Glick stakes out role as consumer advocate

Source: Rod Kuckro, E&E News reporter • Posted: Thursday, April 18, 2019

Commissioner Richard Glick is holding steadfast to his interpretation of the core mission of the Federal Energy Regulatory Commission — to ensure that electricity rates paid by consumers are fair.

In a lengthy dissent late Monday, Glick took issue with his colleagues’ approval without a hearing of a change in an arcane aspect of the PJM Interconnection LLC’s capacity market.

He said the grid operator’s proposal failed to show it “will produce just and reasonable rates” for customers in its footprint spanning 13 states and the District of Columbia.

Voting for the order were Chairman Neil Chatterjee and Commissioners Cheryl LaFleur and Bernard McNamee.

“For many years now, the PJM capacity market has suffered from a chronic oversupply of generation resources,” Glick said.

The change approved by FERC “distorts the shape of the demand curve that PJM uses in its capacity market, causing PJM to procure too many resources at too high a price, with obvious detrimental consequences for consumers,” Glick said.

At issue is a revision of the variable resource requirement (VRR) curve used in PJM’s pricing of electricity in its capacity auctions. It is revisited every four years.

The VRR revision uses as a reference resource a natural gas combustion turbine (CT) as opposed to a combined-cycle turbine (CCT) in determining the net cost of new entry for a generator wishing to participate in the PJM capacity auction.

Glick strongly objected to the choice of the combustion turbine technology because of its resulting higher costs.

Joe Bowring, PJM’s independent market monitor, said Glick raised a “fair question,” noting that PJM was within its right to use combustion turbine technology as a metric in the review but that it’s not widely used throughout the grid operator’s footprint.

Combined-cycle units are the more commonly used technology to burn natural gas to produce electricity in PJM. The grid operator’s consultant, the Brattle Group, supported use of combined-cycle technology.

“There have been at most a couple of new CTs in PJM in 20 years; it’s an irrelevant technology in PJM,” said Bowring.

‘Fair points’

Glick’s dissent received support from legal experts watching FERC.

Bowring said the commissioner’s point “about using combined-cycle is perfectly reasonable. That would make the net cost of new entry much lower. So his point about overprocuring capacity and paying too much for it are all fair points.”

The VRR revision is among the technical inputs to PJM’s capacity market, said Ari Peskoe, director of Harvard Law School’s Electricity Law Initiative.

“These proceedings illustrate how the capacity clearing prices are tied to these technical inputs. Not surprisingly, the generators are arguing for inputs that will lead to higher prices,” said Peskoe.

“These proceedings also underscore the point that the capacity construct is a market-based mechanism, not a market. These inputs dictate demand and drive bidding behavior,” he said.

University of Richmond energy law professor Joel Eisen echoed that point.

“The careful reasoning in the dissent suggests that Commissioner Glick was paying close attention to impact of these technical parameters on broader issues affecting PJM’s capacity market,” said Eisen.

“That still does not address the core issue of what to do about resources that have state subsidies when they bid into the capacity market,” he added.

Eisen was referring to a long-pending order from FERC on changes in PJM’s capacity market that addresses state subsidies and could affect renewable energy development throughout PJM’s territory.

Glick ultimately questioned why the commission, “rather than summarily accepting PJM’s filing” in the face of shortcomings alleged by some intervenors in the matter, did not instead “set the issues for hearing in order to develop the record needed to adequately address them.”