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The Retail Energy Supply Association has opposed another wealth grab by a purported competitive market generator which is seeking make-whole payments related to its capacity obligation during the polar vortex.

This time, it's Old Dominion Electric Cooperative which is seeking $15 million in make-whole payments, through a filing at FERC.

Noting that this is not the first such application by a generator (see Duke), "RESA is concerned because these resources agreed to receive compensation for the provision of capacity service with full knowledge that they must stand ready to dispatch. These resources now seek to retroactively waive the market rules that control the performance of their obligations as capacity resources."

"The waiver sought would shift costs onto other market participants," RESA noted, in what we stress would be an administrative, not market, action

RESA noted retail suppliers were already led to the slaughter this past winter.

"While PJM touts its success at maintaining reliability, PJM's actions came at a great cost — the BOR for January reached unprecedented levels — totaling approximately $600 million. These costs were recovered from load serving entities ('LSEs'), including RESA members. As retail suppliers providing retail service, often at fixed prices, many LSEs were unable to recover these costs from their customers. Reliability-based uplift is unhedgeable and is out the control of the LSE. Thus, LSEs had to pay millions of dollars of added, unhedgeable costs," RESA said.

"RESA's members have paid hundreds of millions of dollars of BOR costs associated with the cold January weather. [Under the sought make-whole payments] RESA's members would be forced to shoulder these additional amounts (and those of other generators who choose to file for the same relief) if ODEC's waiver is granted," RESA said.

"PJM acknowledges that its capacity markets pay capacity suppliers to perform when called and notes that fuel procurement for that obligation to perform is up to the generator. Despite the obligation, PJM worries that a generator would ignore its obligation if performance is uneconomic because, among other reasons, fuel is too expensive. When a generator commits to supply capacity, it receives a capacity payment whether or not it is called to generate and load or LSEs pay for that capacity. Within the simple capacity construct, there are a myriad of rules, procedures, and payment variations. The Tariff and Operating Agreement, as well as the implementing manuals detail these rules and obligations," RESA said of ODEC's application for extra-tariff relief.

RESA's comments were filed in FERC Docket No. ER14-2242-000

Tags:
RESA   Capacity Markets   Uplift   FERC   Wholesale Markets  

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