On March 9, 2015, FERC rejected the Illinois Municipal Electric Agency’s (“Illinois MEA”) waiver from PJM Interconnection, L.L.C.’s (“PJM”) capacity rules for the 2018/2019 delivery year.  As a result, the Illinois MEA cannot use a majority of generation located outside of the Commonwealth Edison Locational Delivery Area (“ComEd LDA”) to meet its capacity obligations of load located within the ComEd LDA.

Currently, Illinois MEA operates under PJM’s Fixed Resource Requirement (“FFR”) Alternative, rather than PJM’s capacity market.  Under the FFR Alternative, a load-serving entity (“LSE”) such as Illinois MEA can elect to serve load within PJM through self-supply or bilateral agreements.  To utilize the FFR Alternative however, Illinois MEA must file an FFR Capacity Plan that includes a minimum percentage of generation from within the affected LDA – in this case, ComEd LDA.

On January 8, 2015, Illinois MEA requested waiver of the FFR Alternative’s requirement that Illinois MEA must use a minimum amount of generation within the ComEd LDA to meet its capacity obligation.  Illinois MEA previously requested a similar waiver of the FFR Alternative’s minimum internal generation requirement due to a PJM modeling change that would have required Illinois MEA fulfill 72.4 percent of its capacity obligations from resources located within the ComEd LDA (see May 9, 2014 edition of the WER).  In its January 2015 waiver request, Illinois MEA stated that the waiver is necessary due to PJM’s treatment of the ComEd LDA as if it were constrained, thereby requiring Illinois MEA to meet a minimum capacity obligation of 91.7 percent with generation resources located within the ComEd LDA.  Illinois MEA argued to FERC that denying its request could result in an increase of capacity costs between $247 and $757 million.

FERC denied the waiver request, finding that the Illinois MEA failed to demonstrate that granting the waiver would not also trigger undesirable consequences.  In doing so, FERC concluded that if it were to grant the waiver and relieve the Illinois MEA of its capacity obligation within the ComEd LDA, the waiver could result in a significant cost shift to other customers in the ComEd LDA.  FERC also stated that the existing internal resource requirement is “designed to protect the reliability of the PJM system, and we do not find…that Illinois MEA has demonstrated that it should be relieved of its share of the internal resource requirement.”  Lastly, FERC distinguished Illinois MEA’s previous waiver from the current waiver request.  Specifically, FERC explained that the Illinois MEA had not received adequate notice of the minimum internal requirement from PJM when it requested the previous waiver, which no one protested at FERC.  In this instance however, FERC noted that the notice concern did not apply, and that several parties protested Illinois MEA’s requested waiver, raising concerns about undesirable consequences, including potential costs shifts to other customers.

A copy of the order is available here.