UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION

Electric Transmission Incentives Policy ) Docket No. RM20-10-000 Under Section 219 of the Federal ) Power Act )

COMMENTS OF PJM INTERCONNECTION, L.L.C.

Craig Glazer Paul M. Flynn Vice President-Federal Government Policy Victoria M. Lauterbach 1200 G Street, N.W. Wright & Talisman, P.C. Suite 600 1200 G Street, N.W., Suite 600 Washington, D.C. 20005 Washington, D.C. 20005 (202) 423-4743 (202) 393-1200 [email protected] [email protected] [email protected] Mark J. Stanisz Senior Counsel Attorneys for PJM Interconnection, L.L.C. PJM Interconnection, L.L.C. 2750 Monroe Boulevard Audubon, PA 19403 (610) 666-4707 (phone) [email protected]

June 25, 2021

TABLE OF CONTENTS

PAGE

I. COMMENTS ...... 6

A. EPAct’s Text and Legislative History Compel the Grant of an Incentive for RTO Participation Without a Fixed Time Limit or Voluntariness Criterion ...... 6

1. EPAct’s Text Mandates the Grant of an Incentive for RTO Participation ...... 6

a. EPAct Does Not Condition Incentive Eligibility on Voluntariness ...... 8

b. EPAct Does Not Permit the Commission to Arbitrarily Remove the Adder After Three Years ...... 9

2. The Legislative Purpose Underlying the RTO- Participation Incentive Confirms that Congress Intended to Incentivize Long-Term RTO Participation, Not Just the One-Time Act of Joining an RTO ...... 10

a. The Pre-Conference House and Senate Versions of EPAct Confirm Congress’s Intent to Incent Long-Term Reliability and Consumer Benefits ...... 10

b. EPAct’s Legislative History, Viewed in Context to Events Contemporaneous with Its Passage, Confirm Congress’s Intent to Incentivize Long- Term Reliability and Consumer Benefits ...... 11

3. The Accuracy of the Commission’s Longstanding Interpretation and Application of FPA Section 219(c) Is Further Confirmed By Congress’s Acquiescence Thereto ...... 14

4. The Supplemental NOPR’s Construction of FPA Section 219(c) Violates the Administrative Procedure Act and Would Be Invalidated ...... 16

B. The Commission’s Current Application of the RTO-Participation Incentive Is Consistent with Congressional Intent and Constitutes Sound Policy ...... 17

i

1. It Is Sound Policy to Promote Stable RTO Membership Through the Award of the RTO-Participation Incentive ...... 17

2. The Introduction of a Time Limitation on Incentive Eligibility Undermines the Goal of Stable RTO Membership ...... 18

3. It Is Sound Policy for the RTO-Participation Incentive to Be Awarded Independent of a ...... 20

C. The Present RTO-Participation Incentive Is Designed to Somewhat Balance the Asymmetric Cost-Benefit Equation Between Utilities and Customers ...... 22

1. The Supplemental NOPR Ignores the Many Obligations and Costs that Transmission Owner RTO Members Undertake and that Commission Regulation Imposes Uniquely on Them ...... 25

2. The Supplemental NOPR Fails to Appreciate that RTO Benefits Flow Mostly to Customers ...... 28

D. FERC’s Use of Adders to Incent Beneficial Behavior Is Consistent with Sound and Established Regulatory Principles ...... 30

E. The Commission Should Holistically Look at Transmission Incentives and Its Regulatory Burdens on RTO Versus Non-RTO Regions and Reconsider the Supplemental NOPR’s Piecemeal Approach ...... 33

F. Should the Commission Proceed with a Final Rule, It Should Provide an Avenue for Parties to Petition for Regional Variation as to Application of the Rule Based on the Unique History and Circumstances of a Particular RTO Region ...... 34

II. CONCLUSION ...... 35

ii UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION

Electric Transmission Incentives Policy ) Docket No. RM20-10-000 Under Section 219 of the Federal ) Power Act )

COMMENTS OF PJM INTERCONNECTION, L.L.C.

PJM Interconnection, L.L.C. (“PJM”) respectfully submits these comments in response to the April 15, 2021 Supplemental Notice of Proposed Rulemaking issued by the

Federal Energy Regulatory Commission (“Commission” or “FERC”) in the above- captioned docket.1

At the outset, PJM believes it important to detail what is and is not at issue in this proceeding. The Supplemental NOPR does not contest that regional transmission organizations (“RTOs”) 2 provide substantial benefits to consumers through enhanced reliability, competitive markets that spur entry for existing as well as new technologies such as demand response, energy efficiency and renewables, and regional and interregional planning. 3 For the PJM RTO alone, PJM has estimated those benefits to end-use consumers as totaling over $3.2 billion to $4 billion per year. The Commission has made it clear that the benefits of RTOs are not at issue in this docket.4

1 Electric Transmission Incentives Policy Under Section 219 of the Federal Power Act, 175 FERC ¶ 61,035 (2021) (“Supplemental NOPR”).

2 For simplicity, PJM uses the term “RTO” to refer to RTOs and independent system operators (“ISOs”) interchangeably, given that they both qualify as Transmission Organizations. See 16 U.S.C. § 796(29).

3 See Supplemental NOPR at P 14 n.29.

4 See id. at P 14 n.29 (citing monetary benefits from MISO and SPP membership), dissent op. (Commissioner Chatterjee) at P 6 (citing monetary benefits from MISO, PJM, and SPP membership), concurring op. (Commissioner Christie) at P 2 (“The Commission has previously enumerated the benefits of RTO/ISO participation to both public utilities and consumers, so the costs and benefits of such membership are not at issue here.”).

What is at issue, however, is the legal meaning of Congress’s directive that the

Commission provide the RTO-Participation Incentive to each transmitting utility or electric utility that joins a Transmission Organization.5 By the same token, the Supplemental

NOPR (and its timing) raises a host of practical and policy implications that, whether intended or not, cannot help to ensure future RTO development and membership stability across the country. Moreover, the timing of the Supplemental NOPR, and the singling out of the RTO-Participation Incentive for Commission action, is at odds with the reality that the Commission will need strong RTOs with stable and growing membership in order to carry forward the Commission’s and the Administration’s ambitious transmission and markets-related goals.6

In these comments, PJM will demonstrate that the Supplemental NOPR’s abrupt reversal of Commission policy is diverting time and resources away from the

Commission’s and RTOs’ ambitious agendas to instead litigate a highly beneficial incentive. In PJM, the ratio of RTO benefits to the cost of the incentive is 23:1 in favor of the end-use customers. Within the PJM region,7 the incentive amounts to approximately

$156 million spread over total annual transmission billings of $31.1 billion.8 By contrast,

5 Energy Policy Act of 2005 § 1241, Pub. L. No. 109-58, 119 Stat. 594 (2005); Federal Power Act § 219(c) (codified at 16 U.S.C. § 824s(c)).

6 PJM’s comments are focused solely on the legal and policy implications of the Commission’s reversal of its prior holdings concerning the structure of the RTO-Participation Incentive. PJM is not opining on issues associated with the overall returns on transmission investment as that is strictly a matter between the transmission owners, its customers, and the Commission exercising its ratemaking authority.

