A proposed settlement to reduce generators’ nonperformance penalties for the December 2022 winter storm received support Thursday from stakeholders, who urged FERC to approve it to reduce legal uncertainty (EL23-53, et al.).

A pair of Pennsylvania coal generators filed what is so far the lone protest against the settlement, which would reduce the penalties for nonperformance by nearly 32%. (See PJM OKs 32% Cut in Elliott Penalties in Proposed Settlement.)

In their objection, Chief Keystone Power and Chief Conemaugh Power argued that reducing the total penalties assessed against generators that did not meet their capacity obligations during the Winter Storm Elliott performance assessment intervals (PAIs) would deprive generators that invested in maintenance and on-site fuel of the Capacity Performance bonus payments they expected to receive under the tariff.

Under the CP construct, the $1.8 billion in penalties would be distributed to generators that exceeded their expected performance during the emergency conditions. The settlement would reduce the penalties to $1.23 billion by requiring bonus payment recipients, including the Chief companies, to return a portion of their share and resolve the 15 complaints generators filed against PJM related to the charges.

The Chief companies countered the argument made in several complaints that PJM had not followed the required steps before initiating a PAI by stating that market participants are able to access equal or superior weather and load forecasts than those that RTO dispatchers rely on and therefore should have been prepared for a potential emergency.

“Here is a settlement negotiated by PJM and a group of generating companies that failed to meet their obligations during a severe weather emergency because, among other things, they decided not to conduct necessary maintenance or procure firm gas deliveries in advance of the emergency and so were unable to generate when non-firm fuel was unavailable,” the companies argued. “The fact that many of the nonperforming companies obtained fuel but failed to operate due to mechanical failures raises questions about maintenance and diligence in winterizing programs.”

They also argue that by resolving the complaints against PJM without a full investigation, the commission might foreclose on an opportunity to learn of any faults in the RTO’s markets or generation fleet that could be improved on before they can disrupt system operations again.

If the commission were to approve the settlement, the Chief companies called for it to make the settlement binding only for those companies that were parties to the agreement.

“PJM proposes that approval of the settlement will relieve it from ‘all claims’ for its actions or inactions before, during and after the Winter Storm Elliott. That ‘release’ in conjunction with other settlement provisions is intended to preclude PJM from having to pay to performing companies the payments that are due under the tariff. While that may be appropriate for those who sign the settlement agreement, it must not apply to those that prefer to exercise their legal rights.”

Support

In its comments supporting the settlement, the Coalition of PJM Capacity Resources — a group of generators that is party to the agreement — argued that it would avoid disrupting the RTO’s markets with “unprecedented” penalties and protracted litigation that was likely to result from the complaints while still providing bonus payments to resources that had earned them.

The group said that many of the complainants sought a larger reduction, or complete rejection, of their CP penalties but agreed that avoiding years of uncertainty around the allocation of penalties and bonuses was preferable.

“If approved, this settlement will allow the parties to the Winter Storm Elliott complaints — PJM, the complainants and intervenors — to avoid the risks and burdens of time-consuming litigation so that PJM and market participants can focus their attention on capacity market reforms, maintaining reliability and encouraging investments in the PJM region,” the coalition said.

It noted that 81 parties had signed on to the agreement with their support, with “many more” indicating that they don’t oppose it, showing a belief among market participants that it is just and reasonable.

“Although the settlement was not agreed upon by all participants to the settlement negotiations, the settling parties include a broad array of market participants, including net nonperformance charge payors, net performance payment recipients, renewable resources, thermal generators, and small and large PJM market participants. This broad support across market participants is indicative that the settlement as a whole is just and reasonable,” the coalition wrote.

Several companies submitted comments stating that they do not contest the settlement in the hope that it can provide market participants with more certainty about their bonus and penalty standings.

In its comments, Avangrid said its preferred outcome would be the implementation of the full penalties and bonus payments outlined in PJM’s tariff, but it sees benefits in market certainty provided by the settlement.

“The primary driver for Avangrid choosing to be a non-contesting party is its recognition that there is value in settling disputes in a streamlined and timely manner,” the company wrote. “Additionally, Avangrid hopes in earnest that this potential value of settling these issues — such that members may focus on forward-looking, and not retroactive, initiatives — comes to fruition.”