Case: 23-1778 Document: 75 Page: 1 Date Filed: 11/13/2023
`
`
`
`
`
`
`
`Oral Argument Has Not Been Scheduled
`In the United States Court of Appeals
`for the Third Circuit
`Nos. 23-1778, 23-1790, 23-1808, 23-1984,
`23-2544, 23-2559, 23-2560, 23-2612
`(consolidated)
`
`PJM Power Providers Group, et al.,
`Petitioners,
`v.
`Federal Energy Regulatory Commission,
`Respondent.
`
`
`
`
`
`
`
`
`On Petitions for Review
`of Orders of the
`Federal Energy Regulatory Commission
`
`BRIEF FOR RESPONDENT
`FEDERAL ENERGY REGULATORY COMMISSION
`
`Matthew R. Christiansen
`General Counsel
`
`
`
`
`
`November 13, 2023
`
`
`
`Robert H. Solomon
`Solicitor
`
`Jared B. Fish
`Attorney
`
`
`
`For Respondent
`Federal Energy Regulatory
`Commission
`888 First Street N.E.
`Washington, DC 20426
`Tel.: (202) 502-8101
`
`
`
`
`
`
`
`
`
`
`Oral Argument Has Not Been Scheduled
`In the United States Court of Appeals
`for the Third Circuit
`Nos. 23-1778, 23-1790, 23-1808, 23-1984,
`23-2544, 23-2559, 23-2560, 23-2612
`(consolidated)
`
`PJM Power Providers Group, et al.,
`Petitioners,
`v.
`Federal Energy Regulatory Commission,
`Respondent.
`
`
`
`
`
`
`
`
`On Petitions for Review
`of Orders of the
`Federal Energy Regulatory Commission
`
`BRIEF FOR RESPONDENT
`FEDERAL ENERGY REGULATORY COMMISSION
`
`Matthew R. Christiansen
`General Counsel
`
`
`
`
`
`November 13, 2023
`
`
`
`Robert H. Solomon
`Solicitor
`
`Jared B. Fish
`Attorney
`
`
`
`For Respondent
`Federal Energy Regulatory
`Commission
`888 First Street N.E.
`Washington, DC 20426
`Tel.: (202) 502-8101
`
`
`
`
`Case: 23-1778 Document: 75 Page: 2 Date Filed: 11/13/2023
`
`Table of Contents
`
`Page
`
`INTRODUCTION ........................................................................................ 1
`
`STATEMENT OF ISSUES ............................................................................ 4
`
`STATEMENT OF RELATED CASES AND PROCEEDINGS ....................... 5
`
`STATEMENT OF FACTS ............................................................................. 5
`
`I.
`
`Background ......................................................................................... 5
`
`A.
`
`The Federal Power Act ............................................................... 5
`
`B. Overview of wholesale electric power markets ........................... 6
`
`1.
`
`2.
`
`The transition to competitive wholesale power markets .... 6
`
`PJM provides power through competitive,
`wholesale power markets .................................................. 8
`
`C.
`
`PJM’s Tariff sets forth rules governing its
`administration of the capacity auction ...................................... 11
`
`D. Certain resources did not offer capacity into the 2024/2025
`auction, threatening an unnecessary price increase for southern
`Delaware consumers ................................................................ 12
`
`II.
`
`PJM files, and FERC accepts, a proposed change to its Tariff rules to
`address non-offering resources in a given capacity auction ................ 14
`
`SUMMARY OF ARGUMENT ..................................................................... 18
`
`ARGUMENT .............................................................................................. 22
`
`I.
`
`Standard of review ............................................................................ 22
`
`II.
`
`FERC’s orders accepting PJM’s Tariff revisions are lawful under the
`filed-rate doctrine and rule against retroactive ratemaking ................ 24
`
`
`
`
`
`Case: 23-1778 Document: 75 Page: 3 Date Filed: 11/13/2023
`
`
`
`A.
`
`B.
`
`C.
`
`D.
`
`E.
`
`F.
`
`PJM’s application of the Tariff Amendment to calculate the
`2024/2025 auction clearing price and to award capacity
`commitments was prospective because it did not alter the past
`legal consequences of past actions ........................................... 27
`
`Contrary to Petitioners’ assumptions, FERC reasonably
`concluded that PJM determined the 2024/2025 auction clearing
`price for the first time after the Tariff
`Amendment took effect ............................................................ 34
`
`1.
`
`2.
`
`3.
