Commissioner James Danly Statement
February 18, 2021
Docket No. EL16-49-006
Order: E-1
I dissent from today’s order because, by vacating footnote 134 of the Commission’s October 15, 2020 order,[1] the Commission is unwisely removing a limitation on the scope of its decision to permit an exception from the definition of a State Subsidy for state procurement auctions that meet defined characteristics. The Commission’s April 16, 2020 rehearing order found that state-directed default service auctions
meet the definition of State Subsidy to the extent they are a payment or other financial benefit that is a result of a state-sponsored or state-mandated process and the payment or financial benefit is derived from or connected to the procurement of electricity or electric generation capacity sold at wholesale, or an attribute of the generation process for electricity or electric generation capacity sold at wholesale, or will support the construction, development, or operation of a capacity resource, or could have the effect of allowing a resource to clear in any PJM auction.[2]
However, the Commission, persuaded by arguments raised on rehearing, modified and set aside, in part, the April Rehearing Order as it relates to state-directed default service auctions.[3] In doing so, the Commission accepted PJM Interconnection, L.L.C.’s (PJM) proposal to exclude from the definition of State Subsidy[4] any revenues from the sale or allocation to an entity providing default retail supply service where such obligation was awarded through a state-directed default auction that has been certified as being conducted through a non-discriminatory and competitive bidding process.[5] Specifically, PJM’s tariff provides that a state default procurement auction that has been certified to be a result of a non-discriminatory and competitive bidding process shall:
(i) have no conditions based on the ownership (except supplier diversity requirements or limits), location (except to meet PJM deliverability requirements), affiliation, fuel type, technology, or emissions of any resources or supply (except state-mandated renewable portfolio standards for which Capacity Resources are separately subject to the minimum offer price rule or eligible for an exemption);
(ii) result in contracts between an Entity Providing Supply Services to Default Retail Service Provider and the electric distribution company for a retail default generation supply product and none of those contracts require that the retail obligation be sourced from any specific Capacity Resource or resource type as set forth in subsection (i) above; and
(iii) establish market-based compensation for a retail default generation supply product that retail customers can avoid paying for by obtaining supply from a competitive retail supplier of their choice.[6]
The New Jersey Board of Public Utilities (New Jersey Board) and the New Jersey Division of Rate Counsel, Office of People’s Counsel for the District of Columbia, Maryland Office of People’s Counsel, and Delaware Division of the Public Advocate (Joint Consumer Advocates) requested clarification and/or rehearing of footnote 134 of the Compliance Order, which delineates the limitation of the Commission’s holding regarding the exclusion of state-directed default service auctions from the definition of State Subsidy.[7] The New Jersey Board asserts that “[t]he tariff language approved by the Order explicitly states that the MOPR will not apply to any default service auction that, in relevant part, has ‘no conditions based on . . . fuel type, technology, or emissions of any resources or supply (except state-mandated renewable portfolio standards for which Capacity Resources are separately subject to the minimum offer price rule or eligible for an exemption).’”[8]
I begin with whether footnote 134 is dicta: the New Jersey Board asserts that it is; I disagree. Although the majority’s decision to vacate the footnote is not based on a finding that it is dicta, it is worth clarifying the purpose of the footnote. The footnote was an express limitation on the scope of the Commission’s decision to permit an exception from the definition of a State Subsidy for state procurement auctions that meet defined characteristics. Explaining the limits of a holding is often, as with footnote 134, an essential element of a decision. For example, the Commission has recognized the penultimate paragraph of the Supreme Court’s decision in Hughes v. Talen Energy Marketing, LLC as explaining the limits of the Court’s preemption holding.[9]
The unwise decision to now reverse course eliminates the control in place for circumstances in which a state-directed default service auction is not in fact nondiscriminatory or fuel neutral, but rather is “for the purpose of supporting the entry . . . of preferred generation resources.”[10]
In today’s order, the majority bases its decision on its finding that the tariff “language provides that ‘state-mandated renewable portfolio standards [(RPS)] for which Capacity Resources are separately subject to the minimum offer price rule or eligible for an exemption’ do not preclude a default service auction from being non-discriminatory and competitive”[11] and its “agree[ment] with the New Jersey Board that aspects of footnote 134 are inconsistent with that language, which is now the filed rate.”[12] In support of this, the order quotes California ex rel. Lockyer v. Dynegy, Inc. to point out that “the terms of the filed tariff are considered to be the law.”[13] Indeed, the Commission accepted the tariff filing, and the tariff is the law. However, I disagree that footnote 134 is inconsistent with the language of the tariff. Nothing in the footnote conflicts with the tariff. The footnote makes clear that while the Commission “accepts the exemption that PJM has proposed, it does not constitute a ruling that any particular state-directed default service auction actually meets these requirements.”[14] The question of whether RPS resources may themselves be subject to the MOPR is relevant in determining whether a state default service auction is competitive and non-discriminatory and, thus, not a State Subsidy.[15] If a state procurement auction authorizes or requires payments for default service to new, non-grandfathered renewable resources that are not otherwise exempt from mitigation, then such payments constitute a State Subsidy. Further, it was within the Commission’s authority to interpret the language of PJM’s tariff and explain the limitation on the scope of the Commission’s decision to permit an exception from the definition of a State Subsidy.[16]
For these reasons, I respectfully dissent.
