UNITED STATES OF AMERICA
`BEFORE THE
`FEDERAL ENERGY REGULATORY COMMISSION
`
`Mirant Energy Trading, LLC,
`Mirant Chalk Point, LLC,
`Mirant Mid-Atlantic, LLC, and
`Mirant Potomac River, LLC,
`
`
`Complainants,
`
`
`v.
`
`PJM Interconnection, L.L.C.,
`
`
`Respondent.
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`Docket No. EL08-8-000
`
`MOTION TO INTERVENE AND
`COMMENTS IN SUPPORT OF COMPLAINT OF
`THE TENASKA FUND ENTITIES
`
`Pursuant to Rules 212 and 214 of the Rules of Practice and Procedure of the Federal
`
`Energy Regulatory Commission (the “Commission”),1 Armstrong Energy Limited Partnership,
`
`LLLP (“Armstrong”), Big Sandy Peaker Plant, LLC (“Big Sandy”), Commonwealth Chesapeake
`
`Company, LLC (“Commonwealth Chesapeake”), Calumet Energy Team, LLC (“CET”), Crete
`
`Energy Venture, LLC (“Crete”), Lincoln Generating Facility, LLC (“Lincoln”), Pleasants
`
`Energy, LLC (“Pleasants”), University Park Energy, LLC (“University Park”), and Wolf Hills
`
`Energy, LLC (“Wolf Hills”) (collectively, the “Tenaska Fund Entities”) respectfully move to
`
`intervene in the above-captioned proceeding and comment in support of the complaint2 filed
`
`therein by Mirant Energy Trading, LLC, Mirant Chalk Point, LLC, Mirant Mid-Atlantic, LLC,
`
`and Mirant Potomac River, LLC (together, “Mirant”) against PJM Interconnection, L.L.C.
`
`
`1
`18 C.F.R. §§ 385.212, 385.214 (2007).
`2
`Complaint, Docket No. EL08-9-000 (Nov. 9, 2007) (the “Complaint”).
`
`
`BEFORE THE
`FEDERAL ENERGY REGULATORY COMMISSION
`
`Mirant Energy Trading, LLC,
`Mirant Chalk Point, LLC,
`Mirant Mid-Atlantic, LLC, and
`Mirant Potomac River, LLC,
`
`
`Complainants,
`
`
`v.
`
`PJM Interconnection, L.L.C.,
`
`
`Respondent.
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`Docket No. EL08-8-000
`
`MOTION TO INTERVENE AND
`COMMENTS IN SUPPORT OF COMPLAINT OF
`THE TENASKA FUND ENTITIES
`
`Pursuant to Rules 212 and 214 of the Rules of Practice and Procedure of the Federal
`
`Energy Regulatory Commission (the “Commission”),1 Armstrong Energy Limited Partnership,
`
`LLLP (“Armstrong”), Big Sandy Peaker Plant, LLC (“Big Sandy”), Commonwealth Chesapeake
`
`Company, LLC (“Commonwealth Chesapeake”), Calumet Energy Team, LLC (“CET”), Crete
`
`Energy Venture, LLC (“Crete”), Lincoln Generating Facility, LLC (“Lincoln”), Pleasants
`
`Energy, LLC (“Pleasants”), University Park Energy, LLC (“University Park”), and Wolf Hills
`
`Energy, LLC (“Wolf Hills”) (collectively, the “Tenaska Fund Entities”) respectfully move to
`
`intervene in the above-captioned proceeding and comment in support of the complaint2 filed
`
`therein by Mirant Energy Trading, LLC, Mirant Chalk Point, LLC, Mirant Mid-Atlantic, LLC,
`
`and Mirant Potomac River, LLC (together, “Mirant”) against PJM Interconnection, L.L.C.
`
`
`1
`18 C.F.R. §§ 385.212, 385.214 (2007).
`2
`Complaint, Docket No. EL08-9-000 (Nov. 9, 2007) (the “Complaint”).
