[00:00:01] Speaker 00:
Case number 24-1092, Energy Harbor LLC petitioner versus Federal Energy Regulatory Commission.

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Ms.

[00:00:09] Speaker 00:
Wu for the petitioner, Mr. Kennedy for the respondents, Mr. Suarez for intervener, PJM Interconnection LLC.

[00:00:19] Speaker 05:
Morning, Ms.

[00:00:20] Speaker 05:
Wu.

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You may proceed when you're ready.

[00:00:25] Speaker 04:
Good morning, Your Honor.

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May it please the court?

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My name is Pamela Wu.

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I'm with the law firm Morgan Lewis and Bacchus, and I'm here on behalf of the petitioner, Energy Harbor LLC.

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I would like to reserve two minutes for rebuttal.

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Thank you.

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The heart of this dispute is whether it is just and reasonable for PJM to assess penalties on Energy Harbor for capacity that Energy Harbor had no obligation to provide and capacity that PJM had approved well in advance

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for it to be unavailable?

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The answer to that question is no.

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The tariff language is clear that the extent of a generator's unavailability due to an approved maintenance outage should not be included in the calculation of a performance shortfall.

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And that's what section 10 AD of attachment DD of PGM's tariff provides.

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The 300 megawatts that were unavailable at Samus Unit 6

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due to maintenance outage, so the scheduled removal from service that PJM approved a month before the winter storm that led to the assessment of penalties.

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Let me ask you a preliminary question, Ms.

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Wu.

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Does the PJM system of assessing an energy resources capacity commitment

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depend on an understanding of its unforced capacity?

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In other words, is it the same kind of system that the New York ISO uses in the, as described in Keyspan Ravenswood?

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You know what I'm talking about?

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The uncommitted capacity and the overall maximum output of the facility is relevant when a facility is bid into the market.

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And so once, and this is the capacity market and this is the market where

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PGM can approve and then subsequently commit generation to provide when called upon three years down the road.

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Once that capacity is cleared and committed into the market, the relevant portion is the committed portion of the capacity.

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And in energy harbors case for the Samus facility, the Samus facility was comprised of three generating units.

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They were individual and separately operated, but they were bid in as a combined resource.

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It had a total maximum output of 1490 megawatts.

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So can I, on a normal day, the Samus plant would attempt to meet its expected performance by calling on any of that 1490 megawatts, right?

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That's correct.

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And that is because the way that the plant is operated is that of the 1490, 1036 was the actual committed capacity.

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That is the obligation that

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Energy Harbor had for the market, and that's what it was compensated for.

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And so when Energy Harbor operated the unit, it's now since been retired, it operated under the goal of providing 1,036 to the market.

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But I guess your yes answer to my question means that with a 300 megawatt planned outage, you could have met the expected performance on during all the relevant performance intervals, correct?

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that when you look at the resource, the facility as a whole, as an aggregate.

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As a practical common sense.

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Sure.

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If you didn't have another problem with the planned outage, you would have met the expected performance.

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That's right.

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But the tariff provision that applies here is specific to the resource on which the capacity resource is based.

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And some of that.

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If we put, and I appreciate, obviously we'll pay attention to the text, if we just step back,

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Fundamental question about your position is why?

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Why would PJM give you a credit if you could have met a credit based on your planned outage?

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You could have met the expected performance.

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Sure.

[00:04:28] Speaker 04:
And in requesting an outage, submitting an outage ticket for the 300 megawatts that were going to be unavailable due to this maintenance that needed to be performed, PJM authorized that outage.

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To us, the obligation to supply power is reduced by the amount that is taken offline and made unavailable due to the maintenance outage.

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How is that consistent with the tariff amendment or which refers or I guess it's the tariff which refers to

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applies to the extent that a capacity resource is unavailable solely because of a maintenance outage.

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So once you have another outage, a forced outage, then it's no longer applicable because it's not solely because of the pre-approved maintenance.

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Thank you.

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And I think the interpretation turns on how the word resource

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should be interpreted.

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And when we look at the language, the term resource should refer to the generating units individually.

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But that's not the way the capacity contract was written.

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It doesn't specify.

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There's not one for six and one for unit seven and one for unit eight.

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It's for the aggregation.

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That seems like that should be dispositive of that point, that they're not contracting for capacity from three different

[00:06:04] Speaker 04:
Yes, and the contract is for the megawatts that are reflected by the resources.

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But when we go back to the language, though, the language is the resource on which the capacity resource is based was on a generator maintenance outage.

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And I think that's where the operational, the way the outages are submitted, requested and approved by PGM, I think that's where

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that informs and actually necessitates an interpretation that the resource should be at the generating level as opposed to the combined resource level.

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So you said that because the outage is described, submitted and requested, the maintenance, the request for approved maintenance is described unit six, that should be read into the tariff and should supervene the language of

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of only to the extent that a capacity resource is unavailable solely because?

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I think that the manner in which an outage ticket is reviewed and approved should be considered when interpreting this tariff provision.

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An outage ticket has to be submitted for each generating unit individually.

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Energy Harbor cannot submit an outage ticket that covers two units.

