The Maryland Public Service Commission on July 14 filed arguments with the Federal Energy Regulatory Commission in support of a June 2 CPV Maryland LLC request for FERC approval of controversial contracts for power out of a CPV-built, gas-fired power project.
These Contracts for Differences (CfDs) had been approved by the Maryland PSC after the state commission picked CPV Maryland as the winner of a request for proposals process. The contracts are between CPV Maryland, and Baltimore Gas and Electric, Delmarva Power & Light and Potomac Electric Power (collectively, the electric distribution companies or “EDCs”). The EDCs have appealed the contracts, so far successfully, in the federal courts, saying they usurp FERC authority.
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 Maryland commission told FERC in its July 14 arguments that these are not the kind of “sweetheart,” backroom deals that normally would get rejected by FERC under this kind of argument. “Indeed, unlike many affiliate transactions, the CfDs were executed as the culmination of a lengthy open, transparent, and competitive administrative process,” it added. “The Request for Proposals (‘RFP’) for new generation that led to the CfDs was designed by the Maryland PSC on behalf of ratepayers to obtain the lowest-cost bid to build much-needed generation in the Southwest MAAC Local Deliverability Area (‘LDA’), not to give any particular affiliate a good deal. The fact that the EDCs protested signing the CfDs is immaterial, given that their parent corporations have every incentive not to undercut their own commercial interests by enabling new entry in capacity-deficient LDAs.”
Nevertheless, to the extent that the federal commission finds that the CfDs do not represent an arm’s length transaction, the appropriate test for federal commission acceptance of the CfDs is presented under a precedential case, the state PSC said. The federal commission has stated in that case that “[t]he underlying principle when evaluating an RFP… is that no affiliate should receive undue preference during any stage of the RFP.”
The Maryland PSC added: “[T]he transparent, open and competitive solicitation administered by the Maryland PSC, with evaluation by an independent expert, meets the Commission’s criteria.”
In approving the CfDs, the Maryland PSC said it relied on evidence that included: the risk that a large number of coal-fired power plants would retire as a result of environmental regulations; the risk that demand response resources, upon which the PJM Interconnection region has increasingly relied to fill capacity shortfalls, would not perform at required levels; the need for flexible generation capacity to back up the growing number of intermittent renewable resources; and the historic lack of new generation construction in Maryland since the inception of PJM’s Reliability Pricing Model, despite the Maryland PSC’s certification of multiple projects.
“For the foregoing reasons, the Maryland PSC respectfully requests that the Commission grant its motion to answer and accept the Contracts for Differences executed between CPV Maryland and certain Maryland Electric Distribution Companies,” the state commission concluded.