Agenda Date: 3/12/12
Agenda Item: 2F
STATE OF NEW JERSEY
Board of Public Utilities
44 South Clinton Avenue, 9thFloor
Post Office Box 350
Trenton, New Jersey 08625-0350
www.ni.~:lov/bpul
ENERGY
IN THE MATTER OF A MOTION FOR
RECONSIDERA--ION REGARDING FERC'S JANUARY
30, 2012 ORDEF ACCEPTING, REJECTING, AND
SUSPENDING PJM'S PROPOSED CHANGES TO RPM
AND ESTABLIS~IING SETTLEMENT PROCEEDINGS
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ORDER OF APPROVAL
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DOCKET NO. ER12010002
BY THE BOARD:
The New Jersey Board of Public Utilities ("Board") HEREBY RATIFIES a Motion for
Reconsideration ("Motion") filed with the Federal Energy Regulatory Commission ("FERC" or
"Commission") orl February 29,2012, under FERC Docket No. ER12-513.
The motion aSSE!rts an erroneous reading of the PJM Interconnection L.L.C. ("PJM") Open
Access Transmis sian Tariff ("Tariff') regarding the administratively determined Gross Cost of
New Entry ("COI-JE") and Net CONE values. These values are used to calculate both the
Reliability Pricing Model ("RPM") clearing price and the Minimum Offer Price Rule ("MOPR").
The RPM clearirlg price determines the amount paid to all generators that clear the RPM
auction, while the MOPR defines economic entry into the PJM Market.
On December 1, 2011, PJM submitted
the capacity auc':ion rules associated
demand curve, tt,e Variable Resource
VRR Curve, the (,ross CONE, and the
proposed changes to its Tariff revising certain aspects of
with RPM. PJM's proposal specifically alters the RPM
Requirement Curve ("VRR Curve") and two inputs of the
Net Energy and Ancillary Services Revenue offset ("EAS
Revenue").
On January 3D, ~012, FERC issued an Order ("January 30 Order") rejecting PJM's proposal for
establishing the region-wide Net CONE and region-wide Gross CONE, finding that the proposal
was unsupported and not shown to be just and reasonable.1 As a predicate to this finding, the
1 PJM Interconnec1ion L.C.C., 138 FERC 1161,062 (2012) at PP 63-64.
January 30 Orde r states that "region-wide Net CONE is calculated by subtracting region-wide
EAS Revenues "om the lowest Gross CONE value of any CONE Area."2 However, the regionwide Gross COI-JE in PJM's Tariff is a stated, static value of $112,868 per MW/year, as
opposed to a d~namic calculation of the lowest Gross CONE areas in PJM. Thus, FERC's
finding is based on an incorrect interpretation of PJM's Tariff. The January 30 Order further
compounds the E~rrorby rejecting this aspect of PJM's filing when the proposal was not shown
to be patently de'lcient.
It is well establi~;hed that the Commission may only dismiss a filing if "no genuine issue of
material fact ma:erial to the decision" exists.3 However, FERC's January 30 Order rejected
PJM's filing as "Jnsupported," despite the fact that the January 30 Order contains a lengthy
discussion of P.. M's reasoning behind its proposal, and a detailed review of other parties'
proposed alternative methods for calculating region-wide CONE values.4 It therefore appears
that genuine isSLes of material fact exist as to the proper Gross CONE values and as to what
methodology should be used to calculate region-wide Gross and Net CONE values.
FERC's January 30 Order also sets for hearing PJM's proposal for calculating Gross CONE in
all five RPM-wi,je CONE Areas, while outright dismissing PJM's proposed Net CONE
calculation methc,dology. This creates a fundamental disconnect between these interconnected
elements of PJMs proposal and alters the basis of PJM's filing.
On February 29, 2012, the Board as a member of the RPM Load Groups requested rehearing of
the rejection of FJM's region-wide CONE proposal because this specific aspect of the January
30 Order was er"oneous. The RPM Load Group also requested that FERC set the issue for
evidentiary hearillg procedures, and suspended the hearing pending the outcome of ongoing
settlement discus sions.