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So let's say Samus Unit 5 and Samus Unit 6

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was requesting authorization to go out on a maintenance outage.

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Separate outage tickets would need to be submitted for Samus Unit 5, and a separate outage ticket would need to be requested for Samus Unit 6.

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And PJM is free to approve each or both.

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Why does, even if you were right about what a resource on which the capacity resource is based, if you were right about what that means, how does that help you?

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Because the text says to the extent that the capacity resource is unavailable.

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And if we just go back to my very first question, the capacity resource is the whole plant's megawatts.

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That's right.

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And they were, let's say they were unavailable.

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to the extent of 300 megawatts.

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And it seems like PGM would say, yeah, that's exactly what we did.

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We didn't consider those.

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We knocked it off your installed capacity.

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And we did the calculation from there.

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It seems like it doesn't get you where you need to go.

[00:08:30] Speaker 04:
And respectfully, when we consider the resource, the maintenance outage was specific to Samus Unit 6.

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It took off 300 megawatts from being available to the market.

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Our interpretation of this tariff is that the resource on which the capacity resource is based, so SAMIS Unit 6, which is a resource that basically supports the SAMIS facility, that unit alone had one maintenance outage.

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There were no other outages in effect at the unit.

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And so when you look at the generating unit level, then the 300 megawatt exemption, excusal reduction, should apply.

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for the performance shortfall for the capacity resource as a whole.

[00:09:17] Speaker 03:
I understand that argument.

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And one other question I had was, it seems like there's a, maybe you can help me with this, but it seems like there's a disconnect between where you started, which is arguments that may or may not be right about the, it's on being unfair or improper to look at installed capacity instead of committed capacity.

[00:09:37] Speaker 03:
But that might support an argument that they should start their calculation from installed capacity.

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That's not what you requested.

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You requested a full 300 megawatt deduction from the performance shortfall.

[00:09:50] Speaker 03:
Yes.

[00:09:51] Speaker 03:
Why do you get them?

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Sure.

[00:09:53] Speaker 04:
Yeah.

[00:09:54] Speaker 04:
Thank you for that question.

[00:09:54] Speaker 04:
The performance shortfall calculation turns on the committed capacity.

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When we look at the inputs to the performance shortfall calculation, the expected performance is based off

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the committed capacity.

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The actual performance is just how the unit performed.

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But the whole premise, the performance shortfall, and actually the capacity market as a whole, the purpose of the performance penalties is to ensure that resources show up when they are called upon three years down the road.

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And that adequate maintenance is performed on them.

[00:10:30] Speaker 05:
That's correct.

[00:10:31] Speaker 05:
That's correct.

[00:10:32] Speaker 04:
But that is to the committed portion of the capacity.

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and not to the incumbent portion of the capacity.

[00:10:39] Speaker 05:
Well, you say that except that I thought you acknowledged at the outset that the concept of unforced capacity applies here, basically that the recognition of the capacity to actually contract in a capacity market is

[00:11:00] Speaker 05:
assessed in light of the history of performance of that unit.

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In other words, a brand new spanking never failed unit would probably have a higher proportion of unforced capacity to total installed capacity, and an old kind of rickety unit would have a lower

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sort of ceiling of unforced capacity compared to installed capacity.

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And so I understand, and it's compelling, your argument that the capacity resource, the amount that's actually contracted into the market, is the responsibility.

[00:11:39] Speaker 05:
But it's really underwritten by the unused capacity, isn't it?

[00:11:46] Speaker 05:
The excess capacity.

[00:11:50] Speaker 04:
Thank you.

[00:11:52] Speaker 04:
I would still turn back to the fact that the performance shortfall and every, all of these calculations are all based off the committed capacity.

[00:11:59] Speaker 05:
This is the capacity.

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But the committed capacity itself is based off of.

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That's correct.

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But the obligation that Energy Harbor had to provide was for the committed capacity and not for the remainder.

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And to your point about, you know, aging units, this was an aging

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coal unit as well.

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And so once Energy Harbor received that capacity commitment for 1036, the way that it operated the units was we will operate at 1036.

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We'll staff it appropriately.

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We'll make sure that all the inputs are there in order to achieve the 1036 that was contracted for.

[00:12:42] Speaker 05:
Great.

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Other questions?

[00:12:44] Speaker 05:
All right.

[00:12:45] Speaker 05:
Thank you.

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Thank you.

[00:12:47] Speaker 05:
We'll hear from Mr. Kennedy.

[00:13:07] Speaker 01:
Good morning, Your Honors.

[00:13:08] Speaker 01:
Robert Kennedy on behalf of the Commission.

[00:13:10] Speaker 01:
I guess I'll start with what I think is the key language of Section 10 A.D., which, as you pointed out, Judge Garcia, is the phrase solely because

[00:13:18] Speaker 01:
The provision operates to provide an excuse for non-performance to the extent a capacity resource, which is defined as megawatts from an existing facility, are unavailable solely because of a maintenance outage.

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And you see in paragraph 26 of the complaint order here, the commission looked at it prospectively.

