FERC has established settlement judge procedures to consider the validity of rate schedules filed by Talen Energy to continue operating its Brandon Shores and H.A. Wagner generators past their retirement date (ER24-1787, ER24-1790). (See PJM Requests 2nd Talen Generator Delay Retirement.) 

The commission’s June 17 order states that the proposed rate schedules may not be just and reasonable because of the calculation of the filings’ valuations of the two generators. It also took issue with adjusting fixed operating and maintenance expenses for inflation using an escalation index, along with the proposed monthly project investment tracker payment and performance requirements. 

“While we are setting these matters for a trial-type evidentiary hearing, we encourage the parties to make every effort to reach settlement before hearing procedures commence,” the order states. 

The filings requested annual fixed costs of around $175 million to keep Brandon Shores’ 1,273-MW coal-fired generator online from June 1, 2025, through Dec. 31, 2028, as well as variable costs such as fuel and $29.9 million in project investments. The Wagner filing requests $40.3 million annually to keep two of Wagner’s oil-fired units, amounting to 702 MW, online for the same period and $4.5 million in additional investments.  

The reliability-must-run (RMR) agreement is intended to keep the generators online to avoid reliability violations identified throughout the Baltimore region while transmission reinforcements are constructed that would allow the units to deactivate without issue. (See FERC Approves Cost Allocation for $5 Billion in PJM Transmission Expansion.) 

The proposed rates were opposed by the Independent Market Monitor and the Maryland Public Service Commission, who argued the rate schedules would improperly include sunk costs incurred prior to the start of the RMR term and unrelated to the going-forward costs of keeping the facilities operational. 

The Monitor argued that including sunk costs that have already been reported as impaired assets would ask ratepayers to make investors whole for past losses. 

The June 17 order accepted the rate schedules, suspended them and initiated the settlement judge procedures with the possibility of evidentiary hearings if that avenue does not yield a consensus. 

Maryland Deputy People’s Counsel William Fields said sunk costs make up a significant portion of the proposed rates and the Office of People’s Counsel is preparing an analysis on how the RMR could affect state ratepayers. He said the office is pleased with the commission’s decision to open settlement judge procedures and plans to fully participate. 

“We don’t view those as costs that are related to going forward with operations of the plant.” 

Fields said he believes PJM’s backlogged generation interconnection process leaves few alternatives to expensive RMR contracts to keep retiring resources online while major grid reinforcements are constructed. 

“We’ve got a few concerns with that approach or reliance on the market response here, and one is that this happens very quickly. You’re talking months, and that is very, very quick for any kind of significant market response to a significant, pretty big retirement. Trying to respond to that with a lot of megawatts is going to be difficult in any circumstance, and right now, the PJM queue process is working through its backlog, and that makes it even more difficult for some kind of new resource to get through and get online on a time frame that’s going to help the situation at all,” he said. 

Protesters also disputed the filings’ methodology for determining the value of Brandon Shores and Wagner, depreciation and the amount of risk the company faces in continuing to operate the generators. 

Monitor Joe Bowring said opportunity costs similar to those Talen is seeking to include in the rates have been rejected by the commission in past RMR filings. 

The Brandon Shores filing also notes it’s subject to a settlement agreement with the Sierra Club requiring that coal combustion at the site cease by the end of 2025. It states that it will seek changes to those terms to allow the generator to keep operating for the RMR term. 

Casey Roberts of the Sierra Club said the organization is willing to engage with Talen on the agreement, but “additional protections for the local community and consumers, and longer-term reforms to avoid similar predicaments in the future, must all be on the table.” 

The club’s protest of the rate schedule also urged the commission to not approve an RMR agreement that would pay for Brandon Shores to remain online until the agreement has been modified to allow the generator to operate. 

“Thus, it appears on the face of the CORS [continuing operations rate schedules] that Talen intends not to operate Brandon Shores under the CORS unless its settlement agreement with Sierra Club is modified, notwithstanding the hundreds of millions of dollars in fixed monthly payments that Talen would receive even if it never generates a single megawatt hour. FERC cannot approve such an arrangement, particularly on the expedited basis that Talen seeks in this proceeding,” the Sierra Club wrote. 

Both the Sierra Club and Maryland Public Service Commission argued that the proposed rates lack performance requirements and would require load to pay significant sums to keep the two generators operational with no guarantee they would respond if dispatched by PJM. 

Maryland PSC spokesperson Tori Leonard said the commission supports FERC’s directive opening the settlement judge proceedings. 

“FERC’s preliminary analysis confirmed that both the Brandon Shores rate schedule and Wagner rate schedule have not been shown to be just and reasonable and may be unjust, unreasonable, unduly discriminatory or preferential, or otherwise unlawful,” Leonard wrote in an email. “This commission is pleased that FERC granted our request (as well as the request of the Maryland Office of People’s Counsel), to set the matter for settlement judge procedures. The commission will continue to advocate for a reasonable resolution of the Brandon Shores and Wagner RMR filings that will minimize impacts to ratepayers, while preserving the reliability of the bulk electric power system to serve Maryland’s needs.”