`
`
`
`(“PJM”). As explained in the Complaint, the current rules in the PJM open access transmission
`
`tariff (the “PJM OATT”) relating to PJM’s Reliability Pricing Model (“RPM”) will, unless
`
`modified as proposed in the Complaint, result in confiscatory rates for capacity procured through
`
`the Third Incremental Auction. For the reasons set forth in the Complaint and below, the
`
`Commission should grant the Complaint to avoid such an unlawful and unconstitutional result.
`
`I.
`
`CORRESPONDENCE AND COMMUNICATIONS
`
`All correspondence and communications concerning the above-captioned proceeding
`
`should be addressed to the following persons:
`
`Neil L. Levy
`David G. Tewksbury *
`KIRKLAND & ELLIS LLP
`655 Fifteenth Street, NW
`Suite 1200
`Washington, DC 20005
`(202) 879-5000
`(202) 879-5200 (facsimile)
`nlevy@kirkland.com
`dtewksbury@kirkland.com
`
`* Designated for service.
`
`Bradley K. Heisey
`Tenaska Capital Management, LLC
`1044 North 115th Street
`Suite 400
`Omaha, NE 68154
`(402) 938-1663
`(402) 691-9727 (facsimile)
`bheisey@tenaska.com
`
`II.
`
`IDENTITY OF THE TENASKA FUND ENTITIES
`
`A.
`
`Armstrong
`
`Armstrong is a Delaware limited liability limited partnership that owns an approximately
`
`625 MW natural gas- and No. 2 fuel oil-fired generating facility in Armstrong County,
`
`Pennsylvania. This facility is interconnected with the transmission grid controlled by PJM.
`
`Armstrong is an indirect, wholly-owned subsidiary of APT Generation, LLC (“APT
`
`
`
`2
`
`
`
`Generation”), an indirect subsidiary of Tenaska Power Fund, L.P. (“TPF I”) and Warburg Pincus
`
`Private Equity IX, L.P. Armstrong has Commission authorization to sell electric energy,
`
`capacity and certain ancillary services at market-based rates.3
`
`B.
`
`Big Sandy
`
`Big Sandy is a Maryland limited liability company that leases and operates an
`
`approximately 300 MW natural gas-fired generation facility located in Wayne County, West
`
`Virginia under a sale/leaseback arrangement with a governmental authority of Wayne County,
`
`West Virginia. This facility is interconnected with the transmission grid controlled by PJM. Big
`
`Sandy is an indirect, wholly-owned subsidiary of TPF Genco Holdings, LLC (“TPF Genco”),
`
`which is, in turn, owned by TPF I and TPF Generation Co-Investment Fund, L.P. Big Sandy has
`
`Commission authorization to sell electric energy, capacity and certain ancillary services at
`
`market-based rates.4
`
`C.
`
`Commonwealth Chesapeake
`
`Commonwealth Chesapeake is a Virginia limited liability company that owns and
`
`operates a 315 MW simple-cycle, oil-fired generating facility in New Church, Virginia. This
`
`facility is interconnected with the transmission grid controlled by PJM. Commonwealth
`
`Chesapeake is an indirect, wholly-owned subsidiary of TPF I. Commonwealth Chesapeake has
`
`Commission authorization to sell electric energy, capacity and certain ancillary services at
`
`market-based rates.5
`
`
`3
`See Dresden Energy, LLC, et al., 97 FERC ¶ 61,277 (2001) (“Dresden”).
`4
`See Constellation Power Source, Docket Nos. ER01-556-000, et al. (Jan. 19, 2001) (unreported)
`(“CPS”).
`5
`See Commonwealth Chesapeake Co., LLC, 85 FERC ¶ 61,404 (1998).
`
`
`
`3
`
`
`
`D.
