Commissioner Richard Glick Statement
October 15, 2020
Docket No. EL16-49-003 et al
Order: E-29
At this point, there is not that much left to say. This proceeding has been one of the Commission’s all-time worst, both in the baffling decisions it reached[1] and the bumbling way in which it got there.[2] Today’s order only digs the hole deeper. Accordingly, I continue to dissent as strongly as possible for the reasons detailed in my earlier statements.[3]
That said, one aspect of today’s order deserves further mention: The Commission’s treatment of state default service auctions.[4] The conclusion in the April 2020 Rehearing Order that the Commission would apply a minimum offer price rule (MOPR) based on payments from state default service auctions was always a harebrained idea.[5] Even parties that have cheered on the Commission’s general MOPR zealotry have balked at applying MOPRs to default service auctions.[6] In that sense, today’s limited grant of rehearing and potential exemption of certain default service auctions from the definition of State Subsidy could have been good news. All else equal, anything that limits the Commission’s creeping administrative pricing regime is potentially a good thing.
But what the Commission gives with one hand it appears to quickly take away with the other. In a bizarre footnote, the Commission goes out of its way to suggest that New Jersey’s default service auction—the Basic Generation Service or BGS auction—would constitute a State Subsidy based on the possibility that the auction winners would have to comply with the requirements of the state’s renewable portfolio standard.[7] It is hard to know exactly what the Commission’s cursory review of BGS Auction FAQ sheets might mean in future proceedings or how the Commission will apply that discussion to other states’ default service auctions.
Nevertheless, the Commission’s discussion of the BGS auction provides every reason to believe that the grant of rehearing on state default service auctions will end up being almost meaningless. Several other PJM states’ descriptions of their default service auctions also mention renewable portfolio standards or similar programs applying to entities that provide default service.[8] Taken seriously, the Commission’s discussion of the BGS auction would seem to suggest that payments from those other states’ auctions would also trigger the MOPR.[9] That would severely, if not entirely, undercut any benefits from today’s limited grant of rehearing.
Perhaps the only thing that the Commission’s discussion of state default service auctions actually makes clear is the extent to which the majority is laser-focused on punishing states’ exercise of their reserved authority under the FPA.[10] Today’s order acknowledges as much, explaining that the Commission is not concerned with default service auctions per se—even though it concluded that they fall neatly within the Commission’s overbroad definition of State Subsidy[11]—but only with the possibility that a state might use a default service auction to further its public policy goals.[12] Today’s order indicates that a state default service auction will trigger the MOPR only if it could conceivably be construed as an exercise of the state’s reserved authority over generation facilities.[13] And, as if to underscore that point, the Commission clarifies that states may impose certain restrictions that the majority deems “reasonable” on default service auctions without triggering the MOPR, as long those restrictions do not appear to be attempts to shape the resource mix.[14]
The upshot of all this is that the only way a state’s default service auction can escape the MOPR is if the state either has no renewable portfolio standards or if the state exempts the default service providers from complying with those standards, which would seem to give those providers a preference of a different sort. Why that is a desirable outcome, much less something that should concern this Commission, is never explained. Instead, the discussion of default service only reinforces the extent to which this proceeding is part of a concerted campaign to stamp out state efforts to shape the resource mix.
Finally, perhaps the most egregious shortcoming in today’s order is the Commission’s failure to wrestle with the eventual fall out from subjecting default service auctions to the MOPR—a result that seems likely, if not inevitable, given its suggestions about the BGS auction.[15] Numerous parties detailed the litany of problems that having default service auctions trigger the MOPR would cause. Those problems include everything from the fact that default service auctions typically take place after the relevant Base Residual Auction (BRA), making it impossible to know at the time of that BRA which resources are “subsidized,”[16] to the near impossibility of tracing payments from a default service auction to individual generators.[17] Today’s order does not discuss, much less resolve, those issues even as it indicates that the MOPR will apply to at least some states’ default service auctions. True to form in this proceeding, the Commission is again kicking the most important can down the road, further undermining what is left of its once-well-deserved reputation for the sort of careful, detailed analysis needed to make modern electricity markets work.[18]
* * *
It is becoming increasingly clear that the PJM MOPR saga will ultimately be remembered as a model case of egregious Commission overreach. The majority has taken MOPRs, already a controversial topic, and thoroughly weaponized them as a tool for increasing prices and stifling state efforts to promote clean energy. The result is an unsustainable construct that will eventually collapse under its own weight. The Commission’s contortions on default service auctions and its failure to address the most important questions implicated by today’s order are just the latest indicator of that inevitable result. At this point, the only real question remaining is how much damage the Commission’s arrogant approach to the states will do in the meantime.
