On April 13, 2017 the Energy Storage Association (“ESA”) filed a complaint with FERC, alleging that PJM Interconnection, L.L.C. (“PJM”) had unilaterally implemented a series of changes to its Regulation market without FERC’s review and approval, in violation of the Federal Power Act (“FPA”).  ESA contended that its members who participate in the Regulation market had “suffered significant and detrimental financial harm” as a result of PJM’s changes, and that ESA was filing its complaint “to compel PJM to give the Commission the opportunity to determine whether each of these changes are just and reasonable and not unduly discriminatory.”

 

Under the terms of the PJM Open Access Transmission Tariff (“Tariff”), “Regulation” is a defined ancillary service.  PJM operates a Regulation market, which provides a market-based system for the sale and purchase of Regulation between market participants.  PJM uses two distinct signals to dispatch Regulation resources: (i) Regulation A (“RegA”), for resources with limited ramp rates (e.g. traditional generators); and (ii) Regulation D (“RegD”), for resources with faster ramp rates (e.g. batteries).  PJM also calculates a “benefits factor” that enables comparisons between RegA resources and RegD resources in the market.

In their April 13, 2017 complaint, ESA stated that in December 2015 and January 2017, PJM introduced several changes to the Regulation market in response to operational concerns during times when a large percentage of the resources providing Regulation in the market were RegD.  Specifically, ESA stated that PJM: (i) introduced a cap on the procurement of RegD resources during specified hours of the day, limiting RegD resources to no more than 26.2 percent of the Regulation procurement requirement; (ii) adjusted the benefits factor to lower the relative value of RegD resources during all hours, thereby increasing the relative value of RegA resources within the market clearing engine; and (iii) modified the RegA and RegD dispatch signals in a manner that disfavored RegD.  ESA contended that PJM , when implementing these changes, took the position that it did not need to file to amend its Tariff by making an FPA section 205 filing with FERC.  Contrary to this position, ESA argued in its complaint that an FPA section 205 filing was required, because the changes to the Regulation market were practices that “significantly affect the rates, terms and conditions” of a FERC-jurisdictional ancillary service (Regulation), and, pursuant to FERC’s “rule of reason,” Regional Transmission Organizations like PJM are required to include such practices in their tariffs.

Accordingly, ESA requested that FERC: (i) direct PJM to file for review under FPA section 205 revisions to its Tariff that set forth the methodology by which PJM calculates the benefits factor used in clearing resources in the Regulation market and justify the reasonableness of its benefits factor calculations; (ii) direct PJM to eliminate the Regulation procurement cap set forth in the PJM Manuals; and (iii) require PJM to file for review under FPA section 205 revisions to its Tariff that set forth the parameters governing the design of its RegD signal, and to revert to its prior RegD signal until such time as it receives FERC approval for any changes.

A copy of the complaint is available here.