7 The cost of the RTO-Participation Incentive for all recipients for the year 2020 is estimated to be $402 million for the six jurisdictional RTOs and ISOs in the United States.

8 2020 State of the Market Report for PJM, Monitoring Analytics, LLC, Table 8 (page 17) (Mar. 11, 2021), https://www.monitoringanalytics.com/reports/PJM_State_of_the_Market/2020/2020-som-pjm-vol1.pdf. PJM has detailed savings to customers from RTO participation at $3.2 billion to $4 billion per year. See PJM Value Proposition, PJM Interconnection, L.L.C., 1 (June 26, 2019), https://www.pjm.com/about- pjm/~/media/about-pjm/pjm-value-proposition.ashx (“PJM Value Proposition”) (a copy is attached hereto as

2 PJM provides a total estimated annual savings of $3.2 billion to $4 billion to the energy marketplace.

Moreover, the Supplemental NOPR would upset the balance between the substantial RTO benefits that flow to consumers and the modest incentive inuring to the transmission owners to encourage their continued active participation in RTOs. This loss of equilibrium can only work in the wrong direction relative to encouraging long-term RTO growth and development in some parts of the nation, and ensuring RTO stability in mature regions like PJM’s own. An RTO should not have to produce an actual exit letter to establish the risk of membership instability on account of the Supplemental NOPR. As the

Commission itself has observed, “the balkanization of electricity markets hurts consumers who pay higher transmission rates and have access to fewer generation options.”9 Thus, while the Supplemental NOPR’s proposal to revise and limit the RTO-Participation

Incentive may be an attempt to lower consumer costs, it could paradoxically increase prices in the long term were transmission owners to leave an RTO.10

PJM strongly encourages the Commission to reconsider the Supplemental NOPR’s overly restrictive approach to the RTO-Participation Incentive. To this end, PJM’s comments address several key points:

 The mandate found in the statutory text of Federal Power Act (“FPA”) section 219(c) clearly anticipates the Commission granting an incentive that

Attachment A). This contrasts with a total cost to load of approximately $164 million or approximately 4% of the total benefits that load realizes today.

9 Regional Transmission Organizations, Order No. 2000, 89 FERC ¶ 61,285, 1996–2000 FERC Stats. & Regs., Regs. Preambles ¶ 31,089, at 31,004 (1999), order on reh’g, Order No. 2000-A, 90 FERC ¶ 61,201, 1996–2000 FERC Stats. & Regs., Regs. Preambles ¶ 31,092 (2000), petitions for review dismissed sub nom. Pub. Util. Dist. No. 1 v. FERC, 272 F.3d 607 (D.C. Cir. 2001).

10 In PJM, even one transmission owner’s exit could have a substantial destabilizing effect on the entire region.

3 promotes membership and participation in Transmission Organizations like RTOs—a requirement confirmed by the legislative and policy backdrop of the Energy Policy Act of 2005 (“EPAct”).11 As PJM will demonstrate with evidence, the majority’s proposed interpretation of the statute is contrary to section 219’s express language and legislative history. None of these primary sources of authority support the Supplemental NOPR’s proposal to abandon the way it has interpreted section 219(c) for fifteen years.

 The Commission’s historical administration of the RTO-Participation Incentive is consistent with section 219(c), while the Supplemental NOPR’s change of course is contrary to the statutory requirement and legislative intent.12

 The Supplemental NOPR’s proposed time and voluntariness limitations are also inconsistent with federal and state policy goals.13

 The Supplemental NOPR ignores the many obligations and costs underlying utility RTO membership and mistakenly assumes customer benefits alone are sufficient to attract and retain transmission owners to RTOs.

 Transmission owner participation in an RTO is not a passive endeavor. Transmission owner participation imposes restrictions and additional responsibilities on the rights transmission owners might otherwise be able to exercise had they not been in an RTO. The Commission has placed many regulatory requirements on RTO members that it has not placed on non- RTO members, recognizing that a large and robust RTO is in the best position to advance Commission policy.

 Finally, the Commission has not supported its abrupt policy reversal with any evidence of changed circumstances. At least in the PJM region, there has been an increased de-coupling of utility generation from previously affiliated wires businesses. 14 This degree of “de-verticalization” has

11 Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594 (2005) (codified as amended in scattered sections of 42 U.S.C. and 16 U.S.C.) (“EPAct”).

12 5 U.S.C. §§ 500 et seq.

13 The size and scope of an RTO is a function of transmission owner decisions to join RTOs. See, e.g., Louisville Gas & Elec. Co., 114 FERC ¶ 61,282, order on reh’g sub nom. E. ON U.S. LLC, 116 FERC ¶ 61,020 (2006).

14 See, e.g., Company History, FirstEnergy, https://www.firstenergycorp.com/about/company_history.html (last visited June 24, 2021) (“FirstEnergy announced its plan to move away from commodity-exposed generation and transform into a fully regulated transmission and distribution utility in 2016. The final milestone in this successful separation took place on February 27, 2020.”); Exelon To Separate Its Utility And Competitive Energy Businesses Into Two Industry-Leading Companies, Exelon (Feb. 24, 2021),

4 substantially increased since EPAct and the adoption of FPA section 219(c). This change, if anything, underscores the rationale for providing incentives for transmission companies to remain and actively participate in RTOs as most benefits of RTO membership flow through to customers and are not realized by the shareholders of new stand-alone transmission entities.

As will be detailed below, Congress proactively supported RTOs by creating incentives to encourage continued RTO participation. Participation in RTOs promotes their growth and sustains their ability to deliver consumer benefits. In this regard and consistent with the law, the Commission cannot and should not substitute its judgment for the judgment of Congress.15

Finally, PJM urges the Commission to reflect on the odd timing and unexplained effort to single out this particular incentive absent a more holistic examination of incentives generally. The Supplemental NOPR is inviting disparate regulatory requirements as between RTO and non-RTO regions—to the detriment of RTO regions. A broader and more thorough assessment of incentives would, at a minimum, reduce this disparate impact.

At the very least, any final rule should allow for individual RTOs and their members to detail to the Commission the unique facts and circumstances (such as the availability of formal exit fees and the unique history of each RTO’s development) that demand a more

https://www.exeloncorp.com/newsroom/exelon-to-separate-its-utility-and-competitive-energy-businesses- into-two-industry-leading-companies, ; PPL Completes Spinoff of Competitive Supply Business, PPL (June 1, 2015), https://pplweb.mediaroom.com/2015-06-01-PPL-Completes-Spinoff-of-Competitive-Supply- Business ; Thomas Gnau, DP&L Sells $240M in Generation Assets, The Dayton Daily News (Apr. 9, 2018), https://www.daytondailynews.com/business/sells-240m-generation- assets/gYcHbxYE7fvmYDUbR8F3FO/#:~:text=DP%26L%20sells%20%24240M%20in,generator%20facil ity%20located%20in%20Dayton.