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Setting aside the 300 megawatts that were out of commission due to the maintenance outage, what did Energy Harbor have available to them when Winter Storm Elliott commenced and the performance assessment interval started?

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And if you just do the math, they had 1,190 megawatts available to them to satisfy their capacity commitments, which were just around 1,000 megawatts, and more than enough to meet the reduced expected performance levels, which were

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I believe 840 and 860 on the two days in question.

[00:14:10] Speaker 01:
So the commission looking at those numbers said, given what you had available to you, you should have been.

[00:14:16] Speaker 06:
The balancing ratio that you talked about.

[00:14:19] Speaker 06:
Tell me what that is.

[00:14:21] Speaker 01:
Sure.

[00:14:21] Speaker 01:
So it's a function.

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It's an input into calculating expected performance.

[00:14:26] Speaker 01:
And basically, as I conceptualize it, PJM will say, OK, here's your capacity commitment, your 1,000 megawatts that you contracted to provide, that we're paying you to provide.

[00:14:37] Speaker 01:
We're going to cut you a break.

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If the fleet as a whole is really only performing at 80% of its

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of its committed capacity, then we're only going to hold you to 80% of your capacity commitment when assessing penalties.

[00:14:51] Speaker 06:
Is that also calculated in five-minute intervals?

[00:14:56] Speaker 01:
I think it is.

[00:14:59] Speaker 01:
But conceptually, it's a discount given to Energy Harbor based on the general performance of the fleet.

[00:15:06] Speaker 06:
Of everybody?

[00:15:07] Speaker 01:
Yes.

[00:15:07] Speaker 01:
Of all the generals?

[00:15:09] Speaker 01:
Yeah.

[00:15:10] Speaker 01:
All the generals, and obviously in the PJM region.

[00:15:13] Speaker 01:
So again, the commission looked at those numbers and said, given that what you had available to you, the shortfall couldn't be solely because of the maintenance outage.

[00:15:26] Speaker 01:
In their briefs, so that's prospectively, you can look at it the other way too.

[00:15:30] Speaker 01:
In their briefs, Energy Harbor attaches a lot of emphasis on the phrase that maintenance outage megawatts shall not be considered in the calculation of performance shortfall.

[00:15:40] Speaker 01:
So you can just look at the shortfall numbers and see that the forced outages more than eclipsed the shortfalls.

[00:15:46] Speaker 01:
In December 23rd, I believe the shortfalls ranged between 330 and 400 megawatts.

[00:15:54] Speaker 01:
Energy Harbor had a forced outage of 750 megawatts that entire day.

[00:15:58] Speaker 01:
And there's a similar story for December 24th where the outages were between 80, the shortfalls, excuse me, were between 80 and 180.

[00:16:07] Speaker 01:
The forced outage rate started at 140, moved up to 375 around 9 a.m.

[00:16:11] Speaker 01:
And then from 11 to 11 at night, it was like 550.

[00:16:14] Speaker 05:
I'm not sure I'm following the point you're making.

[00:16:17] Speaker 05:
Just simply.

[00:16:18] Speaker 01:
Simply the amount of megawatts that were enforced outage more than captured the shortfalls.

[00:16:25] Speaker 01:
So you could.

[00:16:27] Speaker 01:
You could count.

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You could draw.

[00:16:29] Speaker 05:
Right.

[00:16:29] Speaker 05:
So as long as you're counting the forced outages first, they want to count the authorized maintenance outages first.

[00:16:37] Speaker 05:
And you are saying, no, no.

[00:16:39] Speaker 05:
You count the forced outages first.

[00:16:41] Speaker 05:
And that is the whole amount.

[00:16:43] Speaker 01:
Right.

[00:16:44] Speaker 01:
You look at what they had available, and that's the end of the question.

[00:16:48] Speaker 01:
They had enough.

[00:16:49] Speaker 01:
You don't even need to get into the forced outages.

[00:16:51] Speaker 01:
If they had enough available, then putting aside the maintenance outages unnecessarily

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those maintenance average megawatts weren't the sole cause of any shortfall.

[00:17:00] Speaker 05:
But that's because you're counting them afterwards.

[00:17:02] Speaker 05:
Whereas if their rule, you would reduce the committed capacity by that to start and just act like it's a smaller contract.

[00:17:16] Speaker 05:
Well, that's what I understand their position to be.

[00:17:19] Speaker 05:
And so that's why I ask it in terms of sequencing, which you can.

[00:17:21] Speaker 01:
So what their position generally have been is the 300, it's just credit, period.

[00:17:27] Speaker 01:
If there's a maintenance outage, you get a deduction from your performance shortfalls.

[00:17:32] Speaker 01:
And that doesn't work in this situation where there's dueling outages, because the tariff requires that the maintenance outage be the sole cause.

[00:17:39] Speaker 01:
And here there's forced outages.

[00:17:40] Speaker 01:
The argument about

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installed capacity versus committed capacity.

[00:17:46] Speaker 01:
They have not really, there was some discussion that today, they have never argued that you should do the math and start at committed capacity, subtract our maintenance outages and see how we performed.