`
`CET
`
`CET is a Delaware limited liability company that owns and operates a 300 MW simple-
`
`cycle, natural gas-fired generating facility in Chicago, Illinois. This facility is interconnected
`
`with the transmission grid controlled by PJM. CET is a wholly-owned subsidiary of TPF
`
`Calumet, LLC, which is, in turn, owned by TPF I and Calumet Co-Investment Fund, L.P. CET
`
`has Commission authorization to sell electric energy, capacity and certain ancillary services at
`
`market-based rates.6
`
`E.
`
`Crete
`
`Crete is a Delaware limited liability company that owns an approximately 315 MW
`
`natural gas-fired electric generation facility in Crete, Illinois. This facility is interconnected with
`
`the transmission grid controlled by PJM. Crete is an indirect, wholly-owned subsidiary of TPF
`
`II, L.P. (“TPF II”). Crete has Commission authorization to sell electric energy, capacity and
`
`certain ancillary services at market-based rates.7
`
`F.
`
`Lincoln
`
`Lincoln is a Delaware limited liability company that owns an approximately 672 MW
`
`natural gas-fired electric generation facility located in Manhattan, Illinois. This facility is
`
`interconnected with the transmission grid controlled by PJM. Lincoln is an indirect, wholly-
`
`owned subsidiary of TPF II. Lincoln has Commission authorization to sell electric energy,
`
`capacity and certain ancillary services at market-based rates.8
`
`
`6
`See Calumet Energy Team, LLC, Docket No. ER01-389-000 (Dec. 12, 2000) (unreported letter
`order).
`7
`8
`
`See Crete Energy Venture, LLC, Docket No. ER02-963-000 (Mar. 15, 2001) (unreported).
`See Gleason Power I, LLC, et al., 90 FERC ¶ 61,252 (2000).
`
`
`
`4
`
`
`
`G.
`
`Pleasants
`
`Pleasants is a Delaware limited liability company that owns an approximately 313 MW
`
`natural gas- and No. 2 fuel oil-fired generating facility in Pleasants County, West Virginia. This
`
`facility is interconnected with the transmission grid controlled by PJM. Pleasants is an indirect,
`
`wholly-owned subsidiary of APT Generation. Pleasants has Commission authorization to sell
`
`electric energy, capacity and certain ancillary services at market-based rates.9
`
`H.
`
`University Park
`
`University Park is a Maryland limited liability company that owns and operates an
`
`approximately 300 MW natural gas-fired peaking facility located approximately 30 miles south
`
`of Chicago, Illinois. This facility is interconnected with the transmission grid controlled by PJM.
`
`University Park is an indirect, wholly-owned subsidiary of TPF Genco. University Park has
`
`Commission authorization to sell electric energy, capacity and certain ancillary services at
`
`market-based rates.10
`
`I.
`
`Wolf Hills
`
`Wolf Hills is a Maryland limited liability company that owns and operates an
`
`approximately 250 MW natural gas-fired generation facility located in Washington County,
`
`Virginia. This facility is interconnected with the transmission grid controlled by PJM. Wolf
`
`Hills is an indirect, wholly-owned subsidiary of TPF Genco. Wolf Hills has Commission
`
`authorization to sell electric energy, capacity and certain ancillary services at market-based
`
`rates.11
`
`
`9
`See Dresden.
`10
`See CPS.
`11
`See id.
`
`
`
`5
`
`
`
`III.
