Commissioner Christie’s Concurrence to Reactive Power Rehearing Order, Docket Nos. ER23-1752 and EL24-63

Docket Nos. ER23-1752-003, EL24-63-004

The Independent Market Monitor for PJM (IMM) has highlighted serious concerns regarding charges for reactive power capability in PJM, charges that are ultimately passed on to consumers.  In a recent State of the Market Report, the IMM said:

In 2023, customers in PJM . . . paid $388.0 million for reactive capability based on archaic, nonmarket and unsupported assertions about cost allocation and a regulatory review process of filings by individual units that results in unsupported black box settlements.  The current rules permit over recovery of reactive costs through reactive capability charges.  All costs of generators should be incorporated in the market.  The nonmarket approach to reactive capability payments should be eliminated.[1]

The instant proceeding serves to corroborate the IMM’s concerns and may further exacerbate the over-recovery of reactive power costs in PJM at the expense of consumers. 

While I concur with the determination in today’s order that the Commission’s February 16, 2024 Rate Schedule Order[2] did not err in making Oak Trail’s Rate Schedule effective on July 7, 2023, the commercial operation date of the Oak Trail solar generating facility,[3] the outcome may well be unfair to consumers.  As the order explains, aligning the effective date with the commercial operation date is consistent with the Commission’s practice in other reactive power rate proceedings.[4]  However, the unpleasant reality is the Commission’s selection of the July 7, 2023 effective date will deny refund protection to consumers for nearly eight months:  from July 7, 2023 until February 29, 2024, the refund effective date established in the section 206 proceeding in Docket No. EL24-63-000.  This means that, even if the Commission ultimately were to determine in the ordered hearing and settlement judge proceedings that Oak Trail’s reactive power revenue requirement contained in its Rate Schedule were unjust and unreasonable, the Commission would have no authority to require Oak Trail to provide refunds for its over-recoveries above the just and reasonable rate for that nearly eight-month period.

This limitation stems from the fact that Oak Trail’s Rate Schedule is an initial rate, which, under FPA section 205, the Commission may not suspend or make subject to refund—even though Oak Trail’s reactive power revenue requirement has not ever been found to be just and reasonable.[5]  After two rounds of deficiency letters regarding the need for Oak Trail to provide reactive power test data to support its Rate Schedule, the Commission instead invoked its other primary ratemaking tool under the FPA—section 206—and issued the Rate Schedule Order with a refund effective date far after the Rate Schedule’s July 7, 2023 effective date.  This prolonged period without refund protection for consumers makes me question whether the Commission should have simply rejected Oak Trail’s filing before its second or third bite at the apple.

On March 21, 2024, the Commission issued a notice of proposed rulemaking (NOPR), proposing to eliminate compensation for reactive power capability within the standard power range.[6]  This proceeding—and the concerns expressed herein by the IMM on the over-recovery of reactive power costs in PJM generally—compel Commission action on the NOPR as quickly as possible.