[00:17:59] Speaker 01:
They've always just had advocated for a straight credit of 300 million.

[00:18:04] Speaker 05:
Would it be a credit on the performance shortfall?

[00:18:09] Speaker 01:
a deduction from the performance shortfall.

[00:18:11] Speaker 06:
Would it be a fiction?

[00:18:13] Speaker 06:
The capacity was 1490 from which the 300 was deducted.

[00:18:21] Speaker 06:
So if you're going to avoid double counting, then the balancing ratio would have to be applied to 1490.

[00:18:35] Speaker 01:
Well, the balancing ratio is just applied to your, it's not really double counting because it's just setting a level of expected performance.

[00:18:45] Speaker 01:
So you're just applying it to the committed capacity level.

[00:18:49] Speaker 01:
So they're getting the benefit.

[00:18:51] Speaker 01:
And maybe I should just step back and talk about committed capacity versus installed capacity.

[00:18:59] Speaker 01:
And PJM will clear up the details if I have misstepped here.

[00:19:04] Speaker 01:
As I understand it, as I conceptualize it, PJM in these markets, they're purchasing unforced capacity.

[00:19:11] Speaker 01:
And what that basically is, is a cap on the generators.

[00:19:15] Speaker 01:
What they can bid into the market is sort of capped at their installed capacity, their maximum generation, reduced by their historic outage rate.

[00:19:26] Speaker 01:
So PJM buys them at that level, but they are depending on

[00:19:31] Speaker 01:
The reason that level is set is because this is in most critical situations, a blizzard, high demand on a holiday weekend.

[00:19:39] Speaker 01:
You want them to be able to call upon that cushion that's available to them to perform when they're needed most.

[00:19:44] Speaker 01:
I mean, they've been paid all year to show up on this date.

[00:19:47] Speaker 01:
So you want them to be able to access that.

[00:19:49] Speaker 01:
And as you saw, they counted on the entire facility to meet their commitments.

[00:19:55] Speaker 05:
And the reason that's correct is because that is the premise of

[00:19:59] Speaker 05:
the unforced capacity and it's going to am i right i mean yes it's right it's it's going to vary depending on the historic performance of a plant and you may you might be willing to buy some uh capacity from an older rickety or plant as long as it's got a bigger cushion that's right behind it yeah it serves kind of from pjm's perspective it's it's a cushion that it can um

[00:20:25] Speaker 01:
You know, it'll have this gap so that the generators can use to perform.

[00:20:29] Speaker 01:
It's also an incentive to the generators.

[00:20:31] Speaker 01:
If you're capped at bidding your unforced capacity, you know, you want to reduce your outage rates so you can actually bid in more and make more money.

[00:20:40] Speaker 05:
And are these plants, are they doing capacity contracting and they're also doing, you know, same day real time?

[00:20:47] Speaker 01:
Yes.

[00:20:48] Speaker 01:
So there are sort of two separate things.

[00:20:49] Speaker 01:
There's a capacity auction three years ahead of the commitment date.

[00:20:54] Speaker 01:
You get paid during the delivery year just for having received the capacity award.

[00:20:58] Speaker 01:
Then you bid into the energy markets.

[00:21:02] Speaker 01:
And sort of getting how that relates to the unforced installed capacity, which PJM references in their brief, there's a must offer requirement that you have to offer into the day ahead energy market

[00:21:15] Speaker 01:
installed capacity equivalent of your unforced capacity.

[00:21:18] Speaker 01:
So you have to go beyond your commitment, I guess basically multiplied by the historic.

[00:21:26] Speaker 01:
Sorry, let me step back.

[00:21:27] Speaker 01:
You have to offer more than your committed capacity into the energy market.

[00:21:32] Speaker 01:
every day to fulfill your commitments.

[00:21:34] Speaker 01:
And you can see that at 271 of the Joint Appendix.

[00:21:39] Speaker 01:
As for the argument that you should look at this at the resource level and apply it, I think that's contradicted both by the language of Section 10 A.D.

[00:21:47] Speaker 01:
and the record.

[00:21:49] Speaker 05:
you're talking about the resource.

[00:21:51] Speaker 01:
Yes, yes, that that as long as you have an outage at one unit.

[00:21:57] Speaker 01:
That's enough.

[00:21:57] Speaker 01:
So section 10 a D focuses on the.

[00:22:01] Speaker 01:
Excuse me, the unavailability of the capacity resource, which is defined as the net megawatts of capacity from an existing facility.

[00:22:10] Speaker 01:
So that's essentially its maximum output installed capacity.

[00:22:14] Speaker 01:
Then it directs you to look at the.

[00:22:17] Speaker 01:
Whether

[00:22:19] Speaker 01:
unavailability of the – sorry, then it directs you to look at the resource on which the capacity resource is based.

[00:22:26] Speaker 01:
So how did Energy Harbor tell PJM that it was going to provide these net megawatts of capacity?

[00:22:33] Speaker 01:
And I think the record is

[00:22:36] Speaker 01:
Undisputed, and certainly there's substantial evidence supporting the commission's conclusion that Energy Harbor treated this as a combined resource.