15 PJM does not agree with any stakeholders who argue that the incentive is no longer needed or fails to “incent anything.” Congress mandates the award of this incentive for RTO participation. What Congress has granted, only it can take away. The proper forum for such arguments is not the Commission, but Congress.

5 tailored, case-specific application of the incentive as opposed to the Supplemental NOPR’s

“one size fits all” approach.

For the reasons set forth herein, PJM urges reconsideration of the Supplemental

NOPR in its present form.

I. COMMENTS

A. EPAct’s Text and Legislative History Compel the Grant of an Incentive for RTO Participation Without a Fixed Time Limit or Voluntariness Criterion.

The Supplemental NOPR proposes to limit the availability of the RTO-

Participation Incentive to only the first three years of a utility’s voluntary RTO membership. But this construction is contrary to the statutory text, its legislative history, and the policy issues that Congress was addressing through EPAct when it mandated the award of such an incentive.

1. EPAct’s Text Mandates the Grant of an Incentive for RTO Participation. Congress has unambiguously expressed its intent to incent long-term reliability and consumer benefits through the award of the RTO-Participation Incentive. For this reason, the Supplemental NOPR’s proposed construction of FPA section 219(c) does not withstand scrutiny.

The statutory analysis begins with the text of FPA section 219(c): “The

Commission shall, to the extent within its jurisdiction, provide for incentives to each transmitting utility or electric utility that joins a Transmission Organization.” 16 In this

16 See Conn. Nat’l Bank v. Germain, 503 U.S. 249, 253-54 (1992) (“[I]n interpreting a statute a court should always turn first to one, cardinal canon before all others. . . . [C]ourts must presume that a legislature says in a statute what it means and means in a statute what it says there.”); Consumer Prod. Safety Comm’n v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980) (“We begin with the familiar canon of statutory construction

6 singular sentence and when EPAct’s incentive provisions are read as a whole, the unambiguous principle Congress laid down for the Commission to follow is that incentives must be granted to utilities “that join” and thus are ongoing participatory members of RTOs in order to promote long-term reliability and consumer benefits.

This meaning is further confirmed by reading the whole statute, which reflects

Congress’s unambiguous intent to provide for the ongoing award of incentives to promote long-term objectives.17 FPA section 219(a) of EPAct’s incentive provision provides that all of the section 219 incentives, including the RTO-Participation Incentive, are “for the purpose of benefitting consumers by ensuring reliability and reducing the cost of delivered power by reducing transmission congestion.”18 FPA section 219(c) makes clear that the

RTO-Participation Incentive must be part of “the rule issued under this section” 219.

Ensuring reliability, reducing transmission congestion, and delivering consumer benefits are not static, one-time events. They are achieved through continuous, active transmission owner participation in an RTO; not the mere act of “joining” an RTO. The Supplemental

NOPR, especially its sunset proposal, fails to square with Congress’s stated purpose.

that the starting point for interpreting a statute is the language of the statute itself. Absent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive.”).

17 See Davis v. Mich. Dep’t of the Treasury, 489 U.S. 803, 809 (1989) (“It is a fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.”); Indicated Producers--Shell Oil Co., 22 FERC ¶ 61,013, at 61,024 (1983) (“It is a maxim of statutory construction that each part or section of a statute should be construed in connection with every other part or section so as to produce a harmonious whole.”).

18 16 U.S.C. § 824s(a).

7 a. EPAct Does Not Condition Incentive Eligibility on Voluntariness.

FPA section 219(c) is equally telling for what it does not say. Section 219(c) does not condition eligibility for the incentive on the voluntariness of “joining” an RTO.

Congress did not grant the Commission the authority to condition receipt of the RTO-

Participation Incentive based on an examination of whether a particular transmission owner’s decision to join an RTO was “voluntary.”19 This is so even though Congress was on notice at the time EPAct was enacted that some states, such as Ohio and Illinois, had already passed their own mandates for RTO participation. 20 When crafting statutory provisions, Congress is presumed to be aware of the current state of the law both at the federal and state level.21 Moreover, the rules of statutory construction further provide that:

“[I]n the absence of a plain indication to the contrary, . . . Congress when it enacts a statute is not making the application of the federal act dependent on state law.”22 Congress here did not condition the application of its RTO-Participation Incentive on state law particulars.

19 See Supplemental NOPR at P 19.

20 It is important to recall that although several states have mandatory RTO membership provisions in their statutes, such provisions were generally included at the time of passage as part of a comprehensive state restructuring statute to transform the then-vertically integrated utility framework. As part of that restructuring initiative, RTO participation language was included as part of the quid pro quo of the state opening up retail markets and granting stranded costs. For example, the Ohio statute is explicit in this regard: “[N]o entity shall own or control transmission facilities as defined under federal law and located in this state on or after the starting date of competitive retail electric service unless that entity is a member of, and transfers control of those facilities to, one or more qualifying transmission entities.” Ohio Rev. Code Ann. § 4928.12(A) (Lexis 2021) (1999) (emphasis added). See also 220 Ill. Comp. Stat. 5/16-126(a) (Lexis 2021) (1997) (“[E]ach Illinois electric utility owning or controlling transmission facilities or providing transmission services in Illinois . . . as of the effective date of this amendatory Act of 1997 shall submit for approval to the Federal Energy Regulatory Commission an application for establishing or joining an independent system operator.”).

21 See Miles v. Apex Marine Corp., 498 U.S. 19, 32 (1990) (“We assume that Congress is aware of existing law when it passes legislation.”).

22 Jerome v. United States, 318 U.S. 101, 104, (1943); see NLRB v. Nat. Gas Util. Dist., 402 U.S. 600, 603 (1971) (following Jerome); see also Dickerson v. New Banner Inst., 460 U.S. 103, 119 (1980) (following Jerome and NLRB).

8 Therefore, state laws requiring RTO membership must not serve as an automatic disqualifying factor for the grant of the RTO-Participation Incentive.

b. EPAct Does Not Permit the Commission to Arbitrarily Remove the Adder After Three Years.

The statutory text also does not permit the Commission to arbitrarily remove the adder after some Commission-chosen period of time.23 If Congress had intended such a result, it would have directed a “sunset” to the incentive at issue. It did not.

The Commission has previously determined that “[u]nder section 219 of the FPA, each transmitting utility that joins and continues to participate in an RTO is eligible for an

ROE incentive, as long as the utility’s ROE remains within the zone of reasonableness.”24

The Commission has long demonstrated that it is fully capable of ensuring just and reasonable rates while adhering to Congress’s directive to achieve FPA section 219(c)’s goals.25 Over the years, Congress’s directive that the rate be just and reasonable has been implemented by the Commission by calibrating the overall result, even with the application of any adders, to the previously determined “zone of reasonableness.”26 The same text the

Commission interpreted in reaching this conclusion in 2007 remains the operative statutory text today. For the last fifteen years, it has been clear to the Commission, and all public utilities, that the statute provides for incentives for continued RTO membership and participation. The Transmission Incentives NOPR that initiated this docket adhered to this

23 Supplemental NOPR, dissent op. (Commissioner Danly) at P 7.

24 Am. Elec. Power Serv. Corp., 121 FERC ¶ 61,245, at P 10 (2007).

25 See a more detailed discussion at Section II.D, infra.

26 Id.

9 clear statutory directive. 27 The Supplemental NOPR fails to explain how the statute permits the sunsetting of the incentive absent a Congressional directive to do so.