`
`THE COMPLAINT
`
`The Complaint asks that the Commission exercise its authority under Section 206 of the
`
`Federal Power Act (the “FPA”)12 to modify the definition of “Opportunity Cost” in Section
`
`6.7(d)(ii) of the PJM Tariff for purposes of the Third Incremental Auction such that it will be
`
`defined as the higher of the documented price for exports or the Daily Deficiency Rate that
`
`Capacity Market Sellers will incur if they are unable to meet their capacity obligations.13 As
`
`explained in the Complaint, there are three aspects of the existing RPM rules that will result in
`
`bid caps based on the Avoidable Cost Rate (the “ACR”): (1) Capacity Market Sellers will be
`
`required to offer additional capacity for a given Delivery Year that has become available since
`
`the Base Residual Auction (the “BRA”) as a result of updated EFORd determinations into
`
`Incremental Auctions and cannot retain any such capacity as a hedge against penalties for failure
`
`to deliver during the Delivery Year; (2) prices in the Third Incremental Auction will be based
`
`solely on Sell Offers of Capacity Market Sellers with additional capacity and Buy Bids of buyers
`
`needing replacement capacity; and (3) Market Seller Offer Caps in the Third Incremental
`
`Auction will be ACR-based because the current definition of Opportunity Cost does not reflect
`
`the actual opportunity costs of supplying additional capacity offered into the Third Incremental
`
`Auction.14 As PJM management recognized during the stakeholder process, the combined effect
`
`of these rules will allow buyers to exert market power and to force low auction prices.15
`
`
`12
`16 U.S.C. § 824e (2000) (amended 2005).
`13
`See Complaint at 14.
`14
`See id. at 15-16.
`15
`See id. at 17.
`
`
`
`6
`
`
`
`The discrete change proposed in the Complaint is intended to ensure that the definition of
`
`“Opportunity Cost” reflects Capacity Market Sellers’ actual opportunity costs. As explained in
`
`the Complaint, the opportunity cost to Capacity Market Sellers who are precluded from retaining
`
`“new” capacity for use as a physical hedge is equal to the Daily Deficiency Rate (which a
`
`Capacity Market Seller would be required to pay if it failed to deliver during the Delivery
`
`Year).16
`
`IV.
`
`MOTION TO INTERVENE
`
`Each of the Tenaska Fund Entities owns or leases electric generating assets in the PJM
`
`region. As such, each of the Tenaska Fund Entities will be directly affected by the outcome of
`
`this proceeding. No other party can adequately represent the Tenaska Fund Entities in this
`
`proceeding, and unless each of the Tenaska Fund Entities is permitted to intervene and
`
`participate fully, the Tenaska Fund Entities may be bound or adversely affected by a
`
`Commission order issued herein without an opportunity to have their views heard and
`
`considered. Thus, each of the Tenaska Fund Entities’ intervention, and their participation as
`
`parties in this proceeding, is in the public interest.
`
`V.
`
`COMMENTS
`
`The Tenaska Fund Entities support the Complaint. Without a change like that proposed
`
`in the Complaint, Capacity Market Sellers will be forced to supply capacity at rates well below
`
`their actual opportunity costs and could easily face the circumstance in which they would be
`
`paying Daily Deficiency Rates well in excess of what they are being paid for capacity with
`
`
`16
`See id. at 19.
`
`
`
`7
`
`
`
`which they could have avoided incurring such rates. The Commission has recognized that
`
`requiring a generator “to offer capacity at a price less than its net risk-adjusted going forward and
`
`opportunity costs . . . raise[s] the possibility of confiscatory ratemaking, a result that is unjust and
`
`unreasonable.”17 It is black letter law that confiscatory rates are unlawful under Section 205 of
`
`the FPA18 and unconstitutional under the Fifth (or, in the case of state regulation, the Fourteenth)
`
`Amendment to the United States Constitution.19
`
`The Complaint proposes a simple and elegant means of preventing the imposition of
`
`confiscatory rates in a manner that results in minimal changes to the overall package of RPM
`
`rules and the PJM OATT. The Commission can and should grant the Complaint on an expedited
`
`basis to ensure that the needed tariff changes are in place before the Third Incremental Auction
`
`scheduled to occur on January 7, 2008.
`
`
`17
`ISO New England, Inc., 120 FERC ¶ 61,087 at P 52 (2007).
`18
`16 U.S.C. § 824d (2000).
`19
`See Duquesne Light Co. v. Barasch, 488 U.S. 299, 310 (1989); FPC v. Hope Natural Gas Co.,
`320 U.S. 591, 603, 605 (1944); Bluefield Water Works & Improvement Co. v. Public Serv. Comm’n, 262
`U.S. 679, 692-93 (1923).
`
`
`
`8
`
`
`
`VI.
`
`CONCLUSION
`
`WHEREFORE, for the foregoing reasons, the Tenaska Fund Entities respectfully
`
`request that the Commission (1) grant their motions to intervene with full rights as parties to
`
`participate in all stages of the proceeding as might be ordered by the Commission; (2) grant the
`
`Complaint for the reasons set forth therein and herein; and (3) grant the Tenaska Fund Entities
`
`such other further relief as may be required to protect their interests.
`
`Respectfully submitted,
`
`ARMSTRONG ENERGY LIMITED PARTNERSHIP,
`LLLP
`BIG SANDY PEAKER PLANT, LLC
`COMMONWEALTH CHESAPEAKE COMPANY, LLC
`CALUMET ENERGY TEAM, LLC
`CRETE ENERGY VENTURE, LLC
`LINCOLN GENERATING FACILITY, LLC
`PLEASANTS ENERGY, LLC
`UNIVERSITY PARK ENERGY, LLC
`WOLF HILLS ENERGY, LLC
`
`
`
`
`
`By:
`
`
`
`
`
`/s/
`
`Neil L. Levy
`David G. Tewksbury
`KIRKLAND & ELLIS LLP
`655 Fifteenth Street, NW
`Suite 1200
`Washington, DC 20005
`
`Counsel for
`Armstrong Energy Limited Partnership, LLLP,
`Big Sandy Peaker Plant, LLC, Commonwealth
`Chesapeake Company, LLC, Calumet Energy
`Team, LLC, Crete Energy Venture, LLC, Lincoln
`Generating Facility, LLC, Pleasants Energy, LLC,
`University Park Energy, LLC, and Wolf Hills
`Energy, LLC
`
`Dated: November 29, 2007
`
`
`
`9
`
`
`
`
`
`CERTIFICATE OF SERVICE
`
`I hereby certify that I have this day served the foregoing document on each person
`
`designated on the official service list compiled by the Secretary of the Federal Energy
`
`Regulatory Commission in this proceeding.
`
`Dated at Washington DC, this 29th day of November, 2007.
`
`
`/s/
`
`David G. Tewksbury
`
`
`
`
`
`
`
`
`
`
Accessing this document will incur an additional charge of $.
After purchase, you can access this document again without charge.
Accept $ Charge
Still Working On It
This document is taking longer than usual to download. This can happen if we need to contact the court directly to obtain the document and their servers are running slowly.
Give it another minute or two to complete, and then try the refresh button.
A few More Minutes ... Still Working
It can take up to 5 minutes for us to download a document if the court servers are running slowly.
Thank you for your continued patience.
This document could not be displayed.
We could not find this document within its docket. Please go back to the docket page and check the link. If that does not work, go back to the docket and refresh it to pull the newest information.
Your account does not support viewing this document.
You need a Paid Account to view this document. Click here to change your account type.
Your account does not support viewing this document.
Set your membership
status to view this document.
With a Docket Alarm membership, you'll
get a whole lot more, including:
- Up-to-date information for this case.
- Email alerts whenever there is an update.
- Full text search for other cases.
- Get email alerts whenever a new case matches your search.
One Moment Please
The filing “” is large (MB) and is being downloaded.
Please refresh this page in a few minutes to see if the filing has been downloaded. The filing will also be emailed to you when the download completes.
Your document is on its way!
If you do not receive the document in five minutes, contact support at support@docketalarm.com.
Sealed Document
We are unable to display this document, it may be under a court ordered seal.
If you have proper credentials to access the file, you may proceed directly to the court's system using your government issued username and password.
Access Government Site
