UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION. PJM Interconnection, L.L.C. ) Docket No. ER

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1 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION PJM Interconnection, L.L.C. ) Docket No. ER MOTION TO INTERVENE AND PROTEST OF NEXTERA ENERGY POWER MARKETING, LLC Pursuant to Rules 211, 212 and 214 of the Commission s Rules of Practice and Procedure, NextEra Energy Power Marketing, LLC ( NEPM ) hereby respectfully moves to intervene in this proceeding and protests the subject waiver request. In support thereof, NEPM states as follows: MOTION TO INTERVENE On January 23, 2014, PJM Interconnection, L.L.C. ( PJM ) submitted a request for waiver of certain Operating Agreement and Open Access Transmission Tariff provisions as necessary to permit Market Sellers to include in their cost-based offers for Generation Capacity Resources the marginal costs of generation of their resource notwithstanding that those costs exceed the Operating Agreement s $1,000/MWh offer price cap ( Waiver Request ). PJM asked the Commission to set a shortened, 7-day, comment period for the filing, to act on it by February 10, 2014, and to make the waiver effective prospectively from the date of FERC s order on the waiver request. NEPM is a power marketing and trading subsidiary of NextEra Energy Resources, LLC, which is a subsidiary of NextEra Energy, Inc. NEPM purchases and sells electric power in PJM 1

2 markets. NEPM has a direct interest in this proceeding and is not adequately represented by any other party. Communications regarding this document should be directed to the following persons, who should be placed on the Commission's official service list in this proceeding: Joseph T. Kelliher David Applebaum Stephen L. Huntoon NextEra Energy Resources, LLC NextEra Energy, Inc. 21 Pardee Place 801 Pennsylvania Ave., N.W., Ste. 220 Ewing, New Jersey Washington, D.C david.applebaum@nee.com joe.kelliher@nee.com shuntoon@nee.com PROTEST NEPM protests the subject waiver request and respectfully requests that the Commission deny the waiver. Simply put, the Commission s grant last Friday of PJM s waiver request in Docket No. ER has relieved the exigent reliability/equity concern of potentially requiring a generator in PJM to sell at a price below its marginal cost. 1 Under that waiver a generator whose marginal cost exceeds the applicable energy market clearing price will receive a make-whole payment covering the difference between its cost and the clearing price. No generator will be forced to sell at a price below its marginal cost. The waiver extends from the date of the Commission s Order to the earlier of March 31, 2014 or Commission action on this waiver request. Thus, by virtue of the first waiver request granted in Docket No. ER , there is no need for further emergency relief. The granted waiver, as detailed later, is similar to the rules 1 PJM Interconnection, L.L.C., 146 FERC 61,041 (2014). 2

3 in place in New England that were developed after the New England Cold Snap that occurred ten years ago this month, and were accepted by the Commission. PJM s second waiver request is fundamentally different. It would suspend, through waiver, the Operating Agreement s longstanding $1,000/MWh offer price cap which has been in place since Offers would be allowed to exceed the longstanding offer price cap of $1,000/MWh, and those offers, if cleared, would set the market clearing price. PJM Has Not Justified an Abridged Process that Bypasses Stakeholders There are no exigent circumstances justifying the extraordinarily abridged process that PJM has requested for addressing its filing. As noted above, the grant of the first waiver request has relieved any need for further emergency relief. In the absence of exigent circumstances there is no reason to dispense with the standard decisional process under which adequate time is permitted for potentially affected parties to review the merits of the subject filing and develop meaningful comments for Commission consideration, and for the Commission to take deliberative action. The Federal Power Act prescribes that period as 60 days for initial Commission action on a section 205 filing. Here PJM is essentially asking that a longstanding provision of the Operating Agreement be waived, i.e., set aside, with only one week of time for affected parties to develop meaningful comments, and that the Commission decide the merits 10 days after receiving comments. This is not a reasonable truncating of the statutory 60 day initial review period for a non-emergency situation. 2 The offer price cap of $1,000/MWh was part of the original Operating Agreement (section 1.6.1(e)(viii) of Schedule ) filed April 1, 1997, in Pennsylvania-New Jersey-Maryland Interconnection, Docket Nos. OA , et al., accepted by Letter Order issued June 12, 1997, in Docket No. ER The same provision in the same section and schedule was part of the Operating Agreement s predecessor, the Pennsylvania-New Jersey-Maryland Interconnection Agreement, filed December 31, 1996, in Docket Nos. OA , et al., accepted in MidContinent Area Power Pool, 78 FERC 61,203 (1997). 3