[00:22:44] Speaker 01:
You look at the layman affidavit which they submitted in connection with their complaint, paragraphs nine and 10, J189190.

[00:22:52] Speaker 01:
They said, we entered into the market as a combined resource.

[00:22:55] Speaker 01:
It received an award as a combined resource.

[00:22:57] Speaker 01:
It had an obligation to perform as a combined resource.

[00:23:01] Speaker 01:
How did PJM treat it?

[00:23:02] Speaker 01:
You can see this in,

[00:23:04] Speaker 01:
uh, paragraph 64, I believe the of the sorry footnote 64 commissions order recounts that PJM assigned a single resource identification number to the Samus units five through seven when tracking performance throughout the throughout the winter storm Elliott.

[00:23:22] Speaker 01:
So everyone understood before the speed arose that the resource that was supporting the capacity resource was the combined facility and sort of accepting

[00:23:33] Speaker 01:
the analysis that Energy Harbor advocates for now sort of really results in it's not symmetrical.

[00:23:40] Speaker 01:
Expected performance is measured on a combined basis.

[00:23:45] Speaker 01:
Actual performance is measured on a combined basis.

[00:23:48] Speaker 01:
So let me just peel out

[00:23:51] Speaker 01:
and look at the maintenance outage on a resource by resource basis, it really gives the exemption an outsized influence on the math.

[00:23:58] Speaker 01:
And that's really contrary to the whole purpose of these revised rules, which are intended to restrict exemptions and put the risk of non-performance on the generators rather than the consumers.

[00:24:10] Speaker 05:
Are you relying at all on any kind of deference?

[00:24:13] Speaker 01:
So we do think that the commission is entitled to deference in interpreting jurisdictional

[00:24:20] Speaker 01:
contracts we think that um excuse me that possibility survives um loper bright the court has recognized in the kansas cities case uh the national fuel case uh that we cited in our briefs that that predate chevron that um you know the agency's expertise in dealing with jurisdictional contact contracts i mean the commission reviewed and approved this um particularly something as technical and um

[00:24:47] Speaker 01:
you know, in the weeds as the capacity markets and exceptions, the capacity markets rules.

[00:24:51] Speaker 05:
Um, the general, do you need deference?

[00:24:54] Speaker 01:
I don't think we do.

[00:24:54] Speaker 01:
I think we have the best reading period.

[00:24:56] Speaker 01:
Uh, the only reading that gives effects to all the pertinent terms in the, in the contract.

[00:25:01] Speaker 01:
So I don't think we need it in this case, but I think, um, I think it is available to us.

[00:25:12] Speaker 01:
Any other questions?

[00:25:14] Speaker 01:
Thank you, Your Honors.

[00:25:14] Speaker 05:
Thank you.

[00:25:15] Speaker 05:
Now we'll hear from Mr Spurs for PJM.

[00:25:39] Speaker 02:
May it please the court.

[00:25:40] Speaker 02:
My name is Andrew Sweres from the law firm of Wright and Talisman representing the intervener PJM.

[00:25:46] Speaker 02:
I guess I'll take the easiest question first.

[00:25:49] Speaker 02:
Judge Randolph, you asked whether or not PJM does this calculation for every five minute interval and the answer is yes.

[00:25:55] Speaker 06:
Not by hand, I trust.

[00:26:01] Speaker 02:
Excuse me?

[00:26:02] Speaker 06:
Not by hand.

[00:26:03] Speaker 02:
Oh, no, no.

[00:26:05] Speaker 02:
No, in fact,

[00:26:07] Speaker 02:
If you look at the actual programming, which is in, I think it's in the petitioner's reply brief, you can see the actual programming that goes into the computer that calculates this.

[00:26:22] Speaker 02:
I think, well, let's start off with the generator ticket, which Ms.

[00:26:28] Speaker 02:
Wu talked about.

[00:26:29] Speaker 02:
And I believe she said that it takes 300 megawatts of capacity

[00:26:36] Speaker 02:
away from what's available to the market.

[00:26:39] Speaker 02:
I think the generator, if we just look, it's J97.

[00:26:42] Speaker 02:
The outage ticket does not indicate what the committed capacity is.

[00:26:47] Speaker 02:
It says the ticket reduction is 300, installed capacity 600.

[00:26:53] Speaker 02:
So what is happening when a resource or a generator gives PJM requests of maintenance outage, what's happening

[00:27:05] Speaker 02:
is the available capacity to generate is reduced by that number.

[00:27:10] Speaker 02:
So here, their available capacity was 1,490.

[00:27:15] Speaker 02:
It was reduced by 300 megawatts.

[00:27:18] Speaker 02:
That's the amount of the maintenance outage.

[00:27:22] Speaker 02:
And they clearly had more than enough megawatts available, even with that, as you recognize, Judge Garcia, that they could have met their capacity commitment.

[00:27:34] Speaker 02:
The capacity commitment is a commitment.

[00:27:36] Speaker 02:
They're paid a capacity payment every day of the year, even the days where they don't actually perform, in order to be available to stand by and provide those megawatts.

