Commissioner James Danly Statement
January 31, 2022
Docket No. ER17-1433-003
I concur in the result of today’s order. I agree[1] that PJM’s compliance filing met the Commission’s requirement to eliminate the de minimis one-cent threshold and thus reduce the improper mitigation of legitimate Financial Transmission Rights transactions.[2] However, I share the concerns of XO Energy,[3] Exelon,[4] NextEra Energy Marketing, LLC (NextEra), and Vitol Inc. (Vitol) that PJM’s compliance filing may still restrict fully legitimate hedging transactions.[5] While I agree there is no need for PJM to file a “report,”[6] I welcome future filings presenting evidence if the new rule discourages or obstructs efficient trading. PJM should not be in the business of deterring hedging, which reduces risk and—if you believe in markets, as I do—rates for customers.
I also must regretfully agree with the decision not to order refunds because it appears impossible to put this genie back into its bottle. PJM shoulders the blame for this mess for implementing a compliance rate that had not yet been approved.[7] Some transacting parties certainly relied on the rate actually on file, while others relied on the proposed rate PJM was implementing without approval, while others likely hedged their bets (which is, after all, what happens with Financial Transmission Rights). It is difficult to determine refunds when parties essentially were hedging against regulatory risk.
The only thing that is clear is that the party at fault is PJM. PJM violated its own tariff and, in doing so, hurt market participants and ratepayers. PJM is perhaps not in a position to pay refunds, but it should be sanctioned. And the Commission should stop treating regional transmission organizations (RTOs) as anything other than what they are under the law—a utility. RTOs are entitled to no more deference, privilege, or credence than any other utility. The Commission should not sit silently by as PJM knowingly and purposefully violates its own tariff, and in the process harms market participants. That PJM can do this and suffer no consequences, not even a sternly worded warning from the Commission, is unacceptable.
For these reasons, I respectfully concur in the result.
[1] PJM Interconnection, L.L.C., 178 FERC ¶ 61,079, at P 22 (2022).
[2] PJM Interconnection, L.L.C., 175 FERC ¶ 61,137 (2021).
[3] XO Energy, LLC and XO Energy MA, LLC are collectively XO Energy.
[4] Exelon Corporation, Exelon Generation Company, LLC, and its Affiliates are collectively Exelon.
[5] XO Energy Protest at 10-11; Exelon/NextEra Comments at 8-14; Vitol Protest at 5-7.
[6] PJM Interconnection, L.L.C., 178 FERC ¶ 61,079 at P 29 (rejecting a formal report requirement).
[7] See, e.g., XO Energy Protest at 4-5; id. at 5 (“PJM is not coming to the Commission with clean hands on this matter. It chose to implement its new forfeiture rules before they were approved by the Commission . . . .”).