By Rich Heidorn Jr.
FERC may be unable to issue its highly anticipated order on PJM’s capacity market rules before December, further complicating matters for the RTO and market participants.
On Thursday, Commissioner Richard Glick disclosed that he would have to recuse himself from any matters involving his former employer, Avangrid, until Nov. 29, 2019, because FERC’s designated agency ethics official (DAEO) had changed his interpretation of the recusal rules. Avangrid has filed comments and testimony in the case.
PJM has repeatedly postponed its 2019 Base Residual Auction pending a FERC order in response to the RTO’s proposal to create a resource-specific fixed resource requirement (FRR).
In June 2018, FERC ruled that PJM’s capacity market rules were not just and reasonable because they failed to address growing subsidies that the commission said are suppressing prices. (See FERC Orders PJM Capacity Market Revamp.) The RTO made the FRR proposal in November as an alternative to expanding its minimum offer price rule (MOPR) to include all new and existing capacity receiving out-of-market payments, such as renewable energy credits and zero-emission credits for nuclear plants. The RTO’s MOPR currently covers only new gas-fired units.
With the Aug. 30 departure of Commissioner Cheryl LaFleur and the vacant fifth seat since the death of Chairman Kevin McIntyre, the commission’s quorum requires that all three remaining commissioners — Glick, Chairman Neil Chatterjee and Commissioner Bernard McNamee — take part.
Some stakeholders were cheered by news that McNamee received a waiver from the Trump administration on Aug. 29, allowing him to participate in proceedings with parties represented by his former employer, McGuireWoods. Like Avangrid, at least three McGuireWoods clients have interests in the MOPR case.
PJM stakeholders last week had been hopeful that the FERC order could come as soon as Sept. 19, the commission’s next open meeting, but the case was not included in the meeting’s agenda.
Then, late Thursday, Glick issued a statement saying that DAEO Charles Beamon had changed his interpretation of a provision in President Trump’s Executive Order 13770, the so-called “ethics pledge,” signed by all executive branch presidential appointees.
Glick was vice president of government affairs for Avangrid’s (formerly Iberdrola) renewable energy, electric and gas utility and natural gas storage businesses in the U.S. until February 2016, when he became general counsel for Democrats on the U.S. Senate Energy and Natural Resources Committee.
Beamon originally told Glick that he would have to recuse himself from all Avangrid proceedings until Feb. 5, 2018, two years from the end of Glick’s employment with the company. On Sept. 10, however, Beamon told Glick he had been mistaken, and that the ethics pledge requires his recusal for the first two years of his appointment to the commission, which began Nov. 29, 2017. Glick would also have to recuse himself indefinitely from any proceedings for which he had “personally and substantially participated on behalf of the company.”
As a practical matter, that means that without a waiver for Glick, the commission would be unlikely to issue a MOPR ruling before December. Nov. 29, the first day Glick would be permitted to participate in deliberations, is a Friday.
The reversal also raised questions about the validity of Glick’s votes in other proceedings in which Avangrid participated since Feb. 5, 2018.
“In the vast majority of these matters, I suspect that Avangrid was not a substantive participant, but was only a ‘doc-less’ intervenor, which allows service and monitoring of the proceeding,” Beamon said in a memo released by Glick. “The longstanding position of our office is that doc-less interventions do not warrant a recusal under the ethics regulations or ethics pledge, because there is no expressed position of record or substantive participation.”
Nonetheless, Glick said he would avoid even those dockets with doc-less interventions by Avangrid.
Waiver Option for Glick?
However, Glick could seek a waiver like the one McNamee received Aug. 29 from Scott Gast, the designated ethics official for the White House.
Gast said it was “appropriate and in the public interest” to give McNamee a limited waiver “to ensure Commissioner McNamee’s participation in significant issues pending before the commission. His duties cannot be adjusted, and his role cannot be performed by another commission employee.”
Gast also noted that McNamee last worked at McGuireWoods and provided legal services to the clients more than two years ago. “Were it not for a four-month break in federal service [when McNamee left the Department of Energy for a job at the Texas Public Policy Forum], which resulted in the execution of a second ethics pledge, the restrictions of … the ethics pledge would have already lapsed.”
Although their circumstances are not exactly the same, it would appear Glick could seek a similar waiver given that his vote is also needed for a quorum.
“I am considering it but haven’t made a final decision,” Glick said via email Sunday. “On the one hand, I’m not a particularly big fan of waivers. On the other hand, it is important to ensure that the work of the commission continues to get done.”
Enviros Protest
On Sept. 9, meanwhile, the Natural Resources Defense Council and Sierra Club filed a motion requesting that McNamee recuse himself from the MOPR case. They said at least three McGuireWoods clients — Dominion Energy, Duke Energy and Direct Energy — had actively participated in the proceeding, with Duke and Dominion’s Virginia Electric and Power Co. seeking “exceptional treatment of their resources.”
“Dominion has urged that any replacement rate distinguish between resources owned by ‘integrated public utilities’ subject to regulation by state public utility commissions (such as Virginia Electric and Power Co.) from resources in restructured states, arguing that state-regulated utilities’ self-supply resources should not be subject to a revised minimum offer price rule or other mitigation in the capacity market,” the environmental groups said. “Likewise, Duke argues that although state-regulated cost recovery through retail rates could be considered a ‘material subsidy’ triggering the MOPR, an exception should apply to the benefit of its resources.”
They noted that McNamee had regularly recused himself from other dockets in which the companies are involved and said he “advised and represented Dominion regarding cost recovery for resources participating in PJM’s capacity market, resources that will be directly and predictably affected by the decision pending in this proceeding.”
They said he should recuse himself in this case or explain his reason for not doing so.
“Should the commission issue an order establishing a replacement rate that, for example, instituted new MOPR rules with exemptions benefiting state-regulated integrated utilities like Dominion, or carving out state support like the [Ohio Valley Electric Corp.] power purchase agreement to the benefit of Duke, it would cause a reasonable person to question the impartiality of the proceeding,” the groups said. “This appearance of potential bias, irrespective of the presence of actual bias, warrants Commissioner McNamee’s recusal in this proceeding.”
Avangrid, which owns 6.7 GW of generation in the U.S., is a voting member of PJM and is active in the RTO’s energy and capacity markets.
In May 2018, Avangrid filed comments expressing concern that PJM’s FRR proposal “appears to contain inconsistencies, lacks clarity and does not accommodate the [renewable portfolio standards] markets.”
Kevin Kilgallen, Avangrid’s director of market structure and policy origination, filed testimony in October 2018 describing how renewable attributes are traded in the PJM region, and how the RTO’s proposed changes “could be inconsistent with those transactions.”
Kilgallen also filed testimony in November replying to PJM’s initial testimony.
‘Very Troubling’
Glen Thomas, president of the PJM Power Providers Group (P3 Group), said last week that the continued uncertainty over the RTO’s capacity market rules is “very troubling.”
“We’re already starting to miss deadlines for the 2020 auction, and we haven’t even had the 2019 one yet,” he said. “It’s tough to operate when the Tariff’s been declared unjust and unreasonable.”
Christen Smith contributed to this article.