[00:27:49] Speaker 05:
If a forced outage accounts for some but not all of a shortfall, then the shortfall can be partially excused by a maintenance outage or no?

[00:28:05] Speaker 02:
If the forced outage counts for some, but not all, I would say the answer to that question is yes.

[00:28:12] Speaker 05:
That the maintenance outage could be?

[00:28:14] Speaker 02:
The maintenance outage could be.

[00:28:15] Speaker 02:
You know, again, to the extent that it is the sole reason for the outage.

[00:28:22] Speaker 05:
For the remaining portions.

[00:28:23] Speaker 02:
Right.

[00:28:24] Speaker 02:
Right.

[00:28:26] Speaker 02:
Right.

[00:28:26] Speaker 06:
And so, you know, if they hadn't failed, then

[00:28:31] Speaker 06:
They would have met their commitments.

[00:28:37] Speaker 05:
If they hadn't had a forced outage, they would have met the commitments, notwithstanding the fact that they wanted an approved maintenance outage as well.

[00:28:43] Speaker 02:
Absolutely.

[00:28:43] Speaker 02:
That's absolutely true.

[00:28:44] Speaker 02:
If there were not forced outages,

[00:28:48] Speaker 02:
they would have been able to supply that entire capacity commitment with the available generation.

[00:28:54] Speaker 05:
They make this, I think, intuitively very powerful argument that the only committed capacity is what they're obligated for.

[00:29:04] Speaker 05:
And your position, I mean, we had discussion with both Ms.

[00:29:08] Speaker 05:
Wu and Mr. Kennedy about this, the notion that the entire installed capacity is really implicated in

[00:29:18] Speaker 05:
capacity resource.

[00:29:19] Speaker 02:
Your understanding, Judge Ballard, is exactly correct.

[00:29:23] Speaker 02:
When they bid into PJM, they are bidding in an amount of megawatts.

[00:29:29] Speaker 02:
That amount of megawatts is backed by physical generation.

[00:29:35] Speaker 02:
The distinction, and you pointed to the Keyspan Ravenswood case, Judge Tatel there did a very good job of explaining

[00:29:41] Speaker 02:
how you get from installed capacity to unforced capacity and why you need to do that.

[00:29:47] Speaker 02:
And it's because no piece of equipment is running perfectly 100% of the time.

[00:29:51] Speaker 05:
But that's a different system operator.

[00:29:54] Speaker 05:
And so the citation for this, I take it would be the 2024 FERC order that accepted PJM tariff revisions.

[00:30:03] Speaker 05:
I mean, that's one place I saw it just publicly that it's

[00:30:08] Speaker 05:
describes how the tariff entitles PGM to the complete physical capability.

[00:30:13] Speaker 05:
It's like you didn't actually spell this out much in the briefing.

[00:30:18] Speaker 02:
If you would like us to find the site, we could.

[00:30:21] Speaker 02:
It wasn't implicated in the briefing at all, so.

[00:30:24] Speaker 02:
We're going to have to write something.

[00:30:26] Speaker 02:
Okay, we can.

[00:30:27] Speaker 05:
And I think it's, I mean, I'm persuaded that it is the routine operation and understanding of the parties, but

[00:30:36] Speaker 02:
Right.

[00:30:37] Speaker 02:
So in order to supply any amount of megawatts to PJM, you have to back that by a physical resource.

[00:30:44] Speaker 02:
And when you tell PJM that you're going on a maintenance outage and PJM approves it, PJM is saying, OK, we recognize that your ability to generate megawatts is reduced by the amount of that reduction.

[00:30:58] Speaker 02:
The extent to which that implicates your capacity commitment is what's at issue here.

[00:31:06] Speaker 02:
If it's the sole reason, that's one aspect of it.

[00:31:09] Speaker 02:
And then we need to see, well, to what extent does that reduction in installed capacity, the capability to generate, to what extent does that actually eat into your committed megawatts?

[00:31:24] Speaker 03:
I think you were about to suggest that we don't even need to get into this intricacy of how you get from installed to committed capacity

[00:31:34] Speaker 03:
And if you work, or did you just explain why that is?

[00:31:36] Speaker 02:
Well, the only reason why that issue, I think, comes up is because it is Energy Harbor's position that the calculation needs to start with the committed megawatts.

[00:31:50] Speaker 02:
And it is not relevant at all what the installed capacity is.

[00:31:55] Speaker 02:
And it is relevant.

[00:31:58] Speaker 02:
And that's why.

[00:32:03] Speaker 02:
I think that what's interesting about this case is so much of the facts, so many of the facts are completely undisputed.

[00:32:12] Speaker 02:
There are clearly multiple outages affecting the SAMIS resource.

[00:32:18] Speaker 02:
The SAMIS resource bid in as an aggregate resource, as both Judge Garcia and Judge Pollard recognized.

[00:32:28] Speaker 02:
Energy Harbor has conceded that the 300 megawatts

[00:32:32] Speaker 02:
were included in the calculation.

[00:32:34] Speaker 02:
They just don't like where we included them.