2. The Legislative Purpose Underlying the RTO-Participation Incentive Confirms that Congress Intended to Incentivize Long- Term RTO Participation, Not Just the One-Time Act of Joining an RTO. The legislative purpose underlying EPAct, and FPA section 219(c) specifically, confirms the above-interpretation of the statutory text. Congress is understood to have enacted FPA section 219(c) to incentivize long-term RTO participation, not just the one- time act of joining an RTO. As detailed below, the events contemporaneous with EPAct’s passage and the statute’s legislative history confirm this understanding.

a. The Pre-Conference House and Senate Versions of EPAct Confirm Congress’s Intent to Incent Long-Term Reliability and Consumer Benefits.

The version of EPAct passed by the House very clearly included “additional incentives for RTO participation” for utilities “that join[] a Regional Transmission

Organization.” Such incentives included, but were not limited to, the “recovery as an expense in rates of the costs prudently incurred to conduct transmission planning and reliability activities, including the costs of participating in RTO . . . regional planning activities and design, study and other precertification costs involved in seeking permits and approvals for proposed transmission facilities.”28

The Senate version of the bill provided that the Commission “may encourage and may approve the voluntary formation of RTOs” to realize critical objectives like

27 Electric Transmission Incentives Policy Under Section 219 of the Federal Power Act, 170 FERC ¶ 61,204 (2020) (“Transmission Incentives NOPR”).

28 Energy Policy Act of 2005, H.R. 1640, 109th Cong. § 1241 (2005).

10 “facilitating wholesale competition,” “promoting grid reliability,” and “providing for the efficient development of transmission infrastructure needed to meet the growing demands of competitive wholesale power markets.”29 Such objectives can only be achieved through long-term participation in RTOs, not merely the one-time act of joining an RTO.30

b. EPAct’s Legislative History, Viewed in Context to Events Contemporaneous with Its Passage, Confirm Congress’s Intent to Incentivize Long-Term Reliability and Consumer Benefits.

Informed by the experience of the 2003 blackout and as part of the development of the incentives section of EPAct, hearings were held before the House Energy and

Commerce Committee. Commissioners testified on the purpose of incentives as applied to

RTO participation. In his testimony, Chairman Wood called attention to the Commission’s

2003 Proposed Policy Statement on Rate Incentives, which “allow[ed] a higher return on equity when a utility participates in an RTO” and reported that this pre-EPAct approach to incentives “supports, and is consistent with, the transmission tax incentives and other language in the proposed legislation.”31 Commissioner Massey also called attention to the

Commission’s steps to “provide[] enhanced returns on equity for transmission assets that are operated independently from market participants and for new infrastructure

29 Energy Policy Act of 2005, S. 10, 109th Cong. § 1232 (2005).

30 See Order No. 679 at P 331 (“The basis for the incentive is a recognition of the benefits that flow from membership in such organizations and the fact continuing membership is generally voluntary. Our interpretation of the statute is that eligibility for this incentive flows to an entity that “joins” a Transmission Organization and is not tied to when the entity joined.”).

31 Comprehensive National Energy Policy: Hearing Before the Subcomm. on Energy & Air Quality of the Comm. on Energy & Commerce, 108th Cong. 44 (2003) (prepared statement of Hon. Pat Wood III, Chairman, Federal Energy Regulatory Commission).

11 investment.”32 Commissioner Massey went even further to note that, “RTOs will eliminate the conflicting incentives vertically integrated firms still have in providing access.”33 And he interpreted the draft legislation to be “a clear declaration by the Congress that [RTOs] are in the public interest and should be formed. . . . Well structured Regional Transmission

Organizations are necessary platforms on which to build efficient electricity markets.”34

Nowhere in the legislative record for EPAct is there any evidence (let alone discussion on the floor, in Committee, or in the Committee reports) that the RTO-

Participation Incentive was intended to be a one-time, short-term incentive. If the

Supplemental NOPR’s new-found interpretation of the statute were correct, one would expect to find some evidence in the record to support this interpretation. Yet there is none.

The intent of the drafters is confirmed by the affidavit of Representative Joe Barton submitted in the record in this proceeding. Representative Barton chaired the Energy and

Commerce Committee of the United States House of Representatives at the time EPAct was being considered. Representative Barton also chaired the joint House-Senate Energy

Conference Committee for EPAct (“Joint Conference Committee”), which oversaw the harmonization of the House and Senate versions of the bill. In an affidavit submitted into the record in this case, Representative Barton states that one of the “main goals” of the

Joint Conference Committee was to “provide an appropriate incentive for those electric

32 Comprehensive National Energy Policy: Hearing Before the Subcomm. on Energy & Air Quality of the Comm. on Energy & Commerce, 108th Cong. 49 (2003) (statement of Hon. William L. Massey, Commissioner, Federal Energy Regulatory Commission).

33 Id. at 50.

34 Id.

12 utilities that opt to participate” in a Transmission Organization, not only for the initial act of joining such organization.35 Representative Barton explains that:

Contrary to the interpretation proffered in the [Supplemental NOPR], section 219(c) does not contain a “sunset” clause and at no point does it implicitly, or expressly, state that the incentive to a utility that joins a Transmission Organization should be limited in duration. Consistent with my instructions to Conference Committee staff around ambiguity, if the committee had intended that the incentive to a utility that joins a Transmission Organization was meant to be a one-time payment or one-time deal, I would have instructed Conference Committee staff to make that clear in the language of the statute. Both myself, and the Conference Committee staff at the time, were more than capable of drafting language to that effect. The fact that section 219(c) does not expressly limit the incentive to a utility for joining a Transmission Organization indicates that I did not intend for that provision to be a “loss leader” or one-time deal to get a utility to join a Transmission Organization.36

Similarly, in the floor debates on EPAct, Senators further make it clear that the object of the incentive was long-term RTO participation, not the mere one-time act of joining an RTO. Senator Levin, for example, described EPAct as “tak[ing] critical steps to improve the reliability of our electrical grid and promote electricity transmission infrastructure development” and spurring “the need for strong regional transmission organizations to ensure that reliability standards are carried out and enforced.”37 The carrying out and enforcement of objectives are achieved not merely through a decision to join an RTO, but a utility’s continuous participation in an RTO. Senator Collins similarly described EPAct as “strengthen[ing] our electricity grid” and “creating incentives to spur

35 See Affidavit of Joe Barton ¶¶ 5-6 (“Barton Aff.”) (attached to WIRES comments contemporaneously filed in this docket).

36 Barton Aff. ¶ 6.

37 151 Cong. Rec. S. 9353 (July 29, 2005).

13 the creation of a stronger and more robust grid.”38 Such a robust grid is the product of ongoing participation in RTOs, not simply a decision to join.

