”

She urged the commission to exercise primary jurisdiction over future Capacity Performance issues to ensure consistent interpretation of common contractual language and avoid the unintended undermining of Capacity Performance reforms.