[00:32:38] Speaker 02:
And they even concede that every other aspect of the calculation, as was also recognized in the argument earlier, every other aspect of this calculation is done on an aggregate basis.

[00:32:48] Speaker 02:
So from PJM's perspective, what really matters is the amount that you are committing to the market.

[00:32:59] Speaker 02:
And can you meet it?

[00:33:00] Speaker 02:
You're making that commitment.

[00:33:03] Speaker 02:
And we don't really care whether you run Samus 5 and Samus 7 flat out and run Samus 6 just a little bit, or you run them all at 50%.

[00:33:15] Speaker 02:
That doesn't matter.

[00:33:18] Speaker 02:
And so because we haven't disaggregated the calculation in any other way, it would be incongruous to disaggregate the calculation for the one

[00:33:32] Speaker 02:
you know, the one reason to determine whether it's the sole outage for a particular, you know, unit in that calculation.

[00:33:44] Speaker 05:
So the balancing ratio is per event, right?

[00:33:49] Speaker 05:
Per need for the capacity across the PGM.

[00:33:55] Speaker 05:
They apply a balancing.

[00:33:56] Speaker 02:
They apply.

[00:33:57] Speaker 05:
We've had to rely on

[00:34:00] Speaker 05:
capacity contracts to meet the energy needs of the consumers because of Winter Storm Elliott.

[00:34:09] Speaker 05:
And in deciding who to penalize, there's the balancing ratio, as is done off the top, basically.

[00:34:19] Speaker 05:
Nobody was able to operate, or across the fleet, there was

[00:34:25] Speaker 05:
What, an average shortfall?

[00:34:27] Speaker 02:
I think the way PJM would express it is that, okay, so the balancing ratio applies to the expected capacity.

[00:34:35] Speaker 02:
And the expectation is... System-wide capacity.

[00:34:41] Speaker 02:
Fleet-wide, yeah.

[00:34:42] Speaker 02:
Right, and so the expectation for their megawatts is,

[00:34:50] Speaker 02:
discounted, for lack of a better word, by the overall percentage of the fleet that PJM needs to call on at that interval.

[00:35:01] Speaker 05:
Is it an average?

[00:35:04] Speaker 05:
Or it's just, so PJM has contracted for, it has 100% of capacity contracts.

[00:35:15] Speaker 05:
altogether.

[00:35:16] Speaker 05:
And this storm was an 85% serious storm.

[00:35:19] Speaker 05:
In other words, it required us to draw an 85% fleet wide.

[00:35:24] Speaker 05:
And so we're not going to pretend, with respect to Energy Harbor, that it was an emergency that required us to draw in 100% of their resource.

[00:35:34] Speaker 05:
So it's basically, it was enough to feed the customers to use 80% of our aggregate capacity that we had contracted

[00:35:45] Speaker 02:
Yeah, I think that's right.

[00:35:47] Speaker 05:
So it's not about unlike unforced capacity, which is about failures.

[00:35:55] Speaker 05:
The balancing ratio is about need.

[00:35:58] Speaker 02:
The balancing ratio is what PJM called on.

[00:36:02] Speaker 02:
It's a measure of the percentage of the available resources that PJM ultimately needed to call on to meet this emergency.

[00:36:11] Speaker 02:
Got it.

[00:36:15] Speaker 05:
right?

[00:36:18] Speaker 05:
All right.

[00:36:19] Speaker 05:
Thank you.

[00:36:19] Speaker 02:
Thank you.

[00:36:21] Speaker 05:
And, uh, I think once again, we managed to question you and keep you up at the podium longer than your allotted time, but we'll give you a couple of minutes if you want it for rebuttal.

[00:36:31] Speaker 04:
Yes.

[00:36:31] Speaker 04:
Thank you, Your Honor.

[00:36:33] Speaker 04:
I just have a few short points to make.

[00:36:41] Speaker 04:
Um, your honor, you had asked about deference.

[00:36:44] Speaker 04:
Um, our position is that

[00:36:46] Speaker 04:
it should be limited.

[00:36:47] Speaker 04:
And the reason for that is because the... It should be what?

[00:36:53] Speaker 04:
It should be more limited.

[00:36:54] Speaker 04:
So a review of the tariff language here does not require technical knowledge.

[00:37:03] Speaker 04:
It doesn't require industry knowledge.

[00:37:07] Speaker 04:
It doesn't require the expertise that FERC would have to offer.

[00:37:11] Speaker 04:
As Council for FERC actually acknowledged, the interpretation can be

[00:37:16] Speaker 04:
made based off the language that is in the tariff.

[00:37:20] Speaker 05:
I did also want to respond to- Can you be more concrete about where you think a non-differential approach would make a difference for your client?

[00:37:34] Speaker 04:
Well, in our opinion, the tariff language is clear.

[00:37:38] Speaker 04:
And it should be just based off of the plain language of the tariff.

[00:37:45] Speaker 04:
We believe that the order was conclusory in finding that the resource should be the SAMHSA facility because it ignored basically the operational realities of the facility.