4 Also objectionable is that PJM would completely bypass the stakeholder process. In the absence of an emergency there is no reason for PJM to bypass the stakeholder process to consider the merits of waiving/suspending a longstanding Operating Agreement provision. Indeed, PJM has acknowledged that changes to the Operating Agreement require a stakeholder process, and the Commission has agreed: PJM responds that, in the case of changes to the Operating Agreement, its governance practices require a stakeholder process followed by a filing under section 205 or For the foregoing reasons, failure to respect the Federal Power Act decisional time frame and failure to satisfy Operating Agreement requirements for a stakeholder process, the Commission should deny this non-emergency waiver request. PJM Has Not Satisfied the Substantive Requirements for a Waiver NEPM s basic objection to granting PJM a waiver on the fly is that market participants have made contractual commitments based on established market rules. Tens of billions of dollars of obligations among sellers and buyers are committed every year on the basis of market rules, including the $1,000/MWh offer price cap. The $1,000/MWh offer price cap is a longstanding and original element of the PJM energy market upon which market participants have reasonably relied in committing to fixed prices for services such as default supply service (a.k.a. basic generation service). If there was no fixed offer price cap, suppliers would need to reflect that additional price risk in supply offers 3 PJM Interconnection, L.L.C., 124 FERC 61,158 at P 8 (2008). PJM appears to recognize that stakeholders should have a role in potential revisions to the Operating Agreement (Waiver Request, page 1), but does not appear to recognize that the grant of this waiver request would, for all intents and purposes, cut stakeholders out of the process during a time of extremely high prices when there is no emergency justifying such treatment. 4

5 and would engage in different hedging strategies. This would have cost load more in the past and surely would cost load more in the future if this market rule is to be suspended whenever prices are extremely high (the only time the rule actually matters). The unprecedented nature of the polar vortex is all the more reason not to change market rules on the fly. This 1-in-10 weather event, 4 coupled with high levels of forced outages, 5 has created extremely high prices and given sellers of natural gas the upper hand in gas markets. PJM itself cites an unprecedented spike in fuel costs this week (setting new natural gas price records in PJM for the second time in just the past two weeks). (Waiver Request, page 1). PJM points out that gas prices last week were even higher than during the polar vortex earlier this month (Waiver Request, pages 4-5). This is precisely the circumstance in which market participants should be able to rely on a market rule that protects against unlimited price exposure. Indeed, the only time such a rule actually matters is when prices are extremely high. Against this backdrop it is clear that PJM does not meet the requirements for a waiver under Commission precedent. The Commission has granted tariff waiver requests when: (i) the underlying error (if any) was made in good faith; (ii) the waiver request is limited in scope; (iii) a concrete problem needed to be remedied; and (iv) the request did not have undesirable consequences such as harming third parties. 6 4 PJM Response to Commission Data Request, January 10, 2014, available here, at pdf page 6. 5 Id., at pdf page 8. 6 See, e.g., New York Independent System Operator, Inc., 144 FERC 61,147, at P 8 (2013); New York Independent System Operator, Inc., 139 FERC 61,108, at P 14 (2012); PJM Interconnection, L.L.C., 5

6 The first requirement is not applicable because there is no error involved. PJM fails the remaining three requirements. The second requirement is not satisfied because the waiver request is not limited in scope. This requirement is that a waiver request be narrowly drawn to address the exigent circumstances. In this situation, it is the first waiver request, already granted, that was narrowly drawn to the exigent reliability/equity concern of potentially requiring a generator to sell below its marginal cost. This second waiver request is superfluous given the grant of the first waiver request, and therefore this second waiver request cannot be considered narrowly drawn to address the exigent concern. PJM does not identify any residual emergency condition given the grant of the first waiver request (Waiver Request, page 9). 7 The narrowly drawn approach of the first waiver request is supported by stakeholder and Commission action after the extreme cold weather in New England in January 2004 (New England Cold Snap ), ten years ago this month. Following a stakeholder process, ISO New England Inc. and the New England Power Pool Participants Committee proposed to make generators whole for costs exceeding $1,000/MWh during an emergency condition, but that would not change the energy offer cap, i.e., it would not set price. The Commission accepted this proposal as fair to generators and ratepayers. 8 The Commission should follow that precedent here. 137 FERC 61,184, at P 13 (2011); ISO New England, Inc., 134 FERC 61,182, at P 8 (2011); California Independent System Operator Corp., 132 FERC 61,004, at P 10 (2010); ISO New England Inc. EnerNOC, Inc., 122 FERC 61,297 at P 13 (2008). 7 The interim relief that PJM claims necessary (Waiver Request, page 1) was provided by the grant of the first waiver request. 8 ISO New England Inc., 117 FERC 61,082 at P (2006). 6

7 The third requirement is not satisfied because there is not a concrete problem that needs to be remedied. As stated above, the concrete problem has been remedied by the grant of the first waiver request. PJM does not identify any residual emergency given the grant of the first waiver request (Waiver Request, page 9). The fourth requirement of no harm to third parties is not satisfied. As discussed above market participants make commitments based on the established market rules, and NEPM has undertaken substantial supply commitments based on the $1,000/MWh offer price cap preventing unlimited price exposure. PJM claims that: Finally, no market participants can claim any legitimate harm because the PJM market always has been premised on seller recovery of marginal costs, and on clearing prices based on marginal costs. (Waiver Request, page 9). This ignores the fact that the PJM market has been as much premised on the longstanding and original $1,000/MWh offer price cap as on any other market element. The $1,000/MWh offer price cap is so fundamental to PJM markets that PJM s capacity market, the Reliability Pricing Model ( RPM ), is premised in large part on the fact that the offer price cap prevents energy market prices from clearing at levels that alone would sustain longterm reliability. As the Commission observed in approving the original RPM settlement: 9 The Settlement submitted to the Commission by PJM and the Settling Parties provided for a capacity market for PJM, and the Commission has found this capacity market to be just and reasonable. In theory an energy-only and ancillary services market could also produce sufficient capacity, but for such markets to succeed, PJM would have to relax its offer caps and make less stringent its mitigation provisions positions for which there does not appear to be broad regional support. 9 PJM Interconnection, L.L.C., 117 FERC 61,331 at P 143 (2006), aff d, Maryland Pub. Serv. Comm n v. FERC, 632 F.3d 1283 (D.C. Cir. 2011). 7

8 Thus, a decision that customers should pay billions for capacity and pay unlimited energy prices whenever energy prices explode would be harmful and unfair to customers and to market participants like NEPM which supply customers. WHEREFORE, for the foregoing reasons, NEPM respectfully requests that the Commission grant its intervention with full rights as a party and deny the subject waiver request. Respectfully submitted, January 28, 2014 /s/ Joseph T. Kelliher Joseph T. Kelliher, Executive Vice President, Federal Regulatory Affairs Stephen L. Huntoon, Senior Attorney NextEra Energy, Inc. 801 Pennsylvania Avenue, N.W. Suite 220 Washington, D.C CERTIFICATE OF SERVICE I hereby certify that I have this day served the foregoing document upon each person designated on the official service list compiled by the Secretary in this proceeding. Dated at Washington, D.C. this 28th day of January, /s/ Stephen L. Huntoon Stephen L. Huntoon 8