CPV Maryland seeks limited FERC approval of power contracts

In an effort to meet a federal court decision that is currently being contested at the appeals court level, CPV Maryland LLC on June 2 filed with the Federal Energy Regulatory Commission so-called “Contracts for Differences” (CfDs) arrived at under a controversial Maryland program.

Notable is that a federal appeals court on June 2, the day this request was filed at FERC, ruled against the Maryland program, upholding a lower court decision. The FERC filing was based on the lower court decision.

The contracts are between CPV Maryland and each of Baltimore Gas and Electric, Delmarva Power & Light and Potomac Electric Power (collectively, the electric distribution companies or “EDCs”).

A while back, the Maryland Public Service Commission conducted a competitive solicitation for the construction of new generation for the benefit of Maryland’s electric customers. CPV Maryland’s proposal to construct a new generating unit located inside the Southwest Mid-Atlantic Area Council locational deliverability area (LDA) was selected in this solicitation and the Maryland PSC directed CPV Maryland and the EDCs to enter into the essentially identical CfDs in order that CPV Maryland receive an assured revenue stream on the basis of which the facility’s construction could be financed.

Under the CfD terms, CPV Maryland commits to construct a new 661-MW, gas-fired combined-cycle facility, in exchange for which it is to receive a fixed and inflation indexed price multiplied by the facility’s capacity that it bid into the solicitation net of such revenues it receives from its participation in the day-ahead energy market, real-time energy market and Reliability Pricing Model (RPM) capacity market operated by PJM Interconnection over the 20-year term of the CfDs.

CPV Maryland said it thinks that under commission precedent, the CfDs are not jurisdictional contracts under Section 205 of the Federal Power Act because they do not provide for the delivery of capacity or energy to the EDCs. “However, a recent US District Court decision now on appeal found that, in the Court’s view, the financially-settled CfDs ‘establish[…] the price ultimately received by CPV for its actual physical energy and capacity sales to PJM in the PJM Markets’ and are thus subject to the Commission’s jurisdiction,” the company noted. That case is pending at the U.S. Fourth Circuit Court of Appeals.

So, even though CPV Maryland and the state of Maryland have appealed the court’s opinion and continue to believe that the CfDs are not subject to the commission’s jurisdiction, CPV Maryland is now seeking commission review and a determination that the rates in the CfDs are just and reasonable and otherwise comport with the standards for rates in jurisdictional contracts under FPA Section 205.

Company says this solicitation is not unprecedented

“CPV Maryland notes that, in terms of how this filing should be evaluated by the Commission, the Maryland PSC solicitation was no different from other solicitations routinely mandated by state commissions for the procurement of energy to serve those loads that have not selected competitive suppliers, called Standard Offer Service (‘SOS’) in Maryland,” the company wrote.

There should be no concern that the CfDs in any way interfere with the prices set in the RPM, CPV Maryland said. The commission repeatedly has confirmed that it has designed the RPM market rules to ensure that they produce just and reasonable results, regardless of whether suppliers may have participated in state-sponsored procurement programs or even obtained subsidies, it explained.

CPV Maryland said it followed all of the commission’s rules and PJM tariff requirements in connection with its sales of capacity into the RPM and will comply with PJM’s rules when selling energy to PJM. “And while the Commission certainly has worked to ensure that the RPM sends appropriate price signals, nowhere has the Commission ruled that the RPM is the exclusive program under which capacity may be secured or the exclusive source of price signals,” it argued.

FERC, it said, doesn’t need to consider whether the Maryland PSC properly implemented its authority under applicable state laws or the enforceability of the CfDs, CPV Maryland said. “These controversies will be decided in other judicial and state forums and are not relevant to the Commission’s evaluation of the CfDs under the Allegheny standards.”

Company contacts are:

  • Nathan Rushing, Competitive Power Ventures, 8403 Colesville Road, Suite 915, Silver Spring, MD 20910, Phone: 240-723-2338, nrushing@cpv.com.

  • Kenneth Dell Orto, Competitive Power Ventures, 50 Braintree Hill Office Park, Suite 300, Braintree, MA 02184, Phone: 781-817-896, kdellorto@cpv.com.

Notable is that another Competitive Power Ventures affiliate, CPV Shore LLC, filed a similar request on June 2 with FERC related to somewhat similar contracts it signed with EDCs subject to a New Jersey program that bears some resemblance to the Maryland program. The New Jersey program was also struck down by a U.S. District Court, with that decision also now on appeal.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.