Commissioner James Danly Statement
February 11, 2022
Docket No. EL19-58-008
I dissent from today’s order[1] which is now required to address profound and unforeseen consequences of the Voluntary Remand Order[2] directly affecting PJM Interconnection, L.L.C.’s (PJM) market design. I will admit that I did not expect to be vindicated quite so soon, but this order illustrates—indisputably—that, just like I said,[3] the majority rushed to issue the Voluntary Remand Order, doing so over PJM’s and the litigants’ objections, and without a full understanding of the consequences of their actions.
What does this order do? Through a tortured reading of the Voluntary Remand Order, the majority “clarifies” that the reserve price caps were not removed[4] and admits that mere reinstatement of the reserve price caps fails to account for PJM’s new reserve product.[5] This is quite a significant “clarification.”
PJM submitted its January 18, 2022 filing pursuant to Rule 212 (Motions) of the Commission’s Rules of Practice and Procedure[6] and styled it as a Motion for Clarification and Request for Expedited Action by February 11, 2022. While it is true that the motion giving rise to this proceeding purported to seek a clarification, we should call this order what it really is: an order granting rehearing. And that, in truth, is what PJM sought.[7] Instead of being upfront, though, it mischaracterized its filing, thereby evading our rehearing requirements. This may well have been done for tactical reasons. Perhaps PJM figured that, in coming to the Commission to ask for such an embarrassing reexamination of its recent order, requesting a “clarification” might have been more palatable.
And in its enthusiasm to seize this opportunity, the majority misconstrues the contents of PJM’s submissions. It states that “PJM’s complaint did not specifically allege that the reserve price caps are unjust and unreasonable, but rather proposed only to remove the reserve price caps as part of PJM’s replacement rate.”[8] It then quotes a passage of PJM’s complaint in which PJM expressly states that “‘PJM proposes to remove the cap as it arbitrarily suppresses the price for reserves when the cascading of shortages on the system indicate such reserves are most needed.’”[9] By any fair reading, PJM is stating here that the current tariff is unjust and unreasonable. It is simply misleading for the majority to cite to this language and then declare that PJM neither alleged nor provided evidence that the reserve price caps are unjust and unreasonable.[10] If a utility’s declaration that its own tariff causes “arbitrar[y]” price suppression[11] does not constitute “evidence that its tariff is unjust and unreasonable,” then what showing could? There should be no requirement for a utility to use magic language. Section 206 filings need not chant mantras or display talismans.[12] They need only provide evidence that the rate on file is not just and reasonable.[13] PJM did so here.
I am pleased that the majority has finally come around to my position that we must supplement the record before taking further action. Only after having inflicted untold damage on PJM’s market design, heedless of the requests of PJM and the litigants to take thoughtful, deliberate action, does the Commission realize that these market design questions are somewhat tricky, citing to the IMM’s price formation analysis during reserve price capping as proof of “the complexity of the issue at hand and the need to develop a further record.”[14]
Better late than never, I suppose, but there is no excuse for our past recklessness.
For these reasons, I respectfully dissent.
[1] PJM Interconnection, L.L.C., 178 FERC ¶ 61,085 (2022).
[2] PJM Interconnection, L.L.C., 177 FERC ¶ 61,209 (2021) (Voluntary Remand Order). I previously objected to the order on voluntary remand on both substantive and procedural grounds and continue to do so. See id. (Danly, Comm’r, dissenting).
[3] See id. (Danly, Comm’r, dissenting at P 1) (“On the merits, this order arbitrarily retains certain of the Commission’s prior findings and reverses others, all without any further briefing or supplementation of the record. . . . [W]e are arbitrarily changing another fundamental element of PJM’s market, over PJM’s and litigants’ objections, without a full understanding of the consequences.”); id. (Danly, Comm’r, dissenting at P 18) (“Failure to require further briefing has led us to make profound, uninformed changes which may have profound, unforeseen consequences. . . . Should our decisions have been in error, and depending upon the timing of the auction, it may be impossible to provide meaningful relief to the market participants . . . .”) (footnotes omitted).
[4] See PJM Interconnection, L.L.C., 178 FERC ¶ 61,085 at P 15 (“While the [Voluntary] Remand Order did not explicitly address the current reserve price caps . . . we clarify that the [Voluntary] Remand Order did not remove the reserve price caps.”) (emphasis added); see also id. P 16 (“The [Voluntary] Remand Order directed PJM to include in its compliance filing implementing details for the new product, including the relevant Reserve Penalty Factor and [Operating Reserve Demand Curves].”) (citation omitted).
[5] See id. P 17 (“PJM may propose revised reserve price caps to reflect the addition of this new product . . . .”).
[6] 18 C.F.R. § 385.212.
[7] In fact, that is exactly what PJM did seek in a separate pleading styled as a request for rehearing of the Voluntary Remand Order on January 21, 2022. Having acted on this motion, but not the rehearing request, I will be interested to see how that rehearing request is dealt with by the majority.
[8] PJM Interconnection, L.L.C., 178 FERC ¶ 61,085 at P 15 (citation omitted).
[9] Id. P 15 n.34 (citation omitted) (emphasis added); see also PJM March 29, 2019 Transmittal at 12.
[10] See PJM Interconnection, L.L.C., 178 FERC ¶ 61,085 at P 15 (“PJM’s complaint did not specifically allege that the reserve price caps are unjust and unreasonable, but rather proposed only to remove the reserve price caps as part of PJM’s replacement rate. While the May 2020 Order accepted PJM’s proposed replacement Reserve Penalty Factors and PJM’s proposal to remove the price caps by extension, it did not find the reserve price caps unjust and unreasonable under the currently effective ORDCs and Reserve Penalty Factors. Because the Remand Order reversed the determinations regarding the ORDCs and Reserve Penalty Factors, the underlying predicate for removing the price caps no longer exists. Moreover, PJM did not present any evidence that the reserve price caps are unjust and unreasonable under its currently effective ORDC and Reserve Penalty Factors.”) (footnotes omitted) (emphasis added).
[11] PJM March 29, 2019 Transmittal at 12.
[12] See 16 U.S.C. § 824e(a) (“Any complaint . . . to initiate a proceeding under [FPA section 206] shall state the change or changes to be made in the rate, charge, classification, rule, regulation, practice, or contract then in force, and the reasons for any proposed change or changes therein.”); 18 C.F.R. § 385.206(b) (“Contents. A complaint must: (1) Clearly identify the action or inaction which is alleged to violate applicable statutory standards or regulatory requirements; (2) Explain how the action or inaction violates applicable statutory standards or regulatory requirements; . . . (7) State the specific relief or remedy requested . . . and the basis for that relief . . . .”).
[13] See 16 U.S.C. § 824e.
[14] PJM Interconnection, L.L.C., 178 FERC ¶ 61,085 at P 17; see also Voluntary Remand Order, 177 FERC ¶ 61,209 (Danly, Comm’r, dissenting at P 8) (“Whatever the perceived urgency now attending the issuance of this order, can the Commission be making a fully-informed decision in the absence of further briefing, especially given the number and complexity of Commission orders that have followed the issuance of the Operating Reserve Demand Curve (ORDC) orders?”); id. (Danly, Comm’r, dissenting at P 16) (“These are complex, interrelated tariff filings. The tariff provisions at issue have profound consequences for how the market functions. . . . [I]t is unjustifiable for this order to reverse our earlier determinations absent further briefing.”) (footnote omitted).