Price tag of $720 million to keep Brandon Shores and Wagner power plants open imposes unreasonable costs on customers, OPC tells federal regulators
BALTIMORE – A proposed agreement to pay the owner of the Brandon Shores and Wagner power plants near Baltimore $720 million over four years to keep operating while planned transmission system upgrades are constructed is unjust and unreasonable and should be rejected, the Office of People’s Counsel said last week in a protest filed with the Federal Energy Regulatory Commission (FERC).
OPC’s filing points out that the proposed compensation—to be paid to Talen Energy Corporation—far exceeds the costs to run the plants according to the amounts in publicly available information. Under FERC-approved rules, Talen should only recover the actual costs of keeping the plants online. Monitoring Analytics, LLC, the Independent Market Monitor (IMM) for PJM, also opposes the proposed settlement.
“Maryland households should not be burdened with windfall payments to Talen,” said Maryland People’s Counsel David S. Lapp. “The Talen proposal lacks justification for its wildly inflated price tag—a price that reflects Talen’s exercise of market power over Maryland customers.”
In 2023, Talen announced its intention to retire the Brandon Shores and Wagner plants by June 1, 2025. The retirement notices triggered PJM Interconnection, LLC, the operator of the regional power pool, to conduct a reliability analysis, which found the plants necessary to maintain electric system reliability until planned transmission system upgrades can replace the reliability role of the power plants. As a result of its analysis, PJM determined that it would seek to enter into “reliability must run,” or RMR, arrangements with Talen to keep the plants from retiring before the transmission facilities are completed.
Talen initially filed a proposal that would have cost customers $215 million a year. OPC and others protested that proposal at FERC, and FERC agreed last June that the arrangement had not been shown to be just and reasonable. FERC set the matter for an evidentiary proceeding, before which some parties agreed to settle with Talen for $180 million a year, creating the proposal now before FERC. OPC and the IMM did not agree to the settlement.
OPC’s protest of the settlement is based in part on the 2012 arms-length transaction in which Exelon sold the Brandon Shores plant for just $178.35 million. In its initial FERC filing, Talen sought cost recovery based on an asserted $648 million cost of the Brandon Shores plant—nearly four times greater than the price paid by Exelon in 2012. The settlement allows Talen to recover a large percentage of the inflated value of the plant.
OPC’s protest explains that the actual cost of service rate for customers should be, at minimum, $180 million less over the four-year course of the RMR, and as much as $442 million less than the proposed settlement amount. OPC and IMM asked FERC to set the matter for a hearing to determine the appropriate cost of service for maintaining the units pending completion of the transmission solutions.
Importantly, OPC’s protest concerns only the cost of the RMR; OPC and the IMM do not object to the continued operation of the Brandon Shores and Wagner power plants under the RMR arrangements while the transmission upgrades are completed. Should Talen exercise its threat—enabled by its market power—to withdraw from the RMR arrangements, the Department of Energy can require the plants to remain available for reliability purposes upon a request of the Maryland Public Service Commission or PJM.
Talen’s proposed retirement of the power plants also had the effect of removing the plants from participation in the annual capacity market auction administered by PJM for the 2025/2026 delivery year (starting June 1, 2025), conducted in July 2024, in which the auction clearing price soared by 800 percent. According to a widely cited OPC report following that auction, the exclusion—from the capacity market—of generation from the Brandon Shores and Wagner plants during the RMR period earned Talen as much as $360 million in additional revenue and raised the overall auction costs by as much as $5 billion.
Following the July 2024 auction, OPC led an effort by state ratepayer advocates calling on PJM to account for generation under RMR arrangements in its capacity auction. OPC pointed out that by excluding generation under RMR arrangements from the auction, customers were being forced to pay twice for the same reliability—once for RMR costs and then again for costs of the capacity market, the purpose of which is to maintain reliability. While PJM initially opposed accounting for RMRs in the auction, calling it “counterproductive” in response to OPC’s letter, eventually it acquiesced and sought FERC approval to include generation under RMR arrangements in future auctions. FERC recently approved that request.
“We urge FERC to reject the Talen settlement,” Lapp said. “Maryland customers already face higher rates this summer because of the capacity auction. They shouldn’t also pay more because of inflated RMR costs. Talen deserves to be paid the costs associated with temporarily keeping Brandon Shores and Wagner online. It does not deserve an opportunity to price-gouge customers.”
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers of electric, natural gas, telecommunications, private water and certain transportation matters before the Public Service Commission, federal regulatory agencies and the courts.
* * *
|