[00:37:58] Speaker 04:
It ignored the fact that the outages are requested and approved on a generating unit level.

[00:38:05] Speaker 04:
And so this case is about an interpretation of basically a contract.

[00:38:11] Speaker 04:
And so while FERC's interpretation may be entitled

[00:38:15] Speaker 04:
some deference.

[00:38:17] Speaker 04:
Really, the interpretation of the language at issue here doesn't require the technical knowledge and expertise that FERC has to offer.

[00:38:27] Speaker 04:
The second point I just wanted to respond to is, Your Honor, you asked about paragraph 26 of the FERC order, J189.

[00:38:37] Speaker 04:
And in that paragraph, it said, this exemption applies only

[00:38:43] Speaker 04:
to the extent a resource on which the capacity resource is based is on a generator maintenance outage.

[00:38:49] Speaker 04:
And the resource was unavailable solely because it was on such an outage.

[00:38:53] Speaker 04:
And it goes on to find that the maintenance outage was not the sole cause of the inability to meet the expected performance.

[00:39:00] Speaker 04:
So this seems to suggest that if a unit had both a forced outage and a maintenance outage in place, then it would not be eligible for the exemption under section 10 AD.

[00:39:12] Speaker 04:
But in FERC's brief, FERC offers an example that indicates somewhat of a contrary position.

[00:39:19] Speaker 04:
And this is the example that you were asking about.

[00:39:23] Speaker 04:
And that is that even if a unit had a forced outage and a maintenance outage, in the example that they provided on page 33 of its brief, that unit would be penalized for the forced outage, but not for the maintenance outage to the extent that that maintenance outage covered the remainder of the performance shortfall.

[00:39:42] Speaker 04:
So I just wanted to note that because it appears to be a shift, a slight shift in their position.

[00:39:49] Speaker 05:
But that seems consistent with their position as stated today.

[00:39:53] Speaker 04:
As stated today, yes.

[00:39:55] Speaker 05:
The inconsistency is between that and the order?

[00:39:57] Speaker 04:
Yes, in the order on the complaint.

[00:39:59] Speaker 04:
And that's in paragraph 26, where they say.

[00:40:02] Speaker 05:
I'm sorry, what's the inconsistency?

[00:40:03] Speaker 04:
Sure.

[00:40:04] Speaker 04:
So the FERC order says that the exemption applies to the extent that

[00:40:08] Speaker 04:
the unavailability is based solely on the generator maintenance outage.

[00:40:15] Speaker 04:
And then it goes on to find that the maintenance outage was not the sole cause of the inability to meet its expected performance as the tariff requires.

[00:40:22] Speaker 04:
So when I read that, it seems to suggest that if there is a maintenance outage and if there's another outage in place, regardless of how it is

[00:40:33] Speaker 04:
applied to the performance shortfall, then Energy Harbor would not be eligible for the exemption.

[00:40:39] Speaker 05:
I'm understanding them to be looking at increments of outage and that the ultimate increments after the forced outage that were unavailable were unavailable solely because of the maintenance outage.

[00:40:52] Speaker 05:
And that's why those would not be penalized.

[00:40:55] Speaker 04:
OK.

[00:40:55] Speaker 04:
Thank you, Your Honor.

[00:40:56] Speaker 04:
OK.

[00:40:57] Speaker 04:
Great.

[00:40:57] Speaker 04:
Thank you.

[00:40:57] Speaker 04:
May I make one more final point?

[00:41:02] Speaker 04:
I just want to reiterate that Energy Harbor bid in the full output of the Samus facility.

[00:41:09] Speaker 04:
What it was committed, the capacity commitment that it had was a portion of that full output.

[00:41:17] Speaker 04:
Energy Harbor was not paid for the full amount.

[00:41:19] Speaker 04:
The amount that it was paid for and that it had an obligation to provide is the 1036 that we have been discussing.

[00:41:26] Speaker 03:
PJM says your committed capacity was calculated based on the installed capacity that you bid in.

[00:41:31] Speaker 03:
Do you dispute that?

[00:41:33] Speaker 04:
The committed capacity is basically what clears.

[00:41:37] Speaker 04:
There's a market clearing price and all of the units are cleared based off that level.

[00:41:42] Speaker 04:
So yes, the committed capacity is a portion of the installed capacity, but our position still remains that the committed capacity is the relevant portion that needs to be.

[00:41:52] Speaker 03:
I understand them to say.

[00:41:54] Speaker 03:
that when they decide how much committed capacity to accept, require, pay for, they do it in reliance on the installed capacity and a calculation based on your historical forced outages.

[00:42:07] Speaker 03:
Do you dispute that?

[00:42:08] Speaker 04:
No.

[00:42:09] Speaker 04:
OK.

[00:42:09] Speaker 04:
Thank you.

[00:42:10] Speaker 04:
And so in closing, if PJM provided prior approval for a resource to go out on a maintenance outage, that resource just should not be penalized for the unavailability.

[00:42:22] Speaker 05:
Thank you.

[00:42:22] Speaker 05:
Thank you.

[00:42:23] Speaker 05:
Case is submitted.