FERC denied a complaint brought by Champion Energy Marketing against PJM concerning uplift charges in PJM, while outgoing Commissioner Philip Moeller said that the Commission should have taken the opportunity to remedy PJM’s unjust and unreasonable allocation of certain uplift costs, called real-time Balancing Operating Reserve (BOR) charges

As previously reported, Champion Energy sought refund of certain BOR charges during the polar vortex, saying it was unjust that it was assigned such costs when it supplied almost 100% of its load before the real time market

"Champion did everything it was supposed to do to as a load serving entity during the month of January 2014. It followed all the rules, supplied its expected load through bilateral contracts as well as in the day-ahead market, and was almost 100% hedged for the month. The charges at issue here did not arise as a result of commercial risk taking by Champion. So the question before the Commission is whether, in circumstances like these, Champion should be penalized or held harmless for following all of the rules and supplying its load. Champion believes that the answer is emphatically the latter, both as a matter of policy and equity," Champion had said, stating that such uplift should have been reflected in LMP

FERC disagreed, and denied the complaint

"We find that Champion’s argument that its forward contracts absolve it from responsibility for any real-time BOR charges does not constitute grounds to find the relevant Tariff provisions, or PJM’s application of those provisions, unjust and unreasonable. Despite the fact that Champion was long on an aggregate daily basis, as a load serving entity with real-time load, Champion participates with other customers as part of an integrated grid and therefore relies on PJM to assure that its transactions can be delivered as scheduled. Champion, like all PJM customers, therefore relies upon, and benefits from, PJM’s actions to maintain grid reliability. PJM’s real-time BOR charges are driven by resource commitment and dispatch decisions made to ensure that power flows reliably in real-time. As such, PJM’s actions that caused real-time BOR costs in January 2014 benefited all real-time load, including Champion, by ensuring the continued operation and reliability of the system," FERC said

"We also reject Champion’s claim that PJM’s Tariff is unjust and unreasonable because the Tariff permitted the system to incur high real-time BOR charges in January 2014. That real-time BOR charges were high in January 2014 does not demonstrate that the applicable PJM Tariff provisions are unjust or unreasonable. As noted, real-time BOR charges are driven by resource commitment and dispatch decisions made to ensure reliable operations, and the application of such charges is insufficient evidence that the Tariff is unjust and unreasonable. Other than pointing to high real-time BOR charges in January 2014, Champion does not support its claim that the PJM Tariff is unjust and unreasonable with any further evidence," FERC said

"Champion argues that the BOR charges should have been factored into the LMP. While we support the general premise that the costs of operator actions should be reflected in LMP to the greatest extent possible, we do not find that Champion has demonstrated that PJM’s Tariff provisions are unjust and unreasonable. Some operational and reliability challenges may be difficult to incorporate into the market software and this may not be reflected in LMPs. PJM recently implemented provisions to reduce the amount of BOR charges in the future and PJM has an ongoing stakeholder process, the Energy Market Uplift Senior Task Force, to evaluate uplift causes and uplift allocation methodologies. Champion should first raise its concerns and potential resolution through the PJM stakeholder process or in the Commission’s ongoing price formation proceeding," FERC said

"We reject Champion’s argument that it should not have to pay the January 2014 real-time BOR charges because it was unable to obtain sufficient information from PJM about certain details of how BOR costs were incurred and the cost allocation process. The confidentiality rules set forth in PJM’s Operating Agreement, to which market participants agreed, and which we have approved, prevent PJM from releasing commercially sensitive information," FERC said

Moeller dissented in part, slamming the uplift problem in PJM, while agreeing that retroactive relief to Champion would not be appropriate.

However, Moeller said that, "the Commission should have acted under section 206 of the Federal Power Act to remedy PJM’s unjust and unreasonable allocation of certain uplift costs, called real-time Balancing Operating Reserve (BOR) charges, and to improve the transparency of the underlying drivers of those costs."

"Ensuring that uplift costs are allocated to the market participants that caused their incurrence is essential to creating incentives for market participants to improve their behavior and to develop solutions that address the underlying causes of uplift costs," Moeller noted

"Allowing PJM’s current BOR cost allocation to continue harms market participants like Champion and decreases the efficiency of PJM’s markets. Allocating costs broadly to load-serving entities like Champion unfairly frustrates their efforts to hedge their positions; it does not ensure that the market participants who actually caused those uplift costs pay corresponding charges. The Commission defends PJM’s current allocation of BOR costs to load-serving entities like Champion – notwithstanding the record here and in the price formation proceeding – stating that 'BOR charges are driven by resource commitment and dispatch decisions' and that 'PJM’s actions that caused real-time BOR costs in January 2014 benefited all real-time load, including Champion.' The fact that Champion benefits from grid reliability does not indicate that their actions caused the uplift costs it was forced to bear. Champion and other load-serving entities should only be allocated uplift costs on the basis of those benefits when the parties who caused those costs cannot be identified. PJM’s failure to fully identify those cost causers renders its uplift allocation unjust and unreasonable," Moeller said

"The Commission repeatedly faults Champion for failing to provide sufficient evidence to bolster its argument that PJM’s allocation of BOR charges is unjust and unreasonable, notwithstanding the Commission’s own recognition that PJM’s 'confidentiality rules' prevent PJM from releasing relevant information regarding both 'how BOR costs were incurred and the cost allocation process.' Given this fundamental lack of transparency, the section 206 bar is simply insurmountable for Champion and other load-serving entities to challenge PJM’s unfair allocation of uplift costs, absent Commission action," Moeller said

Moeller also faulted the Commission's decision for stating Champion should have first addressed the issue in a stakeholder group. "This is simply incorrect; Champion has absolutely no obligation to first seek redress through alternate forums prior to seeking relief under section 206, nor does the existence of those forums relieve this Commission of its obligation to act now under section 206 to provide prospective relief. PJM’s Energy Market Uplift Senior Task Force has been struggling to consider options for revising PJM’s allocation of BOR charges – options that necessarily affect the pocketbook of every market participant differently – since its first meeting over two years ago. Champion and other load-serving entities should not have to wait for the conclusion of PJM’s lengthy stakeholder processes, or the outcome of the Commission’s similarly lengthy price formation proceeding," Moeller said

Docket No. EL15-46-000