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Over AEP's objections, FERC OKs market monitor request for AEP cost data

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Over AEP's objections, FERC OKs market monitor request for AEP cost data

Siding with the PJM Interconnection's independent market monitor, the Federal Energy Regulatory Commission June 5 ordered the American Electric Power Service Corp. to hand over certain information the IMM said it needs to determine if the utility's cost-based offers raised market power concerns.

Monitoring Analytics contended in a Nov. 22, 2016, petition that AEP was withholding data the utility used to calculate the variable operations and maintenance, or VOM, expense component of cost-based offers submitted to PJM's energy market. Without information on the total cost of AEP's VOM, the monitor argued it could not assess whether the cost inputs AEP used to develop its cost-based offers for its Ceredo generation units for Sept. 1, 2016, raised market power concerns.

But AEP argued that the market monitor failed to identify a potential FERC or PJM market rule violation that would justify more data. It further asserted that "absent a specific, legitimate assertion of market power abuse or other market rule violation, it is not within the authority of the market monitor to demand additional data."

The utility added that market participants were getting opposing guidance from PJM and the IMM on which costs to include in cost-based offers. During the time in question, AEP said, Monitoring Analytics pushed for limiting cost-based offers to short-run marginal costs and excluding VOM costs. But PJM said doing so was contrary to its tariff and a pending market rule changes.

Chiming in on the data request debate, PJM contended that Monitoring Analytics appeared to "be attempting to unilaterally impose its standard of what it believes should and should not be included in cost-based offers." The grid operator said the IMM's petition should instead be used as an opportunity for the commission to clarify what constitutes a "reasonable request" for information.

FERC concluded in the June 5 order that "the IMM's request for cost information falls within the scope of information it may reasonably request to perform its market monitoring functions."

The commission pointed to language in PJM's tariff that allows the IMM to request additional information from utilities "to accomplish [its] objectives" and seek FERC intervention if that data is not provided within a reasonable time.

"We find that the IMM has requested cost information that is necessary to enable the IMM to ensure that the market seller has correctly applied the cost development guidelines and that the level of the offer price cap is otherwise acceptable," FERC said.

Monitoring Analytics' specific request for information on VOM costs was reasonable, FERC said, "given the IMM's broad authority under the PJM tariff to review cost inputs and incremental costs."

As for PJM's assertion that the IMM was trying to impose a cost standard inconsistent with the PJM tariff and market rules, FERC said Monitoring Analytics lacked "the authority to enforce the PJM tariff or PJM rules."

Further, a stakeholder process aimed at clarifying PJM's rules on cost-based offers had no bearing on the IMM's authority and responsibility to review sell offers, cost inputs and incremental costs, FERC said. Thus, the pendency of that process would not render the IMM's request for cost data unreasonable, FERC added.

The commission, therefore, directed AEP to produce the information within 15 days. (FERC docket EL17-22)

Jasmin Melvin is a reporter for S&P Global Platts, which, like S&P Global Market Intelligence, is owned by S&P Global Inc.