PJM’s Annual Meeting, which was to have been held Monday in Chicago, was canceled because of the coronavirus pandemic. But the RTO held its Members Committee meeting via teleconference nonetheless, feting Board Member Susan J. Riley and former Vice President of Planning Steve Herling on their retirements.

Riley Feted on Retirement

Riley, who took over as interim CEO after the tumultuous fallout of the GreenHat Energy default, was honored on her retirement from the RTO. The former CFO for Eastern Outfitters, Riley had served on the PJM Board of Managers since 2005.

Riley guided the organization after former CEO Andy Ott announced his retirement effective June 30, 2019, following an independent probe into the GreenHat debacle that concluded PJM staff ignored red flags about the company’s assets as it amassed 890 million MWh of financial transmission rights while putting up only $60,000 in collateral. (See PJM CEO Andy Ott to Retire.)

Riley held the interim post until new CEO Manu Asthana took over Jan. 1. (See PJM Taps Ex-Direct Energy Exec as New CEO.)

A certified public accountant, Riley served in senior finance roles for The Children’s Place, Abercrombie & Fitch, Mount Sinai Medical Center of New York, Colgate-Palmolive, Dial Corp. and Tambrands.

Riley said her work at PJM provided a unique experience because it gave her direct interaction with the RTO’s “constituents.” Understanding the diverse interests of PJM members was both a challenge and a pleasure, she said, adding she was impressed to see stakeholders working together to solve problems.

“The results of your hard work through compromise and member meetings is a system that delivers reliable and cost-effective electricity to over 65 million people day in and day out,” Riley said.

Members Committee Chair Steve Lieberman, director of regulatory affairs for American Municipal Power, said Riley’s listening skills, responsiveness to stakeholders and ability to make hard decisions illustrated “what a fantastic leader Sue is.”

Lieberman praised Riley for “taking ownership” following the GreenHat default, which he said was “not a shining moment for PJM.”

“She made it a personal issue to make sure that it would not, could not, occur again,” Lieberman said. “On behalf of PJM, she repeatedly owned up to the deficiencies of PJM. She took hard questions” from members. (See Report: ‘Naive’ PJM Underestimated GreenHat Risks.)

Lieberman said he was equally impressed with Riley’s ability to step into the CEO role after Ott left. Several top PJM management personnel were out of their positions within a few months, and Lieberman said Riley was able to hold the RTO together until replacements could be found.

“The ground felt a little shaky from my perspective, but Sue figuratively took the reins and steered us through those uncertain times,” he said.

Board Chair Ake Almgren thanked Riley for her “many contributions to PJM.”

“Through all these years, I looked forward to Susan’s work ethic and her active leadership and very strong commitment to PJM,” Almgren said.

Almgren, Robinson Re-elected; Newcomer Replaces Riley

The MC re-elected Almgren and member Charles Robinson, while selecting Margaret “Margo” Loebl, to replace Riley. Loebl, who has 30 years’ experience with Fortune 500 companies in finance, accounting and risk management, is the former CFO of AgroFresh Solutions, which provides technologies and services to extend the shelf life of fresh produce.

The board waived its term-limit policy for Almgren, who has been on the board since 2003, to allow him to serve an additional year to “ensure a successful leadership transition.” Since 2016, PJM rules have limited board members to five three-year terms.

PJM Sees Potential $26M Revenue Drop from Pandemic

PJM CFO Lisa Drauschak told members the RTO is planning for as much as a $26 million reduction (8.3%) in its Schedule 9 revenues because of reduced energy use during the coronavirus pandemic and is cutting expenses and lining up additional financing in response.

Schedule 9 revenues, which are collected based on transmission usage, represent 85% of PJM’s total income, Drauschak said.

The RTO collected $81 million in Schedule 9 revenue in the first quarter, and its budget anticipated an additional $231 million for the rest of the year, assuming 783 TWh of electric consumption.

But March load was 6.6% below budget and April is expected to be 7.5% below projections, reflecting both shelter-in-place orders and unusually warm weather.

