The Independent Market Monitor filed a complaint May 31 asking FERC to reject all energy efficiency (EE) offers into PJM’s capacity market, alleging that none of them meet the Base Residual Auction (BRA) participation requirements (EL24-113). 

The complaint argues that EE programs that seek to help consumers buy more efficient appliances by entering into agreements with distributors and retailers — known as mid- and upstream programs — are not obtaining consumer-level data or entering into contracts with individual end users. It took aim at the measurement and verification reports of a dozen EE providers, stating they had not included information to demonstrate that installations of more efficient products occurred in a manner that would allow PJM and the Monitor to conduct audits. 

“The reports fail to provide adequate evidence to demonstrate that the included EE measures meet the requirements to be approved and to receive payment. It is unjust and unreasonable to require PJM customers to pay a total of $128 million in the BRA alone for EE MW that have not been demonstrated to meet the requirements to be paid,” the Monitor wrote. 

The complaint asks the commission to either bar the EE providers from receiving capacity market revenues in the 2024/25 delivery year or order PJM and the Monitor to open an investigation to determine eligibility. 

Following the filing, PJM emailed EE market participants that it plans to delay signing off on all post-installation measurement and verification (PIMV) reports supporting EE offers until after the complaint is resolved, which also holds up capacity market payments to EE resources. 

“Delay of PJM action on the PIMV reports provides FERC the opportunity to consider the merits of the IMM complaint,” the email said. “As a result, no payments, deficiency charges and nonperformance charges associated with energy efficiency resources for the 24/25 delivery year will be invoiced to energy efficiency providers until FERC has ruled on the merits of the IMM complaint and PJM approves or rejects the PIMV reports. All replacement transactions associated with energy efficiency providers will be terminated and may be reentered depending on the outcome of this matter at FERC.” 

PJM spokesperson Jeff Shields said the delay affects all EE offers, including components not related to midstream and upstream programs. 

A representative of one of the entities named in the Monitor’s complaint, who spoke on the condition of anonymity, said it’s alarming that PJM opted to withhold capacity market revenues with less than a day’s notice before the start of the delivery year because of a complaint still pending before the commission. 

“From our vantage point, it is hard to see this as anything other than the IMM unilaterally suspending energy efficiency and, for reasons kind of unknown, PJM going along with that and supporting that,” they said. 

They said it fits squarely in the Monitor’s role to scrutinize a particular market participant; however, the complaint appears to target an entire class of resources and enact a policy change through a FERC complaint. They noted that there’s an ongoing stakeholder process focused on the rules around EE measurement and verification that the complaint seeks to sidestep. (See “Stakeholders Regroup on Energy Efficiency Rules After MRC Rejection of Proposals,” PJM MIC Briefs: May 1, 2024.) 

“It’s entirely reasonable and within the IMM’s discretion to take as close a look as he wants at any capacity resources … but to approach it in this fashion, especially in the midst of an ongoing stakeholder dialogue on how to make the rules better — it seems entirely inappropriate,” they said. 

Monitor Joseph Bowring told RTO Insider the complaint addresses a longstanding issue with EE participation in PJM’s capacity market and is meant to ensure consumers are not overpaying for EE under the current rules. He said the complaint is unrelated to stakeholder discussions looking at how the capacity contribution of EE resources is measured and verified. On the approach PJM and stakeholders should take in that forum, Bowring said he believes the tariff does not support the resource class being a part of the capacity market.  

“EE does not belong in the capacity construct at all,” he said. 

Many of the Monitor’s arguments in the complaint echoed those made by PJM as it drafted a proposal to tighten the measurement and verification requirements for EE. During the May 1 Market Implementation Committee meeting, PJM’s Pete Langbein argued it has not been demonstrated that capacity market revenues flowing to EE participants is incentivizing consumers to buy more efficient devices they otherwise would not have. 

“They shouldn’t be able to claim things that are naturally going to occur. … If I’m making a decision to purchase a high-efficiency air conditioner, an EE provider shouldn’t be able to claim that unless they can prove” they incentivized the purchasing of that unit over a less efficient product,” Langbein said in May. 

Stakeholders representing EE providers pushed back, stating that the resource class efficiently provides a guaranteed reduction in consumption over PJM’s load forecast. 

The complaint argues that the party seeking to enter energy savings into the capacity market either must directly control the load reduction or hold a contract with the consumer granting rights to the capacity associated with the energy savings. Without contracts between EE providers and the consumers buying efficient devices, the Monitor also raised the possibility that multiple EE market participants could attempt to include the same load reduction in their capacity offers. 

“There is no evidence that Indicated Energy Efficiency Sellers through midstream and upstream programs provided legally required consideration to any end users for the rights to their projects or products. The Indicated Energy Efficiency Sellers therefore are not the owners of the requisite contractual rights required by the PJM tariff to be eligible to receive revenues from the PJM capacity market,” the Monitor said. 

The Monitor also argued that EE programs that contract with retailers and distributors may not lead to lower costs for consumers buying more efficient devices and that no change in consumer behavior has been demonstrated.