Commissioner Mark C. Christie Statement
December 22, 2021
Docket No. EL19-58-006, ER19-1486-003
Consumers deserve a reliable supply of power at the least cost (consistent with applicable laws). The issues implicated by PJM’s proposal to make major changes to its reserve market construct involve both reliability and consumer costs. Achieving the right balance is always the challenge in utility regulation.
In general, certain changes to PJM’s reserve market construct that were approved in 2020 pose an unacceptable risk that hundreds of millions of dollars of additional costs could be placed on consumers[1] without a conclusive demonstration, in my view, of a commensurate increase in reliability.
More specifically, I agree that PJM failed to meet its demanding burden under section 206 of the FPA to show that the aspects of its currently effective reserve construct addressed by today’s order are unjust and unreasonable. I also agree that since the replacement Operating Reserve Demand Curve (ORDC) construct and Reserve Penalty Factors formed the bases to change the energy and ancillary services (E&AS) Offset from backward-looking to forward-looking and since the findings in today’s order are that the ORDCs and the Reserve Penalty Factors were not shown to be unjust and unreasonable, given this record there is insufficient evidence under section 206 of the FPA to find the backward-looking E&AS Offset to be unjust and unreasonable.[2] Although, as today’s order emphasizes, nothing in this order prevents the approval of a forward-looking offset in the future.[3]
Finally, I agree that reserve resources should be accurately calculated and compensated for their reliability benefits and that penalties for non-performance should be applied without discrimination and should be adequate – principles that should apply in all market constructs.[4] I believe PJM made a good-faith effort to achieve these goals, and today’s order leaves in place a number of the changes PJM proposed and the Commission approved in its prior orders. Further, today’s order does not prevent PJM from proposing additional modifications to its reserve market construct in the future.
For these reasons, I respectfully concur.
[1] See Order at P 5 (“PJM states that, based on simulations, it estimates the annual increase in energy and reserve market billing from its proposal to be approximately $556 million.” (footnote omitted)); see also id. at n.62 (“While we need not address PJM’s proposed replacement rate with respect to Reserve Penalty Factors and the ORDCs, we note that PJM states that, based on simulations, it estimates the annual increase in energy and reserve market billing from its proposal to be approximately $556 million.” (citation omitted)).
[2] Order at P 46.
[3] Id.
[4] See, e.g, PJM Interconnection, L.L.C. 176 FERC ¶ 61,056 (2021) (Christie, Comm’r, dissenting at P 2 and passim) (quoting PJM Interconnection, L.L.C, 175 FERC ¶ 61,084 (2021) (Christie, Comm’r, concurring at P 2) ‘“It is absolutely essential that RTO/ISO capacity markets value and compensate capacity resources as accurately as practicable, for two primary reasons: First, reliability depends on it, and second, consumers should only pay for capacity that actually performs when needed.’”).