Dive Brief:
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The PJM Interconnection and 80 parties have settled disputes over an initial $1.8 billion in total Winter Storm Elliott “non-performance” charges by trimming the penalties 31.7% to $1.2 billion, according to Friday filings at the Federal Energy Regulatory Commission.
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The proposed settlement agreement resolves 15 complaints over PJM’s charges for failing to deliver power during the late-December cold snap, leaving a complaint made by Old Dominion Electric Cooperative the only unresolved issue.
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The parties asked FERC to approve the agreement by Dec. 29, saying they seek “timely commercial certainty.” Swift approval would also allow PJM and its stakeholders to spend their time addressing other issues, including reforms based on the lessons learned from Winter Storm Elliott, they said.
Dive Insight:
During Winter Storm Elliott, close to a quarter of PJM’s generating capacity failed to deliver power when called on by the grid operator, triggering penalties under its capacity performance framework.
The penalties sparked a series of complaints at FERC as well as a negotiated settlement process overseen by one of the agency’s administrative law judges.
The settlement is broadly supported. “The overwhelming number of active parties in the case — including all complainants — support or do not oppose the settlement,” PJM and the other parties told FERC.
The 81 settling parties include PJM, all but one of the complainants, most of the intervenors who protested the complaints, and other interested parties, according to the agreement. Non-opposing parties include Monitoring Analytics, PJM’s independent market monitor.
The complaints had the potential to become the next “mega-litigation,” like the 2000-2001 California energy crisis litigation that took decades to resolve, the parties said.
Power plant owners, such as Constellation Energy, that provided more power than required will see their performance bonuses cut by the same amount as the reduced penalties.
Even so, Baltimore-based Constellation supports the agreement. “The settlement agreement reduces uncertainty for market participants during a time of significant industry transition,” William Berg, vice president of wholesale market development for Constellation, said in an affidavit filed at FERC. “The parties negotiated a global, black box settlement to ensure that all parties had certainty on effect of the settlement.”
PJM said it plans to immediately re-evaluate the credit of each market participant owing a Winter Storm Elliott non-performance charge or performance payment refund to assess how the reduced charges would affect their creditworthiness.
The settlement does not apply to bankruptcy proceedings started before Friday, including those of Lincoln Power, EFS Parlin Holdings and Heritage Power, according to the agreement.
The agreement asks FERC to resolve a dispute between PJM and Energy Harbor over its non-performance penalties. It also preserves East Kentucky Power Cooperative’s right to pursue its claim seeking changes to the non-performance charge rate and non-performance charge stop loss provisions in PJM’s tariff, beginning in the 2023/2024 delivery year.