For these reasons, I respectfully dissent.
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[1] Calpine Corp. v. PJM Interconnection, L.L.C., 169 FERC ¶ 61,239 (2019) (December 2019 Order); Calpine Corp. v. PJM Interconnection, L.L.C., 163 FERC ¶ 61,236 (2018), reh’g denied, 171 FERC ¶ 61,035 (2020) (April 2020 Rehearing Order) (Glick, Comm’r, dissenting at PP 1, 98) (criticizing the Commission’s approach as “illegal, illogical, and truly bad public policy”).
[2] Calpine Corp. v. PJM Interconnection, L.L.C., 168 FERC ¶ 61,051 (2019) (Glick, Comm’r, concurring at P 1) (criticizing the Commission’s “absence of leadership that has caused us to drift rudderless” through the proceeding for more than a year at that point).
[3] See April 2020 Rehearing Order, 171 FERC ¶ 61,035 (Glick, Comm’r, dissenting); December 2019 Order, 169 FERC ¶ 61,239 (Glick, Comm’r, dissenting); Calpine Corp. v. PJM Interconnection, L.L.C., 163 FERC ¶ 61,236 (Glick, Comm’r, dissenting).
[4] As PJM explained in its initial compliance filing, state default service auctions “are mechanisms by which load-serving entities in retail choice states acquire obligations to provide energy and related services to retail customers.” See PJM Interconnection, L.L.C. First Compliance Filing at 16 (filed Mar. 18, 2020).
[5] See April 2020 Rehearing Order, 171 FERC ¶ 61,035 (Glick, Comm’r, dissenting at PP 48-51); see also id. P 51 (explaining that the Commission’s approach to default service auctions was at odds with its “reputation for focusing on the technical and arcane elements of providing reliable electricity at just and reasonable rates rather than on making broad policy pronouncements”).
[6] See, e.g., Vistra Energy Corp. & Dynegy Marketing and Trade, LLC Rehearing Request at 2-3, 4-10 (filed May 18, 2020).
[7] Calpine Corp. v. PJM Interconnection, L.L.C., 173 FERC ¶ 61,061, at n.134 (2020) (Order) (noting 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’” and pointing to frequently asked question (FAQ) sheets that state that the BGS auction agreements are clear that it is a BGS supplier’s responsibility to comply with New Jersey’s renewable portfolio standard) (citing 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 Oct. 24, 2020)).
[8] See, e.g., FirstEnergy Corp., FirstEnergy’s Pennsylvania Default Service Program, https://www.fepaauction.com/Home.aspx (last visited Oct. 24, 2020) (“As Default Service Suppliers, winning bidders must . . . provide certain Alternative Energy Credits (‘AECs’) pursuant to the Alternative Energy Portfolio Standards Act (‘AEPS’).”); The Potomac Edison Co., 2021 Request for Proposals for Full Requirements Wholesale Electric Power Supply (Sept. 11, 2020), https://www.firstenergycorp.com/content/ dam/upp/files/md/power/mdsosrfp/supplierdocs/2021-PE-RFP.pdf (describing the full requirements service requested as “generally including energy, capacity, ancillary services, renewable energy obligations and losses”).
[9] I recognize that taking the majority’s discussion at face value in this proceeding has proved a risky proposition. As expected, the Commission has already tried multiple times to use rehearing and compliance to wiggle out from under its overbroad rulings, with state default service auctions being only the latest, especially predictable example. See December 2019 Order, 169 FERC ¶ 61,239 (Glick, Comm’r, dissenting at PP 23-25) (pointing to the example of state default service auctions as an example of where the Commission would try “to wiggle out from under its own definition of subsidy in ruling on PJM’s compliance filing”). But it is hard to read any other meaning into the Commission’s nearly page-length footnote explaining why the BGS auction FAQ sheets “appear[] to conflict with the notion that the BGS auctions are either nondiscriminatory or fuel neutral.” Order, 173 FERC ¶ 61,061 at n.134.
[10] Section 201(b) of the Federal Power Act reserves for the states exclusive jurisdiction over, as relevant here, retail rates and generation facilities. 16 U.S.C. § 824(b); see April 2020 Rehearing Order, 171 FERC ¶ 61,035 (Glick, Comm’r, dissenting at PP 5-25); December 2019 Order, 169 FERC ¶ 61,239 (Glick, Comm’r, dissenting at PP 7-17).
[11] April 2020 Rehearing Order, 171 FERC ¶ 61,035 at P 386.
[12] Order, 173 FERC ¶ 61,061 at P 71.
[13] And, as if we needed any more evidence of the Commission’s contempt for states’ exercise of their reserved authority, its gratuitous and self-evidently out-of-scope swipe at how certain states run their default service auctions tells you all you need to know. Id. n.136 (“It is not clear why a state would allow a supplier to meet its provider of last resort obligations without specifying what resources it will use to satisfy its supply obligations, but that question is beyond the scope of this proceeding.”). I, for one, suspect that the states know a great deal more about how to regulate retail service than this Commission.
[14] For example, the Commission clarifies that limitations on ownership and deliverability of resources used to satisfy state default service auctions are “reasonable” and not the focus of this proceeding. Order, 173 FERC ¶ 61,061 at P 74.
[15] Order, 173 FERC ¶ 61,061 at n.134; see supra PP 3-4.
[16] See, e.g., Exelon Corp. Limited Protest, Comments, and Request For Clarification at 21-22 (filed May 15, 2020) (explaining that default service auctions often take place after the relevant BRA has been conducted); Pennsylvania Public Utility Commission Rehearing Request at 17 (filed May 18, 2020) (explaining that default service auctions are “temporally incapable” of “affecting BRA price signals”); Vistra Energy Corp. & Dynegy Marketing and Trade, LLC Rehearing Request at 8 (“[I]t will often be the case that at the time of a three-year-forward Base Residual Auction, these default service auctions will not yet have taken place.”); see also April 2020 Rehearing Order, 171 FERC ¶ 61,035 (Glick, Comm’r, dissenting at P 50) (explaining that the timelines and increments for “default service auctions generally do not align with PJM’s annual single-delivery-year capacity auctions”).
[17] See, e.g., Exelon Corp. Limited Protest, Comments, and Request For Clarification at 20 (filed May 15, 2020) (“If the Commission intends in its Order on Rehearing and Clarification to define all indirect payments to resources offering into the PJM energy market at the same time as default load is being served (i.e., all the time) as State Subsidies, then the entire PJM fleet of capacity resources would be deemed to receive a State Subsidy and be subject to the MOPR.”); Energy Harbor LLC Rehearing Request at 7 (filed May 18, 2020) (“Ultimately the April Order, if read broadly, could implicate the majority of generation capacity in PJM.”); see also April 2020 Rehearing Order, 171 FERC ¶ 61,035 (Glick, Comm’r, dissenting at P 50) (questioning whether the Commission’s statements in that order “mean[t] that PJM, the Market Monitor, or someone else will have to chase down every resource power marketers use to satisfy a default service auction contract?”).
[18] April 2020 Rehearing Order, 171 FERC ¶ 61,035 (Glick, Comm’r, dissenting at P 51) (“This Commission has rightly enjoyed a reputation for focusing on the technical and arcane elements of providing reliable electricity at just and reasonable rates rather than on making broad policy pronouncements. Today’s orders will do much to damage that reputation. It makes clear that the Commission is uninterested in the effects its orders may have on how states carry out their basic responsibilities.”); id. (Glick, Comm’r, dissenting at P 50) (criticizing the Commission for “mak[ing] no effort to wrestle with the practical challenges of its edicts”).