Four power plant owners – LS Power, J-POWER North America, Rockland Capital and Earthrise Energy – on Tuesday asked the Federal Energy Regulatory Commission to eliminate or reduce more than $275 million in combined penalties against their generating facilities in Illinois for failing to perform during Winter Storm Elliott.
FERC should bar the PJM Interconnection from collecting an “unprecedented” $1 billion to $2 billion in PJM-wide penalty payments while the commission reviews what will likely be many claims against the grid operator, the companies said in a complaint at the agency. Collecting the penalties starting April 14 could lead power plant owners to default, threatening grid reliability, they said.
During the winter storm, PJM’s Commonwealth Edison zone in Illinois did not operate under emergency conditions and the grid operator violated its rules by failing to curtail non-firm exports to other regions, the companies said in arguing why they shouldn’t pay nonperformance penalties.
The complaint comes days after power plant companies Lincoln Power, with nearly $39 million in pending nonperformance penalties, filed for bankruptcy and Nautilus Power asked FERC to void its PJM penalties.
PJM has launched a stakeholder process to revamp its capacity market rules, partly in response to the widespread failure of power plants in its footprint to run during Winter Storm Elliott in late December.
“Given the magnitude of the penalty assessments — $1 billion–$2 billion PJM-wide — the commission should take action to avoid potentially serious consequences to the generation sector within PJM at a time when the commission itself acknowledges that significant reforms may be warranted to ensure sufficient capacity remains online at just and reasonable rates,” LS Power and the other generators said in support of a pause on the penalties. “Forcing much-needed flexible generation to come under financial stress, particularly under questionable pretense, could have a significant effect on reliability and resiliency.”
PJM shouldn’t have called any “performance assessment intervals,” or PAI, on Dec. 24 after 6 a.m. in its ComEd zone and likely shouldn’t have called any the day before, LS Power and the other companies said. PAIs are triggered when PJM declares an emergency action. Power plants that fail to meet their capacity obligations in those periods face financial penalties and those that overperform are rewarded.
During the winter storm, northern Illinois, where the companies own nearly 6,100 MW, had excess capacity and relatively low real-time electricity prices, indicating the lack of an emergency, according to the complaint.
PJM shouldn’t have ordered the companies’ power plants to run on Dec. 23 and 24 because of transmission constraints that prevented their power from being delivered into PJM’s eastern footprint, according to the complaint.
Also, PJM’s rules require the grid operator to stop all non-firm exports before declaring capacity-related emergencies, something the grid operator failed to do, the companies said.
“Accordingly, there should be no [PAIs] at all because PJM failed to take this critical, predicate step prior to initiating emergency actions that triggered PAIs,” they said.
PJM is confident that its operators took the correct actions to keep the lights on during Winter Storm Elliott, Dan Lockwood, a grid operator spokesman, said Wednesday in an email.
When generators fail to perform when called on, they may be assessed penalties based on a FERC-approved framework, he said, noting that PJM has been working with its members to mitigate member defaults such as extending the period for paying penalties.
FERC on Monday approved PJM’s plan to give generators nine months, up from three months, to pay any nonperformance penalties to avoid defaults.
There were “significant” non-firm exports on Dec. 23 and 24 to the Tennessee Valley Authority and Duke Energy’s North Carolina and South Carolina utilities, according to the complaint.
The companies met with PJM staff and engaged in the grid operator’s dispute resolution process. They were told on March 30 that PJM would not excuse their penalties, according to the complaint.
The companies asked FERC to order PJM to suspend its collection of nonperformance penalties.
“It will take the commission time to sort out the many claims against PJM that will be brought to the commission for resolution,” they said, adding that a pause in the penalties wouldn’t hurt market participants and could support grid reliability.