In short, the legislative history makes clear that the Joint Conference Committee did not envision the RTO-Participation Incentive as a time-limited incentive. Quite to the contrary, the Joint Conference Committee intended to incentivize the growth of RTOs, which had been and continue to be a long-term project, as reflected by the forward-looking goals and mandates contained elsewhere in EPAct,39 all of which can only be achieved with stable RTO membership. There is simply no support in either the language of the statute taken as a whole, or its legislative history, for the Commission’s reversal and sudden reinterpretation of a statute which it had been interpreting consistent with Congress’s intent for the past fifteen years.

3. The Accuracy of the Commission’s Longstanding Interpretation and Application of FPA Section 219(c) Is Further Confirmed By Congress’s Acquiescence Thereto.

At no time since the Commission first implemented the RTO-Participation

Incentive (lacking a voluntariness requirement or any time limitation) has Congress expressed concerns with the Commission’s interpretation of the statute. Indeed, Congress has amended the FPA in a number of ways since 2005, but Congress has never changed

38 151 Cong. Rec. S. 9362 (July 29, 2005).

39 Congress intended FERC’s rulemaking activity implementing EPAct to be focused on long-term, sustainable development of organized markets, to which RTOs were essential (and have only become more so over time). By way of example, EPAct addressed long-term concerns about transmission development. To this end, Congress directed the provision of incentives for: “capital investment in the enlargement, improvement, maintenance, and operation of all facilities for the transmission of electric energy;” “new investment in transmission facilities (including related transmission technologies);” “deployment of transmission technologies and other measures to increase the capacity and efficiency of existing transmission facilities and improve the operation of the facilities;” and spending related to “transmission infrastructure development” and “compl[iance] with mandatory reliability standards.” 16 U.S.C. § 824s. Limiting recovery of the RTO-Participation Incentive to only the first three years of membership is wholly inconsistent with the long view of electricity market development embodied by EPAct.

14 the RTO-Participation Incentive provision.40 As the United States Supreme Court stated in North Haven Board of Education v. Bell,41 “Where an agency’s statutory construction has been ‘fully brought to the attention of the public and the Congress,’ and the latter has not sought to alter that interpretation although it has amended the statute in other respects, then presumably the legislative intent has been correctly discerned.” 42 This further confirms that the Commission has correctly interpreted and applied section 219(c) for more than fifteen years.43 If Congress thought the Commission had misinterpreted section 219 under its longstanding interpretation, Congress would have brought the issue to the attention of the Commission through budget hearings, oversight, or a statutory clarification at some point over the past fifteen years. But there is no such evidence that Congress has ever so acted.

In summary, for the textual and legislative history reasons set forth herein, the

Supplemental NOPR’s newly offered construction of the statute and the Commission’s reversal of its prior statutory analysis are bereft of Congressional support.

40 See 119 Stat. 982; Pub. L. 115–247, §§ 1, 2, Sept. 28, 2018, 132 Stat. 3152 (revising sections 3, 4(e), 18, 32, 201, 203, 206, 211, 306, 307, 314, 315, 316, and 316A of the FPA and also adding new sections to the FPA).

41 456 U.S. 512 (1982)

42 Id. at 535 (quoting United Stated v. Rutherford, 442 U.S. 544, 554 n.10 (1979)).

43 See Utah Power & Light Co., 59 FERC ¶ 61,035, at 61116 (1992) (“Similarly, even after the Commission issued Opinion No. 318-A in 1989, prominently excluding QFs from eligibility under its transmission conditions, Congress amended PURPA and the FPA to promote the development of QFs using solar, wind, waste and geothermal resources, but did not address the issue of mandatory wheeling for QFs. This Congressional inaction supports the conclusion that the Commission has correctly construed section 211.” (footnote omitted)).

15 4. The Supplemental NOPR’s Construction of FPA Section 219(c) Violates the Administrative Procedure Act and Would Be Invalidated.

The Administrative Procedure Act (“APA”) requires courts to “hold unlawful and set aside agency action, findings, and conclusions found to be . . . in excess of statutory jurisdiction” or “otherwise not in accordance with law.”44 For the textual and legislative history reasons noted above, adopting the Commission’s proposal to limit recovery of the incentive to the first three years of RTO membership, and/or conditioning eligibility on only voluntary decisions to join an RTO, exceeds Congress’s delegation to the Commission and will ultimately be set aside on those grounds.

It is also apparent that after fifteen faithful years of statutory implementation, the

Commission is now asserting that FPA section 219(c) is ambiguous. The Commission acknowledges that the provision is susceptible to two different constructions: (1) the Order

No. 679 construction, which expressly incents utilities that join and continue to participate in an RTO; and (2) the Supplemental NOPR construction which incents the single act of joining an RTO and not remaining in a RTO in perpetuity.45 Although courts accord deference to administrative interpretations of statutes entrusted to their care, agency choices between conflicting policies will not withstand judicial review where the statute or

44 5 U.S.C. § 706(2).

45 Compare Supplemental NOPR at P 6 (“[W]e believe that it is reasonable to read FPA section 219(c) to direct the Commission to provide an incentive for ‘join[ing]’ a Transmission Organization and not for remaining in a Transmission Organization in perpetuity”), with Am. Elec. Power Serv. Corp., 121 FERC ¶ 61,245, at P 10 (“Under section 219 of the FPA, each transmitting utility that joins and continues to participate in an RTO is eligible for an ROE incentive, as long as the utility’s ROE remains within the zone of reasonableness.”).

45Supplemental NOPR at P 1.

16 its legislative history demonstrate that the agency’s choice is not one that Congress would have sanctioned.46 So will be the fate of this Supplemental NOPR.

B. The Commission’s Current Application of the RTO-Participation Incentive Is Consistent with Congressional Intent and Constitutes Sound Policy.

The Commission’s implementation of the RTO-Participation Incentive to date reflects sound policy choices in favor of fostering a fulsome and robust RTO participatory scheme with stable membership, ensuring reliability, and reducing congestion costs as described in FPA section 219(a) and the legislative history.

1. It Is Sound Policy to Promote Stable RTO Membership Through the Award of the RTO-Participation Incentive. An important aim of the RTO-Participation Incentive is RTO membership stability.

Having a stable membership of transmission-owning utilities in an RTO delivers consistent, uninterrupted benefits from producer to consumer. Membership stability is a critical ingredient of RTOs’ satisfaction of their Order No. 2000 obligations, particularly in subject areas like transmission planning, market development, and rate design.

Consistent with Congress’s goals of “ensuring reliability and reducing the cost of delivered power by reducing transmission congestion” the RTO-Participation Incentive encourages transmission owners to participate in multi-region RTOs like PJM, which ultimately helps consumers realize immense benefits (like reliability and grid security) across a large footprint.

The prospect of transmission owners exercising their voluntary rights to leave an

RTO is not theoretical. The Commission has witnessed and even sanctioned the wholesale

46 Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 843-45 (1984).