`
`Petitioners’ argument that PJM ran the optimization
`algorithm before the Tariff Amendment took
`effect is forfeited ............................................................. 36
`
`PJM may run the optimization algorithm multiple times,
`meaning a subsequent iteration does not retroactively
`override a prior run ......................................................... 37
`
`Running the algorithm is necessary, not sufficient, to
`determining the auction clearing price ............................ 40
`
`The Commission reasonably found that the Tariff Amendment is
`consistent with the Tariff provisions governing the posting and
`use of the LDA Reliability Requirement ................................... 47
`
`The Commission addressed Petitioners’ concern that PJM’s
`Tariff Amendment upset their s
`ettled expectations ................................................................... 52
`
`Intervenor-Petitioners’ argument, contrary to Petitioners’ own,
`is both forfeited and incorrect .................................................. 53
`
`Petitioners misstate FERC’s interpretation of the filed-rate
`doctrine and expand the doctrine beyond its limits ................... 55
`
`III. The Commission reasonably concluded that PJM’s Tariff Amendment
`is “just and reasonable,” after accounting for Petitioners’ asserted
`settled expectations .......................................................................... 57
`
`
`
`
`ii
`
`
`
`
`
`Case: 23-1778 Document: 75 Page: 4 Date Filed: 11/13/2023
`
`A.
`
`B.
`
`The Commission balanced Petitioners’ settled expectations
`against the benefits of accepting the Tariff Amendment ........... 59
`
`The Commission acted consistent with its case-by-case approach
`in weighing settled expectations against other interests ........... 62
`
`IV. Petitioners’ requested remedy is beyond the Court’s jurisdiction ....... 66
`
`CONCLUSION ........................................................................................... 68
`
`
`
`
`
`
`
`
`
`
`
`iii
`
`
`
`
`
`Case: 23-1778 Document: 75 Page: 5 Date Filed: 11/13/2023
`
`Table of Authorities
`
`
`
`
`
`
`
`
` Page(s)
`
`
`
`
`
`
`
`Court Cases:
`
`ANR Storage Co. v. FERC,
`
`904 F.3d 1020 (D.C. Cir. 2018) ........................................................ 65
`
`Ark. La. Gas Co. v. Hall,
`
`453 U.S. 571 (1981) .......................................................................... 24
`
`Associated Gas Distributors v. FERC,
`
`898 F.2d 809 (D.C. Cir. 1990) .......................................................... 25
`
`Bell Atl. Tel. Cos. v. FCC,
`
`79 F.3d 1195 (D.C. Cir. 1996) ..................................................... 27, 53
`
`Biestek v. Berryhill,
`
`139 S. Ct. 1148 (2019) ................................................................ 22, 59
`
`Bd. of Cty. Comm’rs of Weld Cty., Colo. v. EPA,
`
`72 F.4th 284 (D.C. Cir. 2023) .................................. 26–32, 34, 48, 53
`
`Borough of Ellwood City v. FERC,
`
`583 F.2d 642 (3d Cir. 1978) .............................................................. 24
`
`Boston Edison v. FERC,
`
`856 F.2d 361 (1st Cir. 1988) ............................................................. 26
`
`Bowen v. Georgetown Univ. Hosp.,
`
`488 U.S. 204 (1988) ........................................................................ 27
`
`Burlington Northern, Inc. v. United States,
`
`459 U.S. 131 (1982) .......................................................................... 67
`
`Cal. Dep’t of Water Res. v. FERC,
`
`306 F.3d 1121 (D.C. Cir. 2002) ......................................................... 54
`
`
`
`
`
`iv
`
`
`
`
`
`Case: 23-1778 Document: 75 Page: 6 Date Filed: 11/13/2023
`
`Table of Authorities
`
`
`
`
`
`
`
`
` Page(s)
`
`
`
`
`
`
`
`Court Cases:
`
`Citadel FNGE Ltd. v. FERC,
`
`77 F.4th 842 (D.C. Cir. 2023) ........................................................... 58
`
`
`
`Cogentrix Energy Power Mgmt., LLC v. FERC,
