Federal agency must fix mistake that cost Delmarva customers $180 million, OPC tells federal appeals court
BALTIMORE – Federal regulators erred by requiring customers on the Delmarva peninsula to pay $180 million in extra charges that resulted from a mistaken planning assumption without ever determining whether the rates were just and reasonable as required by law, the Office of People’s Counsel told a panel of judges for the U.S. Court of Appeals for the D.C. Circuit in oral argument this week. PJM Interconnection, the regional transmission organization, used the mistaken assumption in an electricity market auction held in 2022.
“Customers on the Delmarva Peninsula paid the consequences of a mistake PJM made—a mistake that gave generators a windfall, and one that federal regulators failed to fix,” said Maryland People’s Counsel David S. Lapp. “Customers should be made whole through refunds.”
OPC’s challenge involves PJM’s capacity market auction, under which power plant owners make advance commitments to provide power to meet reliability requirements. When PJM conducted the auction in 2022, it wrongly assumed that certain generating plants would participate in the auction. The participation of those generating plants would require additional backup power. When those plants did not participate, the backup was no longer needed but PJM procured it anyway—inflating prices that ultimately ended up on customer bills.
The oral argument held this week follows years of litigation and was the second time the 2022 auction results were addressed in a federal appellate court. The case, Maryland Office of People’s Counsel v. Federal Energy Regulatory Commission, follows a complaint OPC filed with the Federal Energy Regulatory Commission (FERC) asking it to use its authority to find the rates unjust and unreasonable under the complaint provision of the Federal Power Act. FERC had declined to use that authority to address OPC’s complaint, finding that it could not do so because of a prior appellate ruling, and OPC appealed.
At oral argument, OPC told the court that FERC was wrong to duck its central statutory responsibility to determine whether a rate is just and reasonable. OPC refuted FERC’s contention that the earlier decision prevented it from performing that review, and it rebutted intervening generators’ claims that the charges resulting from PJM capacity auctions are immune from challenge. An audio recording of the oral argument can be found here.
If the appeal is successful, the case would return to FERC to review the costs that Delmarva customers paid due to the capacity market auction from June 1, 2024, to May 31, 2025. Even as FERC denied OPC’s complaint, the chair of FERC at the time described the substantive outcome of the flawed auction—driving up rates for customers by $180 million—as “patently inequitable.”
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.
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