17 withdrawal of transmission owners from RTOs.47 Moreover, RTOs like PJM do not have formal exit fees48 nor should the Commission, in PJM’s view, encourage these potentially protectionist measures by RTOs and their stakeholders. To do so would change Congress’s vision of the Commission developing incentives that encourage RTO growth and stabilize

RTO membership through incentives, as opposed to the use of mandates and formal exit fees.

2. The Introduction of a Time Limitation on Incentive Eligibility Undermines the Goal of Stable RTO Membership.

Even before EPAct, the Commission recognized the value of incentivizing RTO membership and chose not to limit requested incentives only to new members of RTOs. In

Order No. 2000 the Commission explained,

We have concluded that members of an existing ISO organization that satisfy the minimum RTO requirements in the regulatory text should be allowed to seek transmission pricing reform as newly formed RTOs, so that they can avail themselves of the same incentives for efficient operation of and investment in the transmission grid.49

The Commission then issued Order No. 679 to implement the incentive mandates in EPAct. Unlike the Supplemental NOPR, Order No. 679 fully appreciates that Congress meant to incentivize not only the initial act of becoming part of an RTO, but also the important act of participating in an RTO long-term:

Our interpretation of the statute is that eligibility for this incentive flows to an entity that “joins” a Transmission Organization and is not tied to when the entity joined. As some commenters note, to do otherwise could create perverse incentives for an entity to actually leave Transmission Organizations and then join another one. It

47 See, e.g., Louisville Gas & Elec. Co., 114 FERC ¶ 61,282 (2006).

48 Nevertheless, RTOs can recover exit-related expenses inherent in the regulatory compact.

49 Order No. 2000 at P 564.

18 would also be unduly discriminatory for the Commission to consider the benefits of membership in determining the appropriate ROE for new members but not for similarly situated entities that are already members.50

The Commission also recognized that section 219(c) sought to incentivize participation in

Transmission Organizations, not the mere act of joining them, noting that “permit[ting] higher returns on equity . . . may be appropriate in several contexts, such as . . . where necessary to encourage . . . participation in a Transmission Organization.”51 Order No.

679-A doubled down on this reasoning, stating clearly:

[T]he incentive applies to all utilities joining transmission organizations, irrespective of the date they join, based on a reading of section 219 in its entirety. . . . The stated purpose of section 219 is to provide incentive-based rate treatments that benefit consumers by ensuring reliability and reducing the cost of delivered power. We consider an inducement for utilities to join, and remain in, Transmission Organizations to be entirely consistent with those purposes.52

Order No. 679-A further noted that the benefits of RTO participation inure to customers on an ongoing basis and also noted the continued value of transmission-owning utilities’ stable membership in RTOs:

The consumer benefits, including reliability and cost benefits, provided by Transmission Organizations are well documented, and the best way to ensure those benefits are spread to as many consumers as possible is to provide an incentive that is widely available to member utilities of Transmission Organizations and is effective for the entire duration of a utility’s membership in the Transmission Organization. To limit the incentive to only utilities yet to join Transmission Organizations offers no inducement to stay in these organizations for members with the option to withdraw, and hence risks reducing Transmission Organization membership and its attendant benefits to consumers. Because the incentive is applicable

50 Order No. 679 at P 331.

51 Order No. 679 at P 27 (emphasis added).

52 Order No. 679-A at P 86.

19 to utilities that join Transmission Organizations and is consistent with the requirements of section 219 of the FPA, the incentive complies with EPAct 2005 and the FPA.53

The Commission’s observations in Order Nos. 679 and 679-A about RTO membership stability and the need for an incentive that is ongoing to reward participation, rather than static as formulated in the Supplemental NOPR to reward mere “joining,” is even more relevant today than in the past as RTOs continue to expand in different parts of the nation and the Commission endeavors to implement a robust national agenda. The achievability of the current executive branch’s renewable energy and environmental goals depends heavily on the health, stability, and expansion of an integrated transmission grid, to which RTOs are key, as well as on interregional planning, to which RTOs are likewise vital. PJM agrees with the many former commissioners who filed a letter in this docket

(included as Attachment B to this filing) emphasizing that, especially in light of increased interest in de-carbonization initiatives, “organized markets are more essential than ever.”54

The former FERC commissioners also rightly encourage the Commission to take action to encourage growth and long-term reliability and resilience of the country’s RTOs.55

3. It Is Sound Policy for the RTO-Participation Incentive to Be Awarded Independent of a “Voluntariness” Requirement. The Transmission Incentives NOPR recognizes that the responsibilities applicable to transmission-owning members of RTOs “persist regardless of the voluntariness of RTO membership.”56 Nothing in the Supplemental NOPR suggests otherwise. Thus, awarding

53 Order No. 679-A at P 86 (footnote omitted).

54 Letter from Nora Mead Brownell, Commissioner 2001-2006, et al. to Chairman Glick et al., Re: Organized Wholesale Power Markets, at 1 (June 2, 2021) (attached hereto as Attachment B).

55 Id. at 1-2.

56 Transmission Incentives NOPR at P 96.

20 the RTO-Participation Incentive regardless of whether membership is voluntary not only comports with the statutory text but it will also yield several practical benefits.

First, it will minimize ongoing Commission litigation about transmission owners’ motives for joining an RTO.57 For example, if a utility agrees in a settlement agreement resolving a merger case to include a provision that commits them to be part of an RTO, is their participation in the RTO still “voluntary”? What about agreeing to join an RTO as a term of another uncontested settlement? And if a utility joins an RTO to help avoid or resolve a U.S. Department of Justice or state attorney general investigation, is that

“voluntary”? It is not clear how the Commission could adjudicate such fact-based issues of “voluntariness” without trying to divine the mental thought process of the utility’s corporate leadership at the time, many of whom may no longer even be employed by the utility.

Second, eligibility for the incentive independent of how “voluntary” the decision to join an RTO was made provides a much clearer and easier to apply rule. 58 The

Supplemental NOPR’s proposal, in contrast, would require a determination of what

“voluntary” RTO membership actually means. This would involve examining the text and underlying legislative history of many different states’ laws, as well as examining in detail

57 See Transmission Incentives NOPR at P 98 (“[N]ot[ing] that the issue of whether RTO membership is voluntary for certain transmitting utilities within RTOs has become subject to litigation and challenges at the Commission”); see, e.g., Pac. Gas & Elec. Co., 168 FERC ¶ 61,038 (2019), (following remand from the Ninth Circuit, reaffirming the Commission’s prior grant of Pacific Gas & Electric Co.’s (“PG&E”) request for the RTO-Participation Incentive based upon findings that California law does not mandate PG&E’s participation in California Independent System Operator Corporation, and that the RTO-Participation Incentive induces PG&E to continue its membership), reh’g denied, 170 FERC ¶ 61,194 (2020).

58 Order No. 679 at P 331 (“It would also be unduly discriminatory for the Commission to consider the benefits of membership in determining the appropriate ROE for new members but not for similarly situated entities that are already members.”).

21 the specific circumstances and trade-offs that led to a utility proposing RTO membership.