WHEREFORE, after consideration of all pertinent materials submitted in this matter, and review
by Board Staff, ttle Board HEREBY FINDS that the actions discussed herein properly effectuate
the Board's goals regarding the ongoing settlement proceedings associated with FERC's January
30 Order. Theref,)re, according to the provisions of this Order, the Board HEREBY RATIFIES this
2 Id. at P 62 (citing 'JM Open Access Transmission Tariff, Attachment DD, sections 2.42 and 5.1 O(a)(ivv)(emphasis added)).
3 See, e.g., ANR P~)eline Corp. v. FERC, 931 F.2d 88,92 (D.C. Cir. 1991); 18 C.F.R. § 385.217.
4 Id. at PP 62-64; sl~e also PJM's justification for its proposed revisions at PP 47-48.
5 The RPM Load G .oup includes the PJM Industrial Customer Coalition; Old Dominion Electric
Cooperative; Public Power Association of New Jersey; Delaware Division of Public Advocate; Southern
Maryland Electric Cooperative, Inc.; North Carolina Electric Membership Corporation; DC Office of
People's Counsel; J\merican Municipal Power, Inc.
2
BPU DOCKET NO. ER12010002
Motion for Recorsideration filed with the Commission pursuant to a FERC imposed deadline, on
February 29, 201 2.
DATED:
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BOARD OF PUBLIC UTILITIES
BY:
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JJ~~~D~
~~~~~~N~~LDEN
NICHOLAS ASSI:L TA
COMMISSIONEFt
ATTEST:
!UJ~ 1y
KRISTI
IZZO
SECRET)~RY
3
BPU DOCKET NO. ER12010002
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULA TORY COMMISSION
PJM Interconne;tion,L.L.C.
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DocketNo. ER12-513-000
F'EQUESTOF mE RPM LOAD GROUPFORREHEARING
Pursuantto Section313 of the FederalPowerAct ("FPA"), 16 ~~S.C.§ 825/, and Rule
713 of the Fedelal EnergyRegulatoryCommission's("Commission")Rulesof Practiceand
Procedure,18C.F.R. § 385.713,the PJM Industrial CustomerCoalition; Old Dominion Electric
Cooperative;Public PowerAssociationof New Jersey;Delaware Division of Public Advocate;
SouthernMaryl~mdElectric Cooperative,Inc.; North Carolina Electric MembershipCorporation;
DC Office of People'sCounsel;American Municipal Power,Inc.; and New JerseyBoard of
Public Utilities ~collectively, "RPM Load Group") hereby request rehearing of one determination
in the Commission'sJanuary30,2012 "OrderAccepting, Rejecting,and SuspendingTariff
Revisions,and l:stablishing Hearingand SettlementJudgeProcedures,"138 FERC, 61,062
(20]2) ("Januar:)'30 Order"). Specifically,the RPM Load Group requestsrehearingof the
Commission'srejectionofPlM's proposalregardingthe calculationof the region-wideGross
Costof New En1ry ("CONE") and region-wideNet CONE, and further requeststhat the
Commissionsetthis proposalfor evidentiaryhearing.
I.
INTRODUCTION AND BACKGROUND
On Oecenber 1,2011, PJM Interconnection,L.L.C. ("PJM") submittedproposedchanges
to its OpenAccess TransmissionTariff ("Tariff') to revise certainfeaturesassociatedwith its
capacity auction rules in the PJM Reliability Pricing Model ("RPM").
The PJM proposal
specifically pro):oseschangesto the RPM demandcurve,the Variable ResourceRequirement
Curve ("VRR Curve") andtwo inputs of the VRR Curve,the GrossCONE, and the Net Energy
and Ancillary S,~rvicesRevenueoffset ("EAS Revenue"). The January30 Order, inter alia,
rejectsrIM's proposalfor establishingthe region-wide Net CONE and region-wideGross
CONE, finding thatthe proposalis unsupportedand has not beenshownto be just and
reasonable.)A~ a predicateto this finding, the January30 Orderstatesthat "region-wide Net
CONE is calcul;ltedby subtractingregion-wideE&AS Revenuesfromthe lowest Gross CONE
value ofany CC'NEArea."2 This statementis factually incorrectbecausethe region-wide Gross
CONE in PIM's Tariff is a statedvalue of$112,868 per MW/year. The January30 Order
compoundsthe ~ctual error by rejectingthis aspectofPJM's filing when PJM's proposalwas not
shownto be patt:ntlydeficient.
By this filing, the RPM Load Group respectfully requests rehearing of the rejection of
PJM's region-wide CONE proposalbecausethis specific aspectof the January30 Order is
erroneous. Inst(ad of rejectingrIM's region-wide CONE proposal,the Commissionshould have
setthe issuefor ~videntiaryhearingprocedures,and suspendedthe hearingpendingthe outcome
of settlementjucge proceedings,as the Commissiondid for other CONE issuesthat were
addressedby the January30 Order.
II.
STATEMENT OF ISSUES AND SPECIFICATIONS OF ERROR
Pursuantto Rule 713(c)of the Commission'sRules of Practiceand Procedure,18C.F.R.
§ 385.713(c),th<:PJM Load Group respectfullystatesthe following issuesand specifiesthe
following error in the Commission'sJanuary30 Order:
T,heJanuary30 Order is erroneousbecauseit restson a misunderstanding
ttat region-wideNet CONE is, currently, calculatedby subtractingregion~ ide E&AS Revenuesfrom the lowestGrossCONE value of any CONE
1
SeeJanuary 30 Orier at PP 63-64.
21d at P 62 (citing :>JM OpenAccess TransmissionTariff, Attachment DD, sections2.42 and 5. 1O(a)(iv-
v)(emphasis
added).
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A.
area. See,e.g.,So. Co/. Edison Co., 805 F.2d 1068, 1072(D.C. Cir. 1986)
(;lgencydeterminationsmustbe basedon reasonedanalysisand evidence
ill the record).
lhe January30 Order is erroneousbecauseit rejectedthe PJM proposal
illstead of settingthe issuefor evidentiaryhearing. See,e.g.,ANR
lipeline Corp. v. FERC,931 F.2d 88, 92 (D.C. Cir. 1991)(statingstandard
fi >routright rejection of filings); 18C.F.R. § 385.217. II
III.
REQUESTFORREHEARING
1 'HE COMMISSION'S CONCLUSION REGARDING PJM'S REGION'VIDE CONE PROPOSAL IS PREMISED UPON AN INCORRECT
lNDERSTANDING OF THE PJM TARIFF.
PJM stat~sthat its proposalto modify the region-wideGrossCONE and region-wide Net
CONE valuesis necessarybecausethe currentTariff, in P1M'stenns, pennits a situationwhere
an "unreasonably" low region-wide CONE value is not representativeof the entire PJM
footprint, and cculd lead to insufficient capacityinvestments.3To correctthis purported
deficiency, PJM proposestwo modifications. First, PJM proposesto setthe region-wide Net
CONE equalto Ihe medianof the Net CONE valuesof the five CONE Areas. Second,PJM
proposesto set t.1eregion-wideGross CONE equalto the GrossCONE componentof the
selectedmedian Net CONE. The region-wideGross CONE valuewould be used only to
calculatethe ma~imumprice on the region-wide VRR Curve, consistentwith the "higherof'
approachto con~;tructingthe VRR Curve that was approvedby the January30 Order.
The January30 Order rejectsthe entiretyofPJM's region-wide CONE proposalbecause,
accordingto the Order, "P1M hasfailed to demonstratethat its proposalis neededto encourage
entry in other, higher-cost,but unconstrainedCONE Areas.,,4The January30 Order also
observesthat "P,fM'sjustification for changingthe region-wideNet CONE calculationis based
3See Transmittal utter at 14.
4 January 30 Order: It P 64.
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on only one oftltese components-Gross CONE."S However, in rejectingthe PJM proposal,the
Commissionin(orrectly basesits analysisand its ultimate conclusionon an incorrectreadingof
the PJMTariff. Specifically, the January30 Orderoperateson the premisethat the GrossCONE
componentoft'r e current approachfor calculatingregion-wide Net CONE is always equalto the
lowestGrossC<)NE value of any CONE Area. However, that premiseis not correct.
The PJN Tariff providesthat the "Cost of New Entry for the PJM Region shall be
$112,868per MW year."6 The GrossCONE in the currentTariff, therefore,is a specifiedvalue
and is not tied t(1any specific CONE Area'sGross CONE value. In accordancewith the Tariff,
this specifiedvalue escalatesover time "basedon changesin the applicable H-W Index."? PJM's
filing attemptedto make clearthat "the statedGrossCONE value for the PJM region now in the
Tariff corres~on~ to the lowestGross CONE value for any CONE Area, but nothing in the
Tariff or in any ~:ommissionorderrequiresPJMto basethe region-wide Gross CONE on the
lowest CONE A 'reaCONE value.'Is PJM's attempted clarification is particularly appropriate in
light ofPJM's proposedchangesto all five CONE Area CONE values. Becausethe
Commission'sultimate detemIination-i.e., rejectionofP]M's region-wide CONE proposalstems from this Inisunderstanding of the status quo, the ultimate determination in the January 30
Orderdoes not cJnstitutereasoneddecision-makingand is otherwiseunsupportedby the
evidencein the r~cord.9 The RPM Load Group,therefore,respectfullyrequeststhat the
5[d. at P 62.
6 SeePJM OATT, .AttachmentDO, § 5.10(a)(iv). It is true that the region-wide Gross CONE numberis identical to
the lowest GrossC(INE of any CONE Area -$112,868/MW year -currently in effect. That Gross CONE numberis
currently specified i1 the OATT for CONE Areas 2, 4, and 5. However,FERC acceptedPJM's proposedchangesto
the Gross CONE va ues for eachof the five specifiedCONE Areas,while keeping the region-wide GrossCONE
number fixed, thus Jundamentallychangingthe relationshipbetweenregion-wide CONE and the Area CONEs that
currently exists in tte PJM OATT.
7 [d. at § 5.10(a)(iv):B).
8 PJM Transmittal letter at 14 (emphasisadded).
9 Cf So. Cal Edison Co.,805 F.2d 1068,1072(D.C. Cir. 1986).
II
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Commissiongrarlt rehearingand, as discussedbelow, add PJM'sregion-wideCONE proposalto
the list of issuessetfor a hearingand settlementjudge process.
B.
THE COMMISSIONERREDBY REJECTING mE PJM REGION-WIDE
CONE PROPOSALINSTEAD OF SETTING mE ISSUEFOR
EVIDENTIARY HEARING.
As discu:.sedabove,the January30 OrderrejectsPJM's proposalto revise the
methodologyfor establishinga region-wide Net CONE and region-wideGrossCONE, finding
that P1M'sfiling was "unsupported."IOIn rejectingthis portion ofP1M's filing, and not setting
the issue for evi<lentiary hearing along with other issues at stake in this proceeding, the January
30 Ordererrs by ignoring precedentas well as Commissionregulations. The Commission
should grantrehl:aringand setthis issuefor evidentiaryhearing.
The Commissionmay only dismissa filing if there is "no genuineissueof material fact
material to the dl:cision. ,,11 Put another way, a filing must be "patently either deficient in form or
a substantivenullity" in orderto be rejectedoutright. 12The January30 Order claims that the
PJM filing is "ursupported," thus warranting rejection. 13 However, in its discussion of the PJM
proposalto revis~the region-wideGrossCONE and region-wideNet CONE, the Commission
explains at some lengthPJM's reasoningfor making its proposal,and also explains otherparties'
concernsand noles their proposedalternativemethodsfor region-wideGross CONE and Net
CONE calculaticns.14For example,PIM setsforth evidenceand argumentin an attemptto
justify its propos~1on the groundsthat the currentGrossCONE value "is unreasonablylow
relative to the re!"t of the PJM Region" and that its new proposal would "make the PJM Region
10SeeJanuary30 Older at P 17.
II See, e.g.,ANR PiJ.eline Corp. v. FERC,931 F.2d 88, 92 (D.C. Cir. 1991); 18 C.F.R. § 385.217.
12See United Gas line Co. v. FERC, 707 F.2d 1507,1511-12(D.C. Cir. 1983).
13SeeJanuary3 Ord er at P 17.
14Id. at PP 62-64; SEe also PJM's justification for its proposedrevisions at PP 47-48.
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price more repr~sentative of pricing throughout the PJM footprint. IIIS In response, and as
indicated by the January30 Order, severalpartiesobjectedto the PJM proposaland some
submittedpoten:ialmodificationsto the proposalfor calculatingregion-wide CONE values.16
Moreover, at least one party argued in favor of retaining the current methodology. I?
Consideringthe fact that the competingproposalsfor the GrossCONE values in the five
CONE Areas co .1taindifferent proposedGrossCONE values, it is evidentthat a genuineissueof
material fact exi)ts asto the properGrossCONE values. It is also evidentthat a genuinedispute
exists asto how the region-wideGrossCONE and region-wideNet CONE valuesshould be
calculatedrelati11e
to the varying GrossCONE values for the five CONE Areas. The January30
Order setsfor h~aring PJM's proposalsfor calculatingGross CONE in all five CONE Areas.
Settingthe Gros; CONE values for the CONEAreas for hearing, without simultaneously
consideringregil)n-wide CONE values,createsa fundamentaldisconnectbetweenthe regionwide CONE vallles and the valuesthat will be determinedfor eachof the five CONE Areas. The
January30 Order errs in not explainingthe disparatetreatmentaccordedthe region-wide CONE
values. Consistt nt with Commission regulations and precedent, and consistent with the
Commission'strl:atment in the January30 Orderof GrossCONE proposalsfor all five CONE
Areas in PJM, tl1eCommissionshould grant rehearingand setthe issuesof region-wide Net
CONE and regicn-wide Gross CONE for evidentiaryhearingand settlementjudge procedures.
15See Transmittal Letter at ]4.
16See,e.g., Motion :0 Interveneand ProtestofLS Power Associates,L.P. at ]3 (Dec. 22, 20] I).
17See,e.g., Motion :0 Intervene,Comments,Protest,and Motion for Suspensionand Evidentiary Hearing ofPSEG
Companiesat 4 (De;. 22, 20] I).
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IV.
CONCLUSION
WHEREFORE,the RPM Load Group respectfullyrequeststhat the Commissiongrant
rehearingand set for evidentiary hearingthe issueof region-wide CONE calculations.
Respectfullysubmitted,
McNEES WALLACE & NURICK LLC
Isl RobertA. Weishaar,Jr.
By
RobertA. Weishaar,Jr.
Dennis Jamouneau
777 N. Capitol Street,N.E.
Suite401
Washington,DC 20002-4292
Phone: (202) 898-5700
Fax: (717) 260-1765
E-mail: [email protected]
[email protected]
SusanE. Bruce
100Pine Street
P.O. Box 1166
Harrisburg,PA 17108-1166
Phone: (717) 237-5254
Fax: (717) 260-1666
Email: [email protected]
Counselto the PJM Industrial CustomerCoalition
and on behalfof the RPM Load Group
Dated: February29, 2012
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CERTIFICATE OF SERVICE
hereby certify that I have this day served, via first-class mail, electronic transmission, or
hand-delivery tile foregoing upon each person designated on the official service list compiled by
the Secretaryin this proceeding.
Dated at Washington,DC this 29thday of February,2012.
/s/ Robert A. Weishaar, Jr.
RobertA. Weishaar,Jr.
777 N Capitol Ste, NE
Suite401
Washington,DC 20002-4292
Phone:(202) 898-5700
Fax: (717)260-1765
Email: [email protected]