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UNITED STATES OF AMERICA
`BEFORE THE
`FEDERAL ENERGY REGULATORY COMMISSION
`
`
`
`Calpine Corporation, Dynegy Inc., Eastern
`Generation, LLC, Homer City Generation,
`L.P., NRG Power Marketing LLC, GenOn
`Energy Management, LLC, Carroll County
`Energy LLC, C.P. Crane LLC, Essential
`Power, LLC, Essential Power OPP, LLC,
`Essential Power Rock Springs, LLC,
`Lakewood Cogeneration, L.P., GDF SUEZ
`Energy Marketing NA, Inc., Oregon Clean
`Energy, LLC and Panda Power Generation
`Infrastructure Fund, LLC
`
` v.
`
`
`PJM Interconnection, L.L.C.
`
`PJM Interconnection, L.L.C.
`
`
`PJM Interconnection, L.L.C.
`
`
`
`Docket Nos.
`
`
`
`
`
`
`EL16-49-000
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`ER18-1314-000
`ER18-1314-001
`
`EL18-178-000
`(Consolidated)
`
`
`
`
`ARGUMENT OF
`THE VIRGINIA STATE CORPORATION COMMISSION
`
`Pursuant to the Commission’s Order Rejecting Proposed Tariff Revisions, Granting in Part
`
`and Denying in Part Complaint, and Instituting Proceeding Under Section 206 of the Federal
`
`Power Act, issued on June 29, 2018 (“June 29 Order”) 1 in this now consolidated proceeding, the
`
`Virginia State Corporation Commission (“VSCC”) respectfully submits this argument regarding
`
`the changes, if any, that should be made to the PJM capacity market in response to the June 29
`
`Order.
`
`
`1 Calpine Corp., et al., 163 FERC ¶ 61,236 (June 29, 2018) (hereinafter “June 29 Order”).
`
`

`

`As discussed below, if the Commission proceeds with changes to the PJM tariff, as
`
`suggested in the June 29 Order, it must include exemptions for self-supply by vertically-integrated
`
`utilities in regulated states such as Virginia. To do otherwise would be arbitrary and capricious,
`
`and expose retail customers in such states to serious risks.
`
`Customers in vertically-integrated states should not bear the risk of paying twice for
`
`capacity, because the states in which such customers reside have made no out-of-market payments
`
`to generators. Rather, should the Commission continue down the path of requiring the existing
`
`PJM Minimum Offer Price Rule ("MOPR") to be expanded to all generation resources, the
`
`Commission must protect such customers by requiring that the expanded MOPR include a self-
`
`supply exemption, as originally approved by the Commission in 2013. What the Commission
`
`concluded at that time remains true today – utilities in regulated states have no incentive to attempt
`
`to artificially suppress capacity prices, and a properly configured self-supply exemption would
`
`fully address the intent of an expanded MOPR.
`
`There quite simply is no evidence showing that vertically-integrated utilities self-supplying
`
`through generation approved by state regulators in such states interferes in any way with the
`
`Commission’s responsibility to ensure resource adequacy at just and reasonable rates. These
`
`resources are not receiving unit specific out-of-market support. The complaint before the
`
`Commission concerns alleged price suppression from state policies directing out-of-market
`
`payments to specific generation units. The ratepayer-funded generation units of vertically-
`
`integrated utilities do not receive out-of-market payments directed to address the current
`
`economics of specific generation units with respect to current wholesale market prices. As such,
`
`remedies regarding alleged price suppression resulting from out-of-market unit-specific subsidies
`
`
`
`2
`
`

`

`should not preclude vertically-integrated utilities the option of self-supplying through the capacity
`
`market.
`
`For these reasons, if the Commission insists on forging forward, it must do so with full
`
`regard given to those customers who have done nothing to contribute to the perceived problem, by
`
`insisting that any expanded MOPR include an exemption for utility self-supply similar to that
`
`proposed by PJM.
`
`The unit-specific Fixed Revenue Requirement ("FRR") mechanism identified by the
`
`Commission in the June 29 Order would not be an adequate remedy for customers in regulated
`
`states for the harm caused by a MOPR with no self-supply exemption. The underlying premise of
`
`this FRR mechanism is that operators of units receiving out-of-market payments could elect to
`
`remove such units and their associated load from the capacity auction on a unit-by-unit basis.
`
`However, in traditionally-regulated states, generators included in the utility's rate base do not
`
`receive out-of-market payments, so application of either an expanded MOPR or FRR mechanism
`
`is inappropriate. Furthermore, it is unclear how the utility's native load attributable to a single
`
`generating unit could even be identified, making application of a unit-specific FRR mechanism
`
`impossible for such load serving entities.
`
`For the foregoing reasons, the VSCC respectfully requests that the Commission include in
`
`any modification to PJM's existing tariff the exemption for self-supply, which the Commission has
`
`previously found to be just and reasonable.
`
`
`
`
`
`
`
`3
`
`

`

`Respectfully submitted,
`
`
`
`
`
`
`
`/s/ Frederick D. Ochsenhirt
`
`William H. Chambliss
`General Counsel
`
`Frederick D. Ochsenhirt
`Associate General Counsel
`Virginia State Corporation Commission
`P.O. Box 1197
`Richmond, Virginia 23218
`(804) 371-9671
`
`
`Dated: October 2, 2018
`
`
`
`
`
`
`4
`
`

`

`CERTIFICATE OF SERVICE
`
`I hereby certify that, on this 2nd day of October, 2018, I have caused the foregoing
`
`document to be served upon each party designated on the official service list compiled by the
`
`Secretary in this proceeding, by email.
`
`
`
`
`
`
`
`
`
`
`
`/s/ Frederick D. Ochsenhirt
`
`
`
`
`
`
`
`
`
`5
`
`

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