And, as noted above, if the decision to join grew out of a settlement of a merger case or related regulatory proceeding, the determination of “voluntariness” of the decision would be that much harder to discern. Arguably, it would trigger the need for discovery to be taken to get into the minds of utility officers and board members from years past. In short, the “voluntariness” standard, whatever its merits, is unworkable from an implementation viewpoint.

Finally, the proposed “voluntary” requirement could also trigger a host of unintended consequences. It could trigger a flood of state legislation that would repeal the state RTO membership mandates and make the same utility eligible for the adder through

“voluntary” RTO participation. The Commission should look no further than the unintended consequences of Order No. 1000, which triggered a number of state right of first refusal statutes.

In summary, the Commission’s reading of FPA section 219(c) as implemented by

Order No. 679 has correctly and faithfully implemented Congress’s intent for nearly twenty years. The Supplemental NOPR should be reconsidered because it attempts to abandon the Commission’s sound statutory construction and policy implementation.

C. The Present RTO-Participation Incentive Is Designed to Somewhat Balance the Asymmetric Cost-Benefit Equation Between Utilities and Customers.

EPAct reflects a carefully struck balance among a variety of competing policy objectives. The Supplemental NOPR would upset this careful legislative balancing, and would give rise to undesirable policy outcomes.

22 When Congress was considering and ultimately passed EPAct, commissioners had long been advocating for some legislative blessing of the Commission’s authority to create

RTOs.59 As Chairman Wood testified in 2001:

Although the Commission decided in past years to move forward with RTO formation on a voluntary basis, the Commission can go further and require them. This may be a moot point if the industry moves assertively forward to form RTOs that cover the nation’s regional power markets. To the extent, however, that any party challenges this forward progress in courts, then Congress should make clear its intent that these organizations are its preference. This will save the industry four years in the courts, will ensure customers get the billions of dollars of savings that a competitive power market can deliver during that time, and most importantly, will rebuild to secure and reliable levels a bedrock industry that has suffered inadequate investment in the past decade.

* * *

The Commission is moving aggressively to promote the formation of RTOs but a clearer statement of Congressional intent could help avoid years of lengthy litigation.60

The Commission had at the time proposed a requirement to adopt a Standard

Market Design across the nation both in RTO and non-RTO/ISO regions as they existed at the time.61 On the one hand, various customer groups and independent generators were

59 National Electricity Policy: Federal Government Perspectives: Hearing Before the Subcomm. on Energy & Air Quality of the Comm. on Energy & Commerce, 107th Cong. 53, 55, 58 (2001) (prepared statement of Hon. Pat Wood III, Chairman, Federal Energy Regulatory Commission) (“The Commission is moving aggressively to promote the formation of RTOs but a clearer statement of Congressional intent could help avoid years of lengthy litigation.”).

60 National Electricity Policy: Federal Government Perspectives: Hearing Before the Subcomm. on Energy & Air Quality of the Comm. on Energy & Commerce, 107th Cong. 55, 58 (2001) (prepared statement of Hon. Pat Wood III, Chairman, Federal Energy Regulatory Commission).

61 See Remedying Undue Discrimination through Open Access Transmission Service and Standard Electricity Market Design, Notice of Proposed Rulemaking, 67 Fed. Reg. 55,452 (Aug. 29, 2002).

23 urging the Commission and the Congress to mandate RTO membership.62 On the other hand, some participants (including former Commission Chairman Hébert) asserted that there was no need for Congress to mandate the formation of RTOs.63 Transmission- owning utilities were also presenting to Congress their concerns with what they perceived as a low level of authorized returns, which were discouraging transmission investment.

The EPAct debates also came on the heels of September 11, 2001 and the blackout of 2003. Chairman Wood pointed to the three then-existing ISOs in the Northeast, of which

PJM was one, as “critical to maintaining transmission grid reliability during and after the

September 11 attacks” thus “demonstrat[ing] the effectiveness of RTOs and strengthen[ing] the need for RTOs.” 64 In Congressional testimony about post-

September 11 security and the FERC/Department of Energy/Canada report on the causes of the blackout,65 many pointed to the benefits of “larger,” multi-state RTOs in terms of enhanced reliability, security, and competitive markets.66

62 See, e.g., Order No. 2000 at 31,010-11.

63 National Energy Issues: Hearing Before the Comm. on Energy & Natural Resources, 107th Cong. 277 (2001) (prepared statement of Curt Hébert, Jr., Chairman, Federal Energy Regulatory Commission) (“I see no need for enactment of legislation allowing FERC to mandate the formation of RTOs. The industry is already forming RTOs because they make economic sense, not because of a legal mandate. If RTOs did not make economic sense, then nothing would be gained by requiring their formation. I am particularly pleased to see that transmission owners, with the urging of (rather than a directive from) the Commission, increasingly are reaching the conclusion that a particular type of RTO a stand-alone, truly independent transmission company will best serve the interests of consumers and the market as a whole.”).

64 National Electricity Policy: Federal Government Perspectives: Hearing Before the Subcomm. on Energy & Air Quality of the Comm. on Energy & Commerce, 107th Cong. 57 (2001) (prepared statement of Hon. Pat Wood III, Chairman, Federal Energy Regulatory Commission).

65 Power Blackout, Federal Energy Regulatory Commission, https://www.ferc.gov/industries- data/electric/overview/electric-reliability/power-blackout (last visited June 22, 2021) (providing copies of the blackout reports); see Regulatory Incentives for Electricity Transmission—Issues and Cost Concerns, Congressional Research Service, (Oct. 28, 2011), https://crsreports.congress.gov/product/pdf/R/R42068/5.

66 National Electricity Policy: Federal Government Perspectives: Hearing Before the Subcomm. on Energy & Air Quality of the Comm. on Energy & Commerce, 107th Cong. 54-55 (2001) (prepared statement of Hon. Pat Wood III, Chairman, Federal Energy Regulatory Commission) (noting that the significant security required to protect the grid “demand[s] a size and scope that only a large, region-wide organization with

24 Through EPAct 2005, Congress balanced each of these important policy objectives and interests. The Supplemental NOPR would upend this delicate balance and as a result

PJM urges reconsideration of the Supplemental NOPR on these independent policy grounds.

1. The Supplemental NOPR Ignores the Many Obligations and Costs that Transmission Owner RTO Members Undertake and that Commission Regulation Imposes Uniquely on Them.

RTO membership is not a passive act on the part of transmission owners. RTO membership entails assuming additional regulatory and practical responsibilities. It entails surrendering functional control of the entity’s assets to an independent entity that is required to consult with a broad array of stakeholders before making policy changes that can affect the operation, use and planning for those assets. The RTO-Participation

Incentive recognizes, encourages, and rewards this active participation and support for

Commission directives and RTO processes.

