Federal regulators Friday approved a PJM Interconnection proposal that allows power plant owners and others to continue participating in the grid operator’s markets when they default, under certain conditions.
Under the plan, PJM may permit a market participant that defaults to maintain its role in the grid operator’s markets when: the continued participation supports grid reliability; the market participant is a net market seller; the market participant can post sufficient collateral; and, continued participation — especially for generation and transmission cooperatives, vertically integrated utilities and municipal utilities — enables them to continue providing services before PJM receives regulatory approval to terminate their membership, FERC said.
“These four circumstances cover situations where continued market participation could minimize relative risk to the PJM markets and provide PJM an opportunity to recover funds on behalf of the PJM membership,” FERC said.
PJM’s tariff continues to mitigate default risks and the grid operator retains its ability to suspend market participants, FERC said.
FERC’s decision comes as PJM is preparing to issue up to $2 billion in penalties to power plant owners for failing to meet their capacity obligations during Winter Storm Elliott in late December. At the peak of the outages, 46,124 MW was unexpectedly offline on Dec. 24, with gas-fired generators accounting for most of the nonperforming capacity, according to a PJM presentation last month.
At least one generator, Lincoln Power, has filed for bankruptcy related to $39 million in pending nonperformance penalties while at least six complaints were filed at FERC as of Friday seeking to avoid possible penalties.
Elliott-related complaints filed last week include one by Talen Energy and other generators that own 27,500 MW in PJM’s footprint. Talen Energy Marketing, Lee County Generating Station, Lincoln Generating Facility, SunEnergy1 and a group that includes LS Power also filed complaints over their nonperformance penalties.
Under PJM’s “capacity performance” framework, power plants that fail to meet their capacity obligations during certain emergency periods, such as during Winter Storm Elliott, face financial penalties and those that overperform are rewarded.
PJM on Thursday urged FERC to reject LS Power’s request for a rapid review of its complaint, which calls for a moratorium on nonperformance penalties while the agency reviews pending complaints.
The complaint asked FERC to require an initial response by April 14, which PJM contends isn’t enough time. The grid operator asked FERC to set a May 18 deadline.
The complaint raises “difficult and consequential questions” about PJM’s use of its emergency procedures, the extent to which parties may challenge operational decisions, potential restrictions on PJM’s obligations to help neighboring grid systems in emergencies, the implementation of the capacity performance construct, the scope of the filed rate doctrine, and the extent of FERC’s remedial discretion under the Federal Power Act, the grid operator said.
“Affording more time for PJM to respond will facilitate the orderly and efficient administration of these Winter Storm Elliott complaints, conserving resources for the commission and litigants,” PJM said. “PJM will use the additional time sought here to prepare a fully developed answer that will comprehensively address the complaint.”
PJM operates the grid and wholesale power markets in 13 Mid-Atlantic and Midwestern states and the District of Columbia.
