In the initial February 2023 order,[1] I said that the estimated rates to be paid by consumers under the tariff which PJM proposed to revise would “[i]n no universe…be considered just and reasonable.”[2] The Third Circuit, however, vacated the portion of the Commission’s LDA Reliability Requirement Orders that allowed PJM to apply the tariff amendments to the 2024/2025 BRA. The Third Circuit found that the amendments were in violation of the filed rate doctrine.[3] Under the circumstances, I agree that this order approving PJM’s petition is the only realistic alternative at this point in the process.[4] As today’s order recognizes, the Third Circuit found that ‘“the equities play no role in our application of the filed rate doctrine’ even if ‘this bright-line rule could potentially produce a harsh result in this case.’”[5] It did.
While I concur, I will again emphasize what I said in my concurrence to the Initial Order, “the elephant in the room must be addressed: Whether PJM’s capacity market construct can still ensure sufficient power supplies to deliver reliability at just and reasonable rates.”[6] As I noted previously, the complexity of the capacity market construct is something that cannot be overstated:
Every “fix” – and there have been many since the [Reliability Pricing Model (RPM)] went into operation about 15 years ago – renders the capacity market construct more incomprehensible (and as I have said many times, it’s an administrative construct, not a market). One could even make a credible argument that its sheer complexity renders it unjust and unreasonable. I have described it before as “Rube Goldberg-esque” and as replete with “hopeless complexity.” Perhaps PJM should be required to post a warning to every reader who tries to read and comprehend a detailed explanation of how the capacity market construct works (borrowing from Dante): “Abandon all hope, ye who enter here.”[7]
The tinkering and complexities here will assuredly impact consumers – who took no part in this tinkering but will surely pay for the complexities by way of what are estimated to be dramatic rate increases. This drives home my point and should require each and every one of us who have played some part in the tinkering (regulators, RTOs, and market participants alike) to make certain that it is not consumers who must abandon all hope.
For these reasons, I respectfully concur.
[1] PJM Interconnection, L.L.C., 182 FERC ¶ 61,109 (2023) (Christie, Comm’r, concurring) (Initial Order), reh’g denied, 184 FERC ¶ 61,055 (2023) (Christie, Comm’r, concurring) (Rehearing Order) (LDA Reliability Requirement Orders)
[2] Initial Order, (Christie, Comm’r, concurring at P 1) (Initial LDARR Christie Concurrence) (available at https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-order-accepting-pjm-capacity-market-tariff). See Initial LDARR Christie Concurrence at P 1 (citing PJM EL23-19 Transmittal at 34 (“The effect of the auction results would require the load in the particular LDA at issue to be responsible for paying over one hundred million dollars in excess of what is necessary for capacity associated with the 2024/2025 Delivery Year.”)); id. at PP 2-3 (addressing Old Dominion Electric Cooperative’s and Maryland Office of People’s Counsel’s estimates of cost increases in the Delmarva Zone).
[3] See, e.g., PJM Power Providers Grp. v. FERC, 96 F.4th 390, 394, 400-01 (3d Cir. 2024) (PJM Power Providers).
[4] The 2024/2025 delivery year begins on June 1, 2024. Protestors advocate for the Commission to retain the results for the BRA and the Third Incremental Auction for the 2024/2025 delivery year. Some argue that this Commission should reinstate the Federal Power Act (FPA) section 206 proceeding PJM filed in EL23-19-000 – filed by PJM in addition to the FPA section 205 tariff amendments that this Commission granted and upheld on rehearing in the LDA Reliability Requirement Orders – and “accept the results of the auction PJM has already run effective immediately.” See, e.g., Maryland Commission Protest at 5-6. Others argue that this Commission should balance the equities and direct PJM to retain the results of the BRA and Third Incremental Auction for the 2024/25 delivery year, arguing, in part, that information recently posted by PJM indicates that recalculating the BRA will more than quadruple the clearing price in the [Delmarva Power & Light Company South LDA (DPL-South LDA)] and will increase the cost to consumers by $177.7 million and that such a result is contrary to the Commission’s statutory obligation to ensure just and reasonable rates. See, e.g., PJM Load Parties Protest at 4-6, 10-16; PJM Load Parties Answer at 1-2, 4-5. In addition, protestors further argue that revising the BRA and rerunning the Third Incremental Auction will interfere with settled expectations and with other established programs. See, e.g., Maryland Commission Protest at 2-3; PJM Load Parties Protest at 10-15. The Third Circuit’s opinion, however, allowed no room for equities in its application of the filed rate doctrine. Order at P 7; see infra, n.5.
[5] Order at P 7 (quoting PJM Power Providers, 96 F.4th 390, 401-02). Indeed, the Third Circuit stated: “We emphasize that the equities play no role in our application of the filed rate doctrine. It is well established that the filed rate doctrine ‘does not yield, no matter how compelling the equities.’ . . . (quotation marks omitted). Accordingly, if FERC ‘violated the filed rate doctrine or the rule against retroactive ratemaking, we would not then invoke the Commission’s assessment of the equities to overcome those violations.’” PJM Power Providers, 96 F.4th 390, 401 ((quoting Okla. Gas & Elec. Co. v. FERC, 11 F.4th 821, 829-30, 832 (D.C. Cir. 2021) (citations omitted)).
[6] Initial LDARR Christie Concurrence at 6 (citing PJM Interconnection, L.L.C., 182 FERC ¶ 61,073 (2023) (Christie, Comm’r, concurring at P 2)).
[7] PJM Interconnection, L.L.C., 186 FERC ¶ 61,080 (2024) (Christie, Comm’r, concurring at P 7) (footnotes omitted) (emphasis in original) (available at https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-pjms-capacity-market-reform-filing-docket-no) (citing Dante Alighieri, The Divine Comedy; PJM Interconnection, L.L.C., 182 FERC ¶ 61,073 (2023) (Christie, Comm’r, concurring at P 2) (footnotes omitted) (available at https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-pjms-quadrennial-review-er22-2984) (“That issue is whether the PJM capacity market itself needs to be reconsidered on a comprehensive basis to determine whether it is still fit for purpose, which is to make certain a sufficient amount of power supply is available to ensure reliability, at a cost that is just and reasonable to consumers. This proposal is only the latest example — and one of the worst in its hopeless complexity — of the endless Rube Goldberg tinkering with the minute details of the capacity market construct. Such tinkering with the rules has gone on for years and never reaches a point of stability, yet stability of market design is essential to attract the necessary capital investment in capacity resources.”)).