For more than twenty years, the Commission has recognized that “[u]tilities that join RTOs should be accorded transmission pricing that reflects the financial risks of turning facilities over to an RTO and that reflects other changes in the structure of the industry.”67 As the Transmission Incentives NOPR recognized,

The duties and responsibilities associated with RTO/ISO membership have also increased since Order No. 679. These include: loss of operational control of transmission facilities to a third party; an obligation to build new transmission facilities at the direction of the RTO/ISO; diminished decision-making control over

intentional redundancy and access to resources can provide”); id. at 56 (“RTOs can offer ‘one-stop shopping’ for transmission service across a large region”); id. at 58 (“[I]t would significantly speed the advent of competitive markets if Congress clarified the Commission’s authority to promote large RTOs.”); see also August 14th Blackout: Causes and Recommendations, U.S.-Canada Power System Outage Task Force, 146 (Apr. 5, 2004), https://www.ferc.gov/sites/default/files/2020-05/ch7-10_0.pdf.

67 Order No. 2000 at 31,172.

25 assets while retaining the responsibility of maintaining the system; meeting reliability standards; obligations to obey RTO/ISO rules; and an obligation to provide electric service even when foundational agreements can change, thereby changing the terms and conditions under which the transmitting utility initially agreed to participate in the RTO/ISO.68

In addition to the obligations associated with RTO membership noted above, many other Commission regulatory requirements apply principally to, or exclusively to, RTO member utilities. These heightened obligations underscore the need to maintain balance between costs of RTO participation to transmission owners versus customer benefits. The

Supplemental NOPR fails to strike an appropriate balancing.

For example, as a result of the competitive bidding processes directed in Order

No. 100069 as administered by RTOs,70 the transmission planning process has become more complex today compared to the early 2000s when Congress mandated the RTO-

Participation Incentive.71 Order No. 1000’s competitive transmission development goals disproportionately increased the complexity, litigiousness, and cost of the transmission planning process in organized markets.72 These additional costs and burdens, the benefits

68 Transmission Incentive NOPR at P 96.

69 Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities, Order No. 1000, 136 FERC ¶ 61,051 (2011), order on reh’g & clarification, Order No. 1000-A, 139 FERC ¶ 61,132, order on reh’g & clarification, Order No. 1000-B, 141 FERC ¶ 61,044 (2012), aff’d sub nom. S.C. Pub. Serv. Auth. v. FERC, 762 F.3d 41 (D.C. Cir. 2014).

70 Although Order No. 1000 applies to all transmission utilities within the Commission’s jurisdiction, the planning and bidding processes are more robust at the RTO level, and involve significant commitments of time, effort, and spending by transmission owners.

71 See Transmission Incentives NOPR at P 96.

72 Although it is true that if a transmission owner were to leave an RTO, the transmission owner would still maintain an Order No. 1000 obligation, the larger footprint-based planning process utilized by RTOs triggers more robust competitive alternatives which benefits customers.

26 of which consumers realize through competition, are at least partially offset by the application of the RTO-Participation Incentive.

Similarly, upon participation in an RTO, utilities become exposed to regulatory requirements and practical realities associated with competitive distributed energy production through Order No. 2222. By the same token, since 2006, RTO and ISO markets have further facilitated the recognition and integration of demand response (Order No. 745) and energy efficiency resources (for example, Order No. 755, regarding regulation service in organized markets), and regulations regarding long-term financial transmission rights

(Order No. 681). These heightened requirements impose costs and burdens on these utilities that the RTO-Participation Incentive is well-situated to partially offset.

By contrast, vertically integrated utilities can maximize the value of their generation fleet by selling into RTOs without their transmission arm having to surrender functional control of their transmission assets or requiring their decision-making to be reviewed in RTO stakeholder processes.73 By simply adding requirements on RTO regions and then removing the RTO-Participation Incentive, the Commission may be unintentionally sending a signal that such strategic action by vertically integrated utilities would better benefit the utility as a whole as opposed to joining an RTO.

The RTO-Participation Incentive as currently administered attempts to somewhat correct for these heightened regulatory obligations on transmission owners in RTOs.74

73 See the discussion of Southern Company Services in note 80, infra.

74 The Commission should recognize that compared to non-RTO regions, RTOs (and their members) are funding a significant and disproportionate share of FERC’s electricity programs, including its reliability program, for the benefit of all users of the bulk electric system. See Annual Charges Assessments for Public Utilities, Notice of Inquiry, 123 FERC ¶ 61,063, at PP 19, 22 (2008).

27 2. The Supplemental NOPR Fails to Appreciate that RTO Benefits Flow Mostly to Customers.

Practically speaking, the creation of the RTO-Participation Incentive, both through statute and Commission practice, is a proven tool to recognize that the decision to remain in an RTO lies with the transmission owner and, by extension in the case of investor-owned utilities, its shareholders while most of the RTO benefits do not inure to the transmission owner shareholders.

Breaking this overall value down reveals:

 $300 million in annual reliability savings, inclusive of savings relating to congestion reduction;

 $1.2 billion to $1.8 billion in annual savings relating to lower reserve margins and competition from alternative resources due to planning efficiencies over a large region;

 $1.1 billion to $1.3 billion in annual savings relating to integrating more efficient resources; and

 $600 million in annual savings relating to energy production costs on account of the PJM footprint’s expanded dispatch area.

A copy of the PJM Value Proposition paper is attached hereto as Attachment A, and can be accessed on the PJM website.75 Rather than focusing on the RTO-Participation

Incentive in a vacuum, the Commission should take note of the 23:1 benefit-to-cost ratio, which reflects the consumer benefits of transmission owner participation in an RTO versus the costs of the adder. Moreover, the Commission should neither assume that elimination

75 PJM Value Proposition, PJM Interconnection, L.L.C. (June 26, 2019), https://www.pjm.com/about- pjm/~/media/about-pjm/pjm-value-proposition.ashx. The Commission should also take note of the fact that other RTOs and ISOs publish similarly compelling value propositions that add further support to the points PJM advances in these comments. See, e.g., Midcontinent Independent System Operator, Inc. claims $3.6 billion in annual benefits to its members (Value Proposition, Midcontinent Independent System Operator, Inc., https://www.misoenergy.org/about/miso-strategy-and-value-proposition/miso-value-proposition/ (last visited June 22, 2021). Moreover, the Commission has recently adopted an RTO Metrics report so the public can see the benefits in a single report using common metrics.

28 of the incentive would have zero effect on the potential for transmission owners to exit an

RTO, nor assume that the consumer benefits would remain at their same level should the size of the RTO be reduced.76

The number of transmission owners with affiliated generation has or soon will noticeably decrease and has, at least in PJM, decreased markedly since the inception of the adder. The following PJM transmission owners already have, or have announced plans to, sell much or all of their generation resources: First Energy Corporation, Exelon

Corporation, PPL Corporation, Public Service Enterprise Group (“PSEG”), 77 Dayton

Power & Light Company (now known as AES Ohio), and Duquesne Light Company.78 As a result, the argument that has been raised that the affiliates of the transmission owner benefit from the transmission entity’s membership in an RTO79 is not compelling. With this ever-growing amount of de-verticalization, the shareholders of the new wires company bear much of the cost of RTO membership while membership benefits flow through to end users. This asymmetry should not be ignored when assessing whether the adder is just and reasonable.80 The RTO-Participation Incentive simply attempts to somewhat rebalance this asymmetry of costