OPC secures federal appeals court victory on capacity market mistake that cost customers $180 million
BALTIMORE – Siding with the Office of People’s Counsel, the U.S. Court of Appeals for the D.C. Circuit agreed today that federal regulators erred in rejecting OPC’s complaint seeking rate relief for customers on the Delmarva Peninsula. OPC’s challenge was to a decision by the Federal Energy Regulatory Commission that required customers to pay $180 million in extra capacity market charges that resulted from a mistaken planning assumption, without addressing whether the rates were just and reasonable as required by law.
“The court’s decision vindicates OPC’s position that federal regulators erred when they dismissed our complaint,” said Maryland People’s Counsel David S. Lapp. “Delmarva Peninsula customers paid the consequences of a mistake PJM made—a mistake that gave generators a windfall, and one that federal regulators failed to fix. The court’s decision significantly advances the possibility that customers will 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 additional backup was no longer needed but PJM procured it anyway—inflating prices that ultimately ended up on customer bills.
The court’s decision today 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 at FERC, joined by other parties, 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.
OPC argued 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.
On remand from the court’s decision, FERC will have to address the complaint on its merits. It will have to decide whether, as the court put it, to “saddle consumers with hundreds of millions of dollars in inflated electricity prices” and require them to spend “an additional $182.8 million to procure just 1.9 per cent more capacity” that PJM did not even need—an “anomalous (and expensive) outcome.”
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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