Following an appeals court ruling Tuesday, Maryland’s ratepayer advocate and others will have a second chance to overturn a decision by the Federal Energy Regulatory Commission that led to a surge in capacity costs for part of the PJM Interconnection.
The U.S. Court of Appeals for the District of Columbia Circuit vacated FERC’s May 2024 decision to reject a complaint related to capacity prices for the Delmarva Power & Light Co. South zone, or DPL South, for the 2024/2025 capacity year. The zone covers parts of Delaware, Maryland and Virginia.
The dispute centers on a capacity auction PJM ran in December 2022. After PJM ran the auction, but before it released the results, the grid operator found that the results for the DPL South zone were “anomalous” and failed to match actual supply and demand conditions because of a flawed planning parameter, which drove up prices for that zone by about $183 million.
FERC approved PJM’s plan to revise its rules so the grid operator could use what it deemed to be correct parameters for the zone. That resulted in lower capacity prices in the zone compared with the original results. But the U.S. Court of Appeals for the Third Circuit overturned FERC’s decision in March 2024, saying PJM’s rule change, which was proposed under the Federal Power Act’s section 205, violated the filed-rate doctrine barring retroactive ratemaking.
FERC then approved PJM’s plan to revert back to its original auction results. That plan was challenged by a coalition that included PJM Load Parties, American Municipal Power, the Delaware Division of the Public Advocate, the Delaware Energy Users Group, Delaware Municipal Electric, the Delaware Public Service Commission, the Maryland Office of People’s Counsel, the Maryland Public Service Commission and Old Dominion Electric Cooperative.
The challenges included a complaint made under the FPA’s section 206.
FERC erred in rejecting the complaint, according to the appeals court, in part because the agency failed to consider the difference between FPA sections 205 and 206.
“The Third Circuit’s decision rejecting FERC’s efforts to modify PJM’s auction process under section 205 simply did not resolve whether FERC might later use its section 206 authority to set aside the auction result,” the court said. “In reaching a different conclusion, FERC committed legal error.”
Section 206 of the FPA focuses on existing rates, empowering FERC to modify rates it deems unjust or unreasonable, the court said.
Also, FERC wrongly assumed that the filed-rate doctrine bars all backward-looking rate changes, the court said. In some cases, such as when ordering refunds, FERC can approve what are effectively retroactive rate decisions, according to the court.
