Allegheny Power 2014 Annual Report Download - page 135

120
conference on January 7, 2015 to discuss application of certain FTR-related rules to Up-to Congestion and virtual transactions and
whether PJM’s current uplift allocation for Up-to Congestion and virtual transactions is just and reasonable. FERC action following
the technical conference is pending.
PJM Market Reform: 2014 PJM RPM Tariff Amendments
In late 2013 and early 2014, PJM submitted a series of amendments to the PJM Tariff to ensure that resources that clear in the
RPM auctions are available as physical resources in the delivery year and that the rules implement comparable obligations for
different types of resources. PJM's filings can be grouped into four categories: (i) DR; (ii) imports; (iii) modeling of transmission
upgrades in calculating geographic clearing prices; and (iv) arbitrage/capacity replacement. In each of the relevant dockets,
FirstEnergy and other parties submitted comments largely supporting PJM's proposed amendments. FERC largely approved the
PJM Tariff amendments as proposed by PJM regarding DR, imports, and transmission upgrade modeling. Compliance filings
pursuant to and requests for rehearing of certain of these orders are pending before FERC. However, FERC rejected the arbitrage/
capacity replacement amendments, directing instead that a technical conference be convened to further examine the issues. The
technical conference has yet to be scheduled.
PJM Market Reform: PJM Capacity Performance Proposal and 2015/2016 Reliability Filings
On December 12, 2014, PJM submitted two filings to implement its proposed “Capacity Performance” reform of the RPM capacity
market. PJM proposes to revise the PJM Tariff to, among other things: (i) adopt a modified version of the FERC-approved ISO New
England Inc. capacity performance payment structure; (ii) allow no excuses for nonperformance except under certain defined
circumstances; (iii) maintain DR as a supply-side resource; and (iv) impose a Capacity Performance Resource must-offer requirement
(units that can perform as a Capacity Performance Resource must offer into the capacity market, except certain defined resources,
including DR). PJM also proposes, among other things, to revise the PJM Operating Agreement to provide limits in energy market
offers based on specific physical characteristics and to ensure that capacity resources are available when the PJM Region needs
them to perform. PJM requested an effective date of April 1, 2015 for these proposed reforms. Numerous parties filed comments
on and protests to PJM’s Capacity Performance filings. FESC, on behalf of its affected affiliates, and, as part of a coalition of certain
other PJM utilities, filed comments and protests on the proposed reforms. PJM's filings and all related pleadings are pending before
FERC.
In addition, on December 24, 2014, PJM submitted two filings seeking to ensure enough capacity is available during the 2015/2016
Delivery Year. First, PJM proposed to revise the PJM Tariff to allow PJM to procure an undetermined amount of additional capacity
for the 2015/2016 Delivery Year to address reliability concerns. PJM requested an effective date of February 23, 2015 for this
revision. Second, PJM requested a one-time PJM Tariff waiver that would permit PJM to keep approximately 2,000 MW of committed
capacity that should be released for the third incremental auction for the 2015/2016 Delivery Year. Without the waiver, PJM would
be required under the PJM Tariff to release this capacity. PJM requests an effective date of February 23, 2015 for the waiver.
Numerous parties filed comments on and protests to these PJM filings. FESC, on behalf of its affected affiliates, and, as part of a
coalition of certain other PJM utilities, filed comments in support of both PJM filings and seeking additional information from PJM
about the scope of any capacity shortfall. PJM's filings and all related pleadings are pending before FERC.
PJM Market Reform: PJM RPM Auctions - Calculation of Unit-Specific Offer Caps
The PJM Tariff describes the rules for calculating the “offer cap” for each unit that offers into the RPM auctions. FES disagreed with
the PJM Market Monitor's approach for calculating the offer caps and in 2014, FES asked FERC to determine which PJM Tariff
interpretation, FES's or the PJM Market Monitor's, was correct. On August 25, 2014, FERC issued a declaratory order agreeing
with the FES interpretation of the PJM Tariff language. FERC went on, however, to initiate a new proceeding to examine whether
the existing PJM Tariff language is just and reasonable. PJM filed its brief explaining why the existing PJM Tariff language is just
and reasonable. Other parties, including FES, submitted responsive briefs. The briefs and related pleadings are pending before
FERC.
PJM Market Reform: FERC Order No. 745 - DR
On May 23, 2014, a divided three-judge panel of the U.S. Court of Appeals for the D.C. Circuit issued an opinion vacating FERC
Order No. 745, which required that, under certain parameters, DR participating in organized wholesale energy markets be
compensated at LMP. The majority concluded that DR is a retail service, and therefore falls under state, and not federal, jurisdiction,
and that FERC, therefore, lacks jurisdiction to regulate DR. The majority also found that even if FERC had jurisdiction over DR,
Order No. 745 would be arbitrary and capricious because, under its requirements, DR was inappropriately receiving a double
payment (LMP plus the savings of foregone energy purchases). On January 15, 2015, FERC and a coalition of DR providers and
industrial end-user groups filed separate petitions for U.S. Supreme Court review of the May 23, 2014 decision. Responses to those
petitions are due March 19, 2015. The U.S. Court of Appeals for the D.C. Circuit will withhold issuance of the mandate pending the
United States Supreme Court's disposition of those petitions.
On May 23, 2014, FESC, on behalf of its affiliates with market-based rate authorization, filed a complaint asking FERC to issue an
order requiring the removal of all portions of the PJM Tariff allowing or requiring DR to be included in the PJM capacity market, with
a refund effective date of May 23, 2014. FESC also requested that the results of the May 2014 PJM BRA be considered void and