The D.C. Circuit Court of Appeals has vacated FERC’s decision to order PJM to rerun its 2024/25 capacity auction without a tweak to the parameters for the DPL South zone. The court ruled that the commission was not justified in dismissing a complaint from consumer advocates arguing that the PJM auction results were not just and reasonable due to the unresolved flaw in the parameters. (See 3rd Circuit Rejects PJM’s Post-auction Change as Retroactive Ratemaking.)

The court ruled that the commission incorrectly determined that revising the 2024/25 Base Residual Auction (BRA) results would violate the filed-rate doctrine. FERC took that stance in the wake of the 3rd U.S. Circuit Court of Appeals in March 2024 finding it had run afoul of the doctrine by permitting a PJM request to revise the locational deliverability area (LDA) for DPL South in December 2022 after the bidding window had closed but before the results were posted. The RTO said it had identified a “mismatch” in the capacity expected to be available in the region versus what was offered. The DPL South zone encompasses the Delmarva Peninsula. (See PJM Decides Against Posting Indicative Capacity Auction Results.)

PJM intervened to defend FERC’s order, along with the Electric Power Supply Association, PJM Public Power Providers Group, Midwest Generation, Constellation Energy and NRG Business Marketing.

The court’s Jan. 13 ruling states that the 3rd Circuit had applied only to the request to revise the reliability requirement and did not necessarily bind the commission from revising the BRA results if they are determined to be unjust and unreasonable.

“There may have been a sound basis for FERC to deny relief. But the only reason it articulated — that the 3rd Circuit resolved the matter — was anything but sound. The 3rd Circuit held that the filed-rate doctrine foreclosed FERC’s efforts to modify PJM’s rate-setting process under Section 205 of the (Federal Powers Act). But it never addressed whether the auction result is subject to revision under Section 206. FERC’s conclusion to the contrary was erroneous,” the court wrote.

The court was not swayed by the commission’s arguments that the 3rd Circuit anticipated the economic effects of its ruling and therefore it could not act in a way that would render the court’s expectations meaningless. The Jan. 13 ruling states that courts are not economic regulators and the 3rd Circuit’s ruling could be interpreted as acknowledging that FERC had multiple paths it could proceed with, not solely requiring it to direct PJM to rerun the auction.

The vacatur did not direct the commission to take any particular action, and it cautions that a reversal of the auction results is not guaranteed.

“We do not mean to suggest that the DPL customers are necessarily entitled to a refund under Section 206(b). We hold only that labeling the relief they seek as “retroactive” should not foreclose the possibility that it is available under Section 206,” the court wrote.

Maryland People’s Counsel David Lapp said the ruling is a step toward reversing a PJM mistake that cost ratepayers $180 million.

“Delmarva Peninsula customers paid the consequences of a mistake PJM made — a mistake that gave generators a windfall, and one that federal regulators failed to fix. The court’s decision significantly advances the possibility that customers will be made whole through refunds,” Lapp said in a statement.