Because of uncertainties over the length of the pandemic, PJM developed three scenarios for load:

• Scenario A: 723 TWh, reflecting a 14.4% reduction through May before ramping up to normal, would reduce Schedule 9 revenue for the remainder of the year to $224 million.
• Scenario B: 693 TWh, a 14.4% reduction through August before ramping up to normal, would produce $213 million in Schedule 9 revenue for the second through fourth quarters.
• Scenario C: 670 TWh, a 14.4% reduction from the total for the year, would generate only $205 million in additional revenue, an overall reduction of $26 million (8.3%).

The most optimistic scenario would leave PJM with an $18 million reserve at year-end; the most extreme scenario would reduce the reserve to only $3 million. “PJM is not expecting to fall below zero” in reserves, Drauschak said.

The RTO has cut some operating expenses in response to the lower revenues and unexpected pandemic-related costs, she said. It also executed a short-term $50 million liquidity support agreement with PNC on April 23 and asked FERC to increase its borrowing authority to $200 million. A ruling from the commission is expected by May 26.

The RTO is cutting expenses through a freeze on new hires and reductions in spending on travel and training.

To address cash flow issues, PJM has a $150 million line of credit. It expects its peak borrowing to be between $130 million and $139 million, likely in the third quarter.

Return to ‘Normal’ not Close

Scott Heffentrager, senior director of physical security, briefed members on Pennsylvania’s plan for reopening its economy but said Montgomery County, where the RTO is headquartered, is still seeing too many new COVID-19 cases to contemplate a return to business as usual.

Gov. Tom Wolf has a three-phase reopening plan. All 67 counties are currently in the “red” stage’s stay-at-home rules, with only life-sustaining businesses in operation.

It plans to move to the “yellow” stage for 24 mostly rural counties on May 8. That will ease stay-at-home restrictions, although the state will continue to require telework where feasible.

The final “green” stage, which will lift the safety order and stay-at-home restrictions, will require counties to average less than 50 new positive cases per 100,000 residents over 14 days. That computes to 415 new cases over two weeks in Montgomery County (~30/day).

The county averaged 204 positive cases a day over the last two weeks, Heffentrager said. “So, we’re well behind the criteria to move from red to yellow.”

Herling Retires

After a 30-year career at PJM, Steve Herling will retire on June 30. He began his career in May 1990 as a professional engineer, working his way up to vice president of planning for in 2004 before beginning his transition last year as executive consultant.

Ken Seiler, Herling’s successor as vice president of planning, provided remarks in recognition of Herling’s retirement, joking that he was “someone to look up to” as the tallest person on the PJM campus. Seiler said Herling, who stands 6’8″, was affectionately referred to as the “tower of power” among PJM staff, and thanked him for hiring him in June 2000.

Herling was one of the original architects of the Regional Transmission Expansion Plan in 1998, Seiler said, and was widely regarded as one of the most knowledgeable people on PJM’s staff.

“Steve knows the bulk power system of our region like nobody else,” Seiler said. “And our lawyers love to have him testifying at the regulatory hearings because he literally knows everything there is to know seemingly off the top of his head.”

Herling said it was hard to believe he had been with the company for 30 years. He said he had many wonderful experiences being a part of the RTO.

He said he mostly wanted to thank the planning staff who worked under him, saying he could not have done half of his accomplishments without their dedication.

“It’s easy for us to look good when we have such a strong group of people backing us up,” Herling said. “I’m sure there will be a lot more success stories in PJM’s future.”

New CEO Comments

PJM CEO Manu Asthana said he would never have imagined making his first Annual Meeting address over teleconference.

Asthana, who took over leadership on Jan. 1, said he also would have never envisioned the amount of change in the world during the first four months of his leadership of the RTO. He said the COVID-19 pandemic has created unique challenges for PJM and himself personally to come up to speed in his role.

Asthana said he chose to come to PJM because he wanted to have an impact on an organization that is directly affecting 65 million people each day. He said he had seen the rapid energy transition taking place in the U.S., driven by technologies as well as environmental preferences and policies, and he saw PJM being at the center of that revolution.

“It’s been quite an interesting time to take over as CEO of a complex and important organization like PJM in the middle of this disruption,” Asthana said. “It’s hard to believe it’s only been four months in the role, but it has been a meaningful and impactful and pretty stressful four months.”

Tariff, OA Changes

The committee approved administrative revisions to the Tariff, Operating Agreement and Reliability Assurance Agreement as recommended by the Governing Document Enhancement & Clarification Subcommittee.