`
`24 F.4th 677 (D.C. Cir. 2022) ..................................................... 22, 32
`
`Columbia Gas Transmission Corp. v. FERC,
`
`895 F.2d 791 (D.C. Cir. 1990) ........................................................... 53
`
`Consol. Edison Co. of N.Y. v. FERC,
`
`347 F.3d 964 (D.C. Cir. 2003) .......................................................... 25
`
`Del. Div. of Pub. Advocate v. FERC,
`
`3 F.4th 461 (D.C. Cir. 2021) .............................................................. 10
`
`FCC v. Prometheus Radio Project,
`
`141 S. Ct. 1150 (2021) ................................................................ 22, 59
`
`Fed Cetera, LLC v. Nat’l Credit Servs.,
`
`938 F.3d 466 (3d Cir. 2019) ............................................................ 29
`
`Fed. Power Comm’n v. Tenn. Gas Co.,
`
`371 U.S. 145 (1962) .......................................................................... 25
`
`FERC v. EPSA,
`
`577 U.S. 260 (2016) ........................................................... 5–6, 22, 59
`
`Garland v. Ming Dai,
`
`141 S. Ct. 1669 (2021) ...................................................................... 66
`
`Hughes v. Talen Energy Mktg., LLC,
`
`578 U.S. 150 (2016) .................................................................. 8–9, 25
`
`
`
`
`
`v
`
`
`
`
`
`Case: 23-1778 Document: 75 Page: 7 Date Filed: 11/13/2023
`
`Table of Authorities
`
`
`
`
`
`
`
`
` Page(s)
`
`
`
`
`
`
`
`Court Cases:
`
`Int’l Transmission Co. v. FERC,
`
`988 F.3d 471 (D.C. Cir. 2021) ..................................................... 16, 66
`
`In re Wettach,
`
`811 F.3d 99 (3rd Cir. 2016) ......................................................... 37, 55
`
`Landgraf v. USI Film Prods.,
`
`511 U.S. 244 (1994) ............................................................. 27–29, 31
`
`La. Pub. Serv. Comm’n v. FERC,
`
`10 F.4th 839 (D.C. Cir. 2021) .......................................... 27, 31, 53, 55
`
`Midwest ISO Transmission Owners v. FERC,
`
`373 F.3d 1361 (D.C. Cir. 2004) ........................................................... 6
`
`Morgan Stanley Capital Grp. Inc. v. Pub. Util. Dist. No. 1 of
`
`Snohomish Cty.,
`
`554 U.S. 527 (2008) ........................................................................... 6
`
`Nantahala Power & Light Co. v. Thornburg,
`
`476 U.S. 953 (1986) ......................................................................... 26
`
`N.J. Bd. of Pub. Utils. v. FERC,
`744 F.3d 74 (3d Cir. 2014) (“New Jersey”) ... 6–9, 22, 24, 39, 41, 58–59, 62
`
`
`New York v. FERC,
`
`535 U.S. 1 (2002) ............................................................................... 7
`
`NextEra Energy Res., LLC v. FERC,
`
`898 F.3d 14 (D.C. Cir. 2018) ............................................................... 1
`
`
`
`
`
`NSTAR Elec. & Gas Corp. v. FERC,
`
`481 F.3d 794 (D.C. Cir. 2007) .......................................................... 23
`
`
`
`
`vi
`
`
`
`
`
`Case: 23-1778 Document: 75 Page: 8 Date Filed: 11/13/2023
`
`Table of Authorities
`
`
`
`
`
`
`
`
` Page(s)
`
`
`
`
`
`
`
`Court Cases:
`
`Okla. Gas & Elec. Co. v. FERC,
`
`11 F.4th 821 (D.C. Cir. 2021) ........................................... 11, 26, 32, 51
`
`Old Dominion Elec. Coop. v. FERC,
`
`892 F.3d 1223 (D.C. Cir. 2018) ................................... 6, 22, 24, 32, 57
`
`Oneok, Inc. v. Learjet, Inc.,
`
`575 U.S. 373 (2015) .................................................................... 50–51
`
`Pub. Citizen, Inc. v. FERC,
`
`839 F.3d 1165 (D.C. Cir. 2016) ................................................... 16–17
`
`SFPP, L.P. v. FERC,
`
`967 F.3d 788 (D.C. Cir. 2020) .......................................................... 23
`
`Sw. Pa. Growth All. v. Browner,
`
`121 F.3d 106 (3d Cir. 1997) .............................................................. 54
`
`
`
`
`
`
`Towns of Concord, Norwood, and Wellesley, Mass. v. FERC,
`
`955 F.2d 67 (D.C. Cir. 1992) ............................................................ 24
`
`Vistra Corp. v. FERC,
`
`80 F.4th 302 (D.C. Cir. 2023) ......................................... 29, 39, 58, 62
`
`West Deptford Energy, LLC v. FERC,
`
`766 F.3d 10 (D.C. Cir. 2014) ................................................. 33, 49–50
`
`Wis. Pub. Power, Inc. v. FERC,
`
`493 F.3d 239 (D.C. Cir. 2007) .......................................................... 16
`
`
`
`
`
`
`
`
`vii
`
`
`
`
`
`Case: 23-1778 Document: 75 Page: 9 Date Filed: 11/13/2023
`
`Table of Authorities
`
`
`
`
`
`
`
`
`
`
` Page(s)
`
`Administrative Cases:
`
`
`
`
`ISO New England Inc.,
`
`170 FERC ¶61,187 (2020) .......................................................... 63–65
`
`
`PJM Interconnection, L.L.C., (“GreenHat Order”)
`
`166 FERC ¶61,072 (2019) .......................................................... 63–64
`
`PJM Interconnection, L.L.C., (“Initial Order”)
`
`182 FERC ¶61,109 (Feb. 21, 2023) ......... 10, 12, 14–17, 28, 30, 41, 45,
` 50, 53, 56–57, 59, 61–62, 65
`
`PJM Interconnection, L.L.C., (“Rehearing Order”)
`
`184 FERC ¶61,055 (July 27, 2023) ......... 10, 12–14, 17–18, 26, 28–31,
` 36–46, 48–53, 55–58, 60–65
`
`Statutes:
`
`
`Administrative Procedure Act
`
`
`
`
`
`
`
`
`
`
`
`5 U.S.C. § 706(2)(A) ......................................................................... 22
`
`
`
`Federal Power Act
`
`
`
`
`
`
`
`Section 201, 16 U.S.C. §824 ............................................................... 5
`
`Section 205, 16 U.S.C. §824d ........................................................... 58
`
`Section 205(a), 16 U.S.C. §824d(a) ............................................... 5, 16
`
`Section 205(b), 16 U.S.C. §824d(b) .............................................. 5, 16
`
`
`
`
`
`
`
`Section 205(c), 16 U.S.C. §824d(c) ......................................... 5, 24, 26
`
`
`
`Section 205(d), 16 U.S.C. §824d(d) ................................................... 17
`
`
`
`
`viii
`
`
`
`
`
`Case: 23-1778 Document: 75 Page: 10 Date Filed: 11/13/2023
`
`Table of Authorities
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
` Page(s)
`
`Statutes:
`
`
`
`Section 206(a), 16 U.S.C. §824e ................................................. 16, 54
`
`
`
`Section 313(b), 16 U.S.C. §825l(b) .................................. 22, 54, 66–67
`
`
`
`Regulations:
`
`
`
`
`
`
`
`Section 206(a), 16 U.S.C. §824e(a) ......................................... 5, 24, 26
`
`18 C.F.R. §35.11 ................................................................................. 17
`
`18 C.F.R. §35.28(a)(7) ...................................................................... 37
`
`
`
`
`
`
`ix
`
`
`
`
`
`Case: 23-1778 Document: 75 Page: 11 Date Filed: 11/13/2023
`
`A
`
`APA
`
`Br.
`
`CETO
`
`Commission or FERC
`
`Constellation
`
`EPSA
`
`Initial Order
`
`Load-serving entity
`
`LDA
`
`
`
`
`
`
`Glossary
`
`Addendum
`
`Administrative Procedure Act
`
`Opening brief of Petitioners
`Constellation, EPSA, NRG, and P3
`
`The Capacity Emergency Transfer
`Objective, which is the amount of
`electric energy capacity that must be
`imported into a PJM region to
`compensate for a certain amount of
`loss of electric energy capacity within
`that region
`
`Respondent Federal Energy
`Regulatory Commission
`
`Petitioner Constellation Energy
`Generation, LLC
`
`Petitioner Electric Power Supply
`Association
`
`The first FERC order on judicial
`review: PJM Interconnection, L.L.C.,
`182 FERC ¶61,109 (Feb. 21, 2023)
`
`PJM-member utility that sells
`electricity to end-use retail customers
`
`Locational Deliverability Area, which
`is a geographic area with limited
`transmission capability to import
`electric capacity
`
`x
`
`
`
`
`
`Case: 23-1778 Document: 75 Page: 12 Date Filed: 11/13/2023
`
`LDA Reliability Requirement
`
`Market Monitor
`
`NRG
`
`P
`
`P3
`
`PJM capacity auction
`
`PJM Interconnection, L.L.C.
`
`Rehearing Order
`
`A measure of electric generation
`capacity that is projected to be
`available within an LDA plus the
`capacity that must be imported into
`the LDA to ensure grid reliability
`
`The Independent Market Monitor,
`which is responsible for carrying out
`market monitoring functions in
`FERC-approved regional
`transmission organizations like PJM
`
`Petitioner NRG Business Marketing
`LLC
`
`Internal paragraph number in a FERC
`order
`
`Petitioner PJM Power Providers
`Group
`
`Wholesale market designed to ensure
`adequate electric capacity (i.e., the
`ability for an electric generator to
`produce power) to meet projected
`electric load (i.e., consumer demand)
`in the future
`
`FERC-regulated regional
`transmission organization—termed a
`“wholesale market operator”
`herein—for 13 Mid-Atlantic States
`and the District of Columbia
`
`Order on FERC rehearing of the
`Initial Order and here on judicial
`review: PJM Interconnection, L.L.C.,
`184 FERC ¶61,055 (July 27, 2023)
`
`
`
`
`xi
`
`
`
`
`
`Case: 23-1778 Document: 75 Page: 13 Date Filed: 11/13/2023
`
`Tariff Amendment
`
`Wholesale market operator
`
`PJM’s December 23, 2022-filed
`amendment to its Tariff to permit
`modifications to the LDA Reliability
`Requirement to address significant
`mismatches between electric
`generation resources that PJM
`expects to place capacity offers in a
`particular capacity auction and those
`that ultimately do
`
`A regional transmission organization
`that operates the electric
`transmission system and manages
`wholesale sales through markets like
`the PJM capacity auction
`
`
`
`
`xii
`
`
`
`
`
`Case: 23-1778 Document: 75 Page: 14 Date Filed: 11/13/2023
`
`
`
`
`
`
`
`In the United States Court of Appeals
`for the Third Circuit
`Nos. 23-1778, 23-1790, 23-1808, 23-1984,
`23-2544, 23-2559, 23-2560, 23-2612
`(consolidated)
`
`PJM Power Providers Group, et al.,
`Petitioners,
`v.
`Federal Energy Regulatory Commission,
`Respondent.
`
`
`
`
`
`
`On Petitions for Review
`of Orders of the
`Federal Energy Regulatory Commission
`
`BRIEF FOR RESPONDENT
`FEDERAL ENERGY REGULATORY COMMISSION
`
`INTRODUCTION
`
`
`
`
`
`
`
`
`The Federal Power Act entrusts the Federal Energy Regulatory
`
`Commission (“Commission” or “FERC”) with “protect[ing] consumers from
`
`excessive rates and charges.” NextEra Energy Res., LLC v. FERC, 898 F.3d
`
`14, 21 (D.C. Cir. 2018) (cleaned up). Electric utilities’ rates must be “just
`
`and reasonable” such that they are high enough to ensure a reliable electric
`
`supply without over-billing ratepayers. See id. at 20; 16 U.S.C. §824d(a).
`
`This case involves a challenge to Commission orders that prevented a
`
`
`
`
`
`
`
`Case: 23-1778 Document: 75 Page: 15 Date Filed: 11/13/2023
`
`projected rate increase of more than four times what is necessary to ensure
`
`grid reliability.
`
`
`
`The Nation’s interstate electric grid is divided into geographic regions.
`
`In many of these regions, the grid is managed by a FERC-regulated regional
`
`transmission organization, hereafter termed a “wholesale market operator.”
`
`PJM Interconnection, L.L.C. is one such operator. Its territory spans 13
`
`States and the District of Columbia. To ensure a reliable electric supply at
`
`competitive prices, PJM holds an auction to secure electric power capacity
`
`that is adequate to meet projected consumer demand.
`
`The auction is really a request for capacity offerings. Electric
`
`generators (power plants), many of which are represented by Petitioners,1
`
`submit a price they are willing to receive to commit their resources to
`
`providing electric energy to the grid. PJM then matches these capacity offers
`
`against a curve that represents future demand for electricity. After an
`
`administrative review of the results, and after making necessary
`
`adjustments, PJM posts a clearing price for the capacity auction. All
`
`
`Constellation Energy Generation, LLC (“Constellation”), Electric
`1
`Power Supply Association (“EPSA”), NRG Business Marketing LLC
`(“NRG”), and PJM Power Providers Group (“P3”).
`
` 2
`
`
`
`Case: 23-1778 Document: 75 Page: 16 Date Filed: 11/13/2023
`
`resources that clear receive the clearing price, in exchange for committing to
`
`supply a specified amount of electricity when needed.
`
`The matter on review involves a PJM capacity auction (the
`
`“2024/2025 auction”) to secure electric capacity for the year commencing
`
`June 1, 2024 (the “delivery year”). PJM accepted capacity offers from
`
`December 7, 2022 through December 13, 2022. After the auction window
`
`closed but before PJM posted the clearing price, PJM discovered an anomaly:
`
`Not all the generation resources it expected to place offers in southern
`
`Delaware actually did place offers. That risked warping the auction results
`
`for that area because it meant one of the inputs (the Locational Deliverability
`
`Area (“LDA”) Reliability Requirement) PJM used to develop the auction
`
`demand curve for southern Delaware included generation resources that did
`
`not participate. Had PJM completed the auction under the then-in-effect
`
`demand curve, consumers would have incurred a surcharge, PJM projected,
`
`of approximately $100 million.
`
`At the relevant time, PJM’s Tariff allowed it to adjust a problematic
`
`LDA Reliability Requirement under certain conditions. On December 23,
`
`2022, PJM filed with the Commission an amendment to its Tariff (the
`
`“Tariff Amendment”) to add one more condition to the list: If planned
`
` 3
`
`
`
`Case: 23-1778 Document: 75 Page: 17 Date Filed: 11/13/2023
`
`resources that PJM expects to place capacity offers do not do so, and the
`
`addition of those resources materially affects the LDA Reliability
`
`Requirement, then PJM will adjust the Requirement to exclude those
`
`resources. It would then calculate the clearing price based on the adjusted
`
`version. On February 21, 2023, the Commission granted PJM’s request, and
`
`six days later PJM posted the clearing price for the 2024/2025 capacity
`
`auction.
`
`
`
`I.
`
`STATEMENT OF ISSUES
`
`Did the Commission’s approval of PJM’s Tariff Amendment comply
`
`with the filed-rate doctrine and rule against retroactive ratemaking,
`
`where those principles require a utility like PJM to apply its Tariff
`
`rules that are on file with the Commission, and where PJM applied
`
`the rules on file—the Tariff Amendment—to determine the
`
`2024/2025 capacity auction clearing price and auction
`
`participants’ capacity commitments?
`
`II. Did the Commission reasonably conclude, after balancing
`
`consumers’ interest in not paying an unnecessary surcharge against
`
`Petitioners’ expectation that the pre-amended 2024/2025 capacity
`
` 4
`
`
`
`Case: 23-1778 Document: 75 Page: 18 Date Filed: 11/13/2023
`
`auction rules would control the auction outcome, that it was “just
`
`and reasonable” to accept PJM’s Tariff Amendment?
`
`STATEMENT OF RELATED CASES AND PROCEEDINGS
`
`
`
`
`This case has not previously been before this Court and the
`
`Commission is not aware of any other related case or proceeding.
`
`STATEMENT OF FACTS
`
`I. Background
`
`A.
`
`The Federal Power Act
`
`
`
`
`
`
`
`Section 201 of the Federal Power Act, 16 U.S.C. §824, gives the
`
`Commission exclusive jurisdiction over the rates, terms, and conditions of
`
`service for the transmission and sale at wholesale of electric energy in
`
`interstate commerce. See FERC v. EPSA, 577 U.S. 260, 264–266 (2016).
`
`Under Section 205, §824d(a)–(b), all rates related to the transmission
`
`or sale of electric energy, and all related rules and regulations, must be “just
`
`and reasonable” and not “undu[ly] preferen[tial].” Further, the rates a utility
`
`charges must be on file with the Commission and publicly available.
`
`§824d(c).
`
`Under Section 206, §824e(a), if the Commission finds, on its own
`
`initiative or upon a third-party complaint, that an existing rate, or a rule,
`
` 5
`
`
`
`Case: 23-1778 Document: 75 Page: 19 Date Filed: 11/13/2023
`
`regulation, or practice affecting such rate, is “unjust, unreasonable, unduly
`
`discriminatory or preferential,” it must set a new just and reasonable rate, see
`
`FERC v. EPSA, 577 U.S. at 266, but may do so only prospectively, Old
`
`Dominion Elec. Coop. v. FERC, 892 F.3d 1223, 1226–1227 (D.C. Cir. 2018).
`
`B. Overview of wholesale electric power markets
`
`1.
`
`The transition to competitive wholesale power markets
`
`
`
`
`
`Traditionally, wholesale rates for electricity were primarily set on an
`
`individualized, cost-of-service basis. Morgan Stanley Cap. Grp. Inc. v. Pub.
`
`Util. Dist. No. 1 of Snohomish Cty., 554 U.S. 527, 532 (2008). That changed
`
`in 1996 with FERC Order 888 and in 1999 with FERC Order 2000, which
`
`normalized market-based rates. N.J. Bd. of Pub. Utils. v. FERC, 744 F.3d 74,
`
`81 (3d Cir. 2014) (“New Jersey”); Midwest ISO Transmission Owners v.
`
`FERC, 373 F.3d 1361, 1363–1364 (D.C. Cir. 2004). Among other things,
`
`both orders encouraged electric transmission owners to divest control of their
`
`transmission facilities and turn over operations to a wholesale market
`
`operator. Id. These market operators “are ‘public utilities’ under the
`
`[Federal Power Act], and are thus subject to FERC’s regulation.” New
`
`Jersey, 744 F.3d at 81. Taken together, FERC Orders 888 and 2000 sought
`
`to leverage market forces to promote competition in wholesale sales of
`
` 6
`
`
`
`Case: 23-1778 Document: 75 Page: 20 Date Filed: 11/13/2023
`
`electricity. New York v. FERC, 535 U.S. 1, 11 (2002); New Jersey, 744 F.3d
`
`at 82.
`
`
`
`
`
`Figure 1: Wholesale market operators, available at https://perma.cc/NZY3-JPQB
`
`
`
` 7
`
`
`
`Case: 23-1778 Document: 75 Page: 21 Date Filed: 11/13/2023
`
`2.
`
`PJM provides power through competitive, wholesale power
`markets
`
`
`
`PJM Interconnection, L.L.C. is one of several wholesale market
`
`operators. See Figure 1, supra. Its footprint is large, covering part or all of 13
`
`States and the District of Columbia. New Jersey, 744 F.3d at 82. “One of
`
`PJM’s primary responsibilities as system operator is to ensure that there is a
`
`sufficient amount of electrical capacity within its system to provide reliable
`
`electricity to its consumers during periods of peak demand. ‘Capacity’ is not
`
`electricity itself but the ability to produce it when necessary.” Id. (cleaned
`
`up). Demand for electric energy is termed “load,” and local utilities that sell
`
`electricity to end-use consumers are deemed, in industry vernacular,
`
`“load-serving entities.” Id.
`
`PJM administers “a ‘capacity auction’ to ensure the availability of an
`
`adequate supply of power at some point in the future.” Hughes v. Talen
`
`Energy Mktg., LLC, 578 U.S. 150, 155 (2016). The capacity auction relevant
`
`to this case is the Base Residual Auction. As pertinent here, the auction’s
`
`primary purpose is to ensure “that [PJM’s] system will be reliable.” New
`
`Jersey, 744 F.3d at 84. A higher auction clearing price encourages the
`
`construction of new resources, whereas a lower price signals a need for the
`
` 8
`
`
`
`Case: 23-1778 Document: 75 Page: 22 Date Filed: 11/13/2023
`
`“retirement of existing high-cost generators.” Hughes, 578 U.S. at 156.
`
`Consumers ultimately bear the cost of the clearing price through the rates
`
`they pay their local load-serving entities. See New Jersey, 744 F.3d at 84.
`
`PJM conducts the auction to secure capacity sufficient to meet
`
`projected system demand for a full year (the delivery year). Id. at 82, 84.
`
`The delivery year generally takes place three years in the future.2 Id.
`
`Capacity sellers (i.e., capacity resources like electric generators or entities
`
`that have contracted for capacity) offer their capacity into the auction at the
`
`minimum price they are willing to receive. Id. at 83. PJM clears the auction
`
`by accepting offers until there is sufficient capacity to satisfy PJM’s
`
`projected demand for each sub-region within PJM—an approach called the
`
`Reliability Pricing Model. Id. at 83–84. These sub-regions are called
`
`Locational Deliverability Areas. Id. All offers that clear the auction receive
`
`the clearing price relevant to a particular LDA, which may differ from PJM’s
`
`regionwide clearing price. See id.; Hughes, 578 U.S. at 156 n.2; PJM Tariff,
`
`Attach. DD, §§5.11(e); 6.2(b), A57–A58, A68. In the matter on review, the
`
`capacity auction for the Delmarva Power & Light–South LDA
`
`
`Market reforms in recent years have resulted in a compressed schedule.
`
`2
`
` 9
`
`
`
`Case: 23-1778 Document: 75 Page: 23 Date Filed: 11/13/2023
`
`(“Delmarva”)—which covers southern Delaware—commenced on December
`
`7, 2022, for the delivery year beginning June 1, 2024. PJM Interconnection,
`
`L.L.C., 184 FERC ¶61,055, PP 4, 10 (July 27, 2023), JA___–___, ___
`
`(“Rehearing Order”). Because the delivery year spans June 1, 2024 to May
`
`31, 2025, the auction is hereafter termed the “2024/2025 auction.”
`
`The shape of the capacity demand curve for each LDA, and for the PJM
`
`region as a whole, depends on certain inputs. One such input is the LDA
`
`Reliability Requirement, PJM Interconnection, L.L.C., 182 FERC ¶61,109,
`
`P 3 (Feb. 21, 2023), JA___–___ (“Initial Order”), which “is the amount of
`
`capacity that must be produced to meet peak demand, including a reserve
`
`margin,” Del. Div. of Pub. Advocate v. FERC, 3 F.4th 461, 463–464 (D.C. Cir.
`
`2021). Specifically, the Requirement represents the internal generation
`
`capacity within an LDA plus the amount of capacity that must be imported
`
`into the LDA to maintain grid reliability. Rehearing Order P 6, JA___. This
`
`imported capacity is called the Capacity Emergency Transfer Objective
`
`(“CETO”). Id.
`
`
`
`
`
` 10
`
`
`
`Case: 23-1778 Document: 75 Page: 24 Date Filed: 11/13/2023
`
`C.
`
`PJM’s Tariff sets forth rules governing its administration of the
`capacity auction
`
`Under the filed-rate doctrine, a utility like PJM may apply only its
`
`
`
`Tariff rules that are on file with the Commission. Okla. Gas & Elec. Co. v.
`
`FERC, 11 F.4th 821, 829 (D.C. Cir. 2021). At the time PJM commenced the
`
`2024/2025 auction, its capacity auction rules prescribed the following:
`o “The parameters of the [LDA demand curve] will be established prior to
`
`the conduct of the Base Residual Auction for a Delivery Year and will be
`
`used for such Base Residual Auction.” Tariff, Attach. DD,
`
`§5.10(a)(vi)(A), A53.
`o “[PJM] shall determine the … [LDA] Reliability Requirement … on or
`
`before February 1, prior to the conduct of the Base Residual Auction[.]”
`
`§5.10(a)(vi)(B), A53.
`o “[P]rior to conducting the Base Residual Auction,” “PJM will post …
`
`[t]he [LDA] Reliability Requirement” for a given LDA. §5.11(a), (a)(v),
`
`A56.
`o After generator capacity offers are received and the offer window closes,
`
`see §§5.6, 5.6.1, 5.8, A35–A37, A40–A41, “[PJM] shall employ an
`
`optimization algorithm … to evaluate the Sell Offers and other inputs to
`
` 11
`
`
`
`Case: 23-1778 Document: 75 Page: 25 Date Filed: 11/13/2023
`
`such auction to determine the Sell Offers that clear such auction.” §5.12,
`
`A59. The algorithm “shall be applied” in a way that “minimiz[es] the
`
`cost of satisfying the reliability requirement[].” §5.12(a), A59–A60.
`o After running the optimization algorithm, “[PJM] shall calculate a
`
`clearing price” for the auction. §5.14(a), A67. “PJM will post” the
`
`clearing price “as soon … as possible” after making any necessary
`
`adjustments to, for example, the LDA Reliability Requirement. §5.11(e),
`
`A57–A58. At the time PJM commenced the 2024/2025 auction, PJM
`
`could adjust the LDA Reliability Requirement to, for example, reflect
`
`Price Responsive Demand,3 correct errors, and address
`
`lower-than-expected clearing of energy efficiency resources. Rehearing
`
`Order P 58 n.185, JA___.
`
`D. Certain resources did not offer capacity into the 2024/2025
`auction, threatening an unnecessary price increase for southern
`Delaware consumers
`
`In conducting the 2024/2025 capacity auction, PJM complied with its
`
`
`
`auction rules by timely posting the LDA Reliability Requirement for
`
`
`Price Responsive Demand refers to end-use consumers capable of
`3
`curtailing their energy use within a short timeframe in response to variable
`energy prices. See Initial Order P 17 n.58, JA___.
`
` 12
`
`
`
`Case: 23-1778 Document: 75 Page: 26 Date Filed: 11/13/2023
`
`Delmarva (on August 29, 2022), and timely opening the auction window (on
`
`December 7, 2022) and closing it (on December 13, 2022). Id. PP 10, 35,
`
`JA___–___, ___–___. But after the offer window closed, PJM discovered
`
`an anomaly. Its LDA Reliability Requirement counted as capacity resources,
`
`for purposes of the 2024/2025 delivery year, planned facilities that were to
`
`be built and placed into service prior to June 1, 2024. Id. PP 6, 8, JA___,
`
`___. That is, PJM expected these new resources to be available to provide
`
`electric generation capacity beginning June 1. Yet “a significant amount” of
`
`those resources “did not offer [their capacit
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