[1] Calpine Corp. v. PJM Interconnection, L.L.C., 173 FERC ¶ 61,061, at P 69 n.134 (2020) (Compliance Order).
[2] Calpine Corp. v. PJM Interconnection, L.L.C., 171 FERC ¶ 61,035, at P 386 (2020) (April Rehearing Order).
[3] Compliance Order, 173 FERC ¶ 61,061 at P 69.
[4] PJM Tariff, § 1, OATT Definitions—R-S (defining “State Subsidy”).
[5] See Compliance Order, 173 FERC ¶ 61,061 at P 69.
[6] PJM Tariff, § 1, OATT Definitions—R-S (emphasis added).
[7] Specifically, footnote 134 states,
[w]hile this order accepts the exemption that PJM has proposed, it does not constitute a ruling that any particular state-directed default service auction actually meets these requirements. For example, we note that the New Jersey Basic Generation Service (BGS) auction appears to give guidance that conflicts with the proposition it is “non-discriminatory” or “fuel neutral.” Specifically, in the section on frequently asked questions (FAQs), FAQ-24 addresses the question whether Supplier Master Agreements (SMAs) submitted to the state BGS must comply with renewable portfolio requirements. See Frequently Asked Questions # 24, New Jersey Statewide Basic Generation Service Electricity Supply Auction, http://www.bgs-auction.com/bgs.faq.item.asp?faqId=1100 (last visited Sept. 26, 2020). FAQ-24 instructs that “[t]here is no exemption under the SMAs from future increases in RPS requirements.” Id. Further, while FAQ-24 acknowledges that “in the past, the Legislature, when increasing solar requirements, exempted existing BGS Suppliers from the increase,” it continues by stating that “there is no guarantee that future legislation, Board Orders, or other changes would continue to provide such an exemption for BGS Suppliers.” Id. This guidance appears to conflict with the notion that the BGS auctions are either non-discriminatory or fuel neutral and may indicate that such auctions may be “for the purpose of supporting the entry . . . of preferred generation resources.” June 2018 Order, 163 FERC ¶ 61,236 at P 1.
Compliance Order, 173 FERC ¶ 61,061 at P 69 n.134.
[8] New Jersey Board Rehearing Request at 6 (citation omitted).
[9] See Hughes v. Talen Energy Mktg., LLC, 136 S. Ct. 1288, 1299 (2016); see also, e.g., Calpine Corp. v. PJM Interconnection, L.L.C., 169 FERC ¶ 61,239, at P 68 n.147 (2019) (citing Hughes, 136 S. Ct. at 1299 (“Nothing in this opinion should be read to foreclose Maryland and other States from encouraging production of new or clean generation through measures ‘untethered to a generator’s wholesale market participation.’”)); cf. April Rehearing Order, 171 FERC ¶ 61,035 (2020) (Glick, Comm’r, dissenting at P 9 n.23 ) (“The term ‘untethered’ first entered the FPA lexicon in Hughes, 136 S. Ct. at 1299, and the specific concept of ‘tethering’ described in that opinion has played an important role in subsequent FPA preemption litigation.”).
[10] Calpine Corp. v. PJM Interconnection, L.L.C., 163 FERC ¶ 61,236, at P 1 (2018).
[11] Calpine Corp. v. PJM Interconnection, L.L.C., 174 FERC ¶ 61,109, at P 13 (2021) (citing PJM Tariff, § 1, OATT Definitions—R-S (State Subsidy definition, § (3)(e)(i)); Compliance Order, 173 FERC ¶ 61,061 at P 47 (describing PJM’s proposed Tariff language)).
[12] Id. (citing Mont.-Dakota Utils. Co. v. Nw. Pub. Serv. Co., 341 U.S. 246, 251 (1951); Cal. ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 853 (9th Cir. 2004) (explaining that “the terms of the filed tariff are considered to be the law”) (internal quotations omitted)).
[13] Id. P 13 n.28 (quoting Cal. ex rel. Lockyer v. Dynegy, Inc., 375 F.3d at 853).
[14] Compliance Order, 173 FERC ¶ 61,061 at P 69 n.134 (emphasis added).
[15] This is why the Commission’s discussion of attenuation in the Compliance Order, like the distinction drawn in footnote 134, contained the proviso that it was limited to “a state-directed default service auction that would qualify for exclusion from the definition of State Subsidy.” Id. P 71 (emphasis added).
[16] See El Paso Elec. Co. v. FERC, 832 F.3d 495, 503 (5th Cir. 2016) (“FERC’s choices in regulating rates, tariffs, and related practices involve technical issues within its purview that are entitled to great deference. . . . Therefore, when FERC designs rates, we give deference to those designs and defer to FERC’s construction of any ambiguous language in agreements setting rates, ‘so long as [FERC’s construction] is reasonable.’”) (citations omitted); Pub. Serv. Elec. & Gas Co. v. FERC, 485 F.3d 1164, 1168 (D.C. Cir. 2007) (“If the tariff language is unambiguous, we (unsurprisingly) follow it; if not, we defer to reasonable interpretations by the Commission.”) (citation omitted).