Additional generator companies have filed complaints with FERC alleging that PJM violated its governing documents during its response to the December 2022 winter storm in its assigning of nonperformance penalties.

Independent power producer Nautilus Power filed one of the first complaints March 30, arguing that PJM did not follow the correct process for initiating an emergency, depriving gas generators of notice that they could be called on and to procure fuel. (See IPP Asks FERC to Dismiss PJM Performance Penalties over Elliott Outages.)

Nautilus’ filing was followed by several more in the following week, alleging that PJM violated its tariff by exporting energy during emergency conditions, failing protocols for declaring an emergency and penalizing generators not scheduled.

ComEd Generators: Region was not in Emergency

Several independent power producers within the ComEd zone filed a joint complaint arguing that conditions in the region throughout most of the performance assessment interval (PAI) during the storm, also known as Winter Storm Elliott, did not warrant emergency conditions and that the penalties faced by generators there should be eliminated (EL23-54).

The companies argued that PJM was exporting as much as 6,000 MW to the Tennessee Valley Authority and the SERC Reliability footprint during emergency conditions, in violation of the Operating Agreement and suggesting that emergency procedures were not warranted. It argued that there was not a capacity shortage by pointing out that LMPs were below the rest of PJM throughout much of the assessment intervals.

“Simply put, no emergency conditions existed in the ComEd zone: There was no capacity shortage in the ComEd zone, prices were low, and constraints precluded the generation in the ComEd zone from helping the rest of PJM and, if anything, signaled to PJM to back down in-zone generation. Further, PJM committed several tariff, OA and manual violations, such as failing to curtail exports,” the IPPs said.

Prior to the declaration of the Dec. 24 PAI around 4:30 a.m., PJM’s net exports to TVA and SERC were approximately 5,000 MW. Exports had fallen to under 1,000 MW by 6 a.m. but began to increase three hours later and had reached 4,000 MW by noon.

Drawing off an affidavit supplied by Scott Harvey of FTI Consulting, the complaint said that reserve shortages “disappeared” when exports were cut and argued that that shows they were the driver of the shortages leading to the emergency declaration.

“Dr. Harvey concludes that the effect of the increases in exports on PJM prices and reserve levels suggests that emergency actions in other regions of PJM may have been needed (though not needed in ComEd) precisely because of the exports that were supposed to be curtailed before emergency actions were invoked,” the IPPs said.

Solar Developer Argues Penalties Run Contrary to Purpose

SunEnergy1, which operates about 1 GW of solar generation, filed a complaint arguing that the nonperformance charges and the overall Capacity Performance construct are unjust and unreasonable by creating penalties that do not incentivize a change in behavior for solar units that have no capability to operate at night. The company said that 87% of the charges it has been assigned were accrued during evening hours (EL23-58).

The company argued that both PJM and FERC discussed the need for incentives for capacity resources to invest in performance during emergencies as one of the justifications for creating CP following the 2013/14 polar vortex. PJM’s effective load-carrying capability (ELCC) structure already accounts for solar resources’ output fluctuations in class accreditations, the company argued, and imposing penalties could drive resources out of the capacity market.

Because PJM staff are aware of and plans around the limitations of solar, the company argued that nighttime operations should be treated similarly to planned outages.

“How does it further the goals of PJM’s capacity market, and how is it just and reasonable, to excessively penalize such resource for nonperformance during times when such resource is physically incapable of performing ― particularly when PJM’s operators know such resource cannot operate during such times, and do not rely upon it to operate during such times in order to maintain the reliability of the bulk power system?” SunEnergy1 said.

The complaint asks FERC to “direct PJM to explore more holistic and comprehensive reforms to its capacity market design to specifically ensure that the risks of participating in PJM’s capacity market do not materially outweigh revenue opportunities for solar resources in PJM’s capacity market moving forward.”

Generator Coalition Files Complaint

Several companies representing 27,500 MW of generation jointly filing as the Coalition of PJM Capacity Resources argued that PJM should be required to determine which resources would not have been dispatched had the RTO curtailed non-firm exports during the PAI and excuse them from penalties. The group also recommended that FERC require PJM to recalculate the balancing ratio to include all exports and to use those figures to reassess penalties (EL23-55).

The coalition said PJM’s low load forecast resulted in insufficient capacity being procured, which the RTO was slow to make up for through reliability assessment and commitment (RAC) runs that did not secure any systemwide capacity on Dec. 22 and less than a third of the forecast error the next day.

It also argued that PJM continued exporting throughout emergency declarations, constituting a tariff violation and effectively holding generators to the capacity needs of outside regions.

“To be clear, complainants do not object to PJM providing assistance to neighboring regions when that assistance is needed and when PJM has available resources to assist (as PJM apparently did during Winter Storm Elliott),” the coalition said. “Rather, complainants object to PJM declaring emergency operations and imposing penalties on PJM resources to support other systems.”

Talen Generators not Dispatched

In addition to joining the coalition’s complaint, Talen Energy filed its own, arguing that PJM is seeking to improperly assign penalties against several of its generators that were available to operate but were not dispatched (EL23-56).

“These generators had available staffing, access to fuel and start times that would have allowed them to provide power during the Dec. 23 and Dec. 24 PAIs had PJM scheduled them in a timely manner,” Talen said. “Assessing nonperformance charges against the Talen PJM generators in this circumstance would amount to penalizing them for following PJM’s instruction, which was to remain ready to operate if dispatched.”

Talen argued that generators are normally excused from CP charges if they are not dispatched or are scheduled down by PJM, with an exemption to allow penalties for units not scheduled solely based on their operating parameter limitations or market-based offers that are higher than their cost-based offers. This was not the case for at least two of the company’s generators, as similarly configured facilities in its fleet were dispatched, it said.

“Simply put, PJM made a judgment call, or perhaps even a mistake, at the time of the PAIs and did not dispatch Martins Creek,” Talen said referring to its 1,719 MW gas-fired generator. “PJM must take responsibility for its own management of the grid during Winter Storm Elliott — including its decision not to dispatch the Martins Creek units.”

Lincoln Power Declares Bankruptcy Because of Penalties

Delaware-based Lincoln Power declared bankruptcy on March 31 because of about $39 million in nonperformance penalties assigned to two of its combustion turbine generators: the 480-MW Elgin Plant and the 330-MW Rocky Road Plant, both in Illinois. Like Nautilus, the company is an affiliate of Cogentrix Energy Power Management.

In an affidavit filed with the U.S. Bankruptcy Court in Delaware, Chief Restructuring Officer Justin Pugh stated that PJM has been withholding $350,000 weekly from the company’s revenues and demanding about $2 million in collateral. While it has been disputing the validity of the penalties with PJM, Pugh told the court that the company cannot continue to operate through the withholdings.

Lincoln has been experiencing a liquidity crunch because of low clearing prices in recent capacity auctions, Pugh said, but the company likely would have otherwise remained profitable.

“While such liquidity constraints are substantial, the debtors could have sustained their current debt load had their business not been subjected to numerous issues caused by a severe winter storm that struck and inflicted record cold temperatures across most of the United States, from Dec. 22, 2022, through Dec. 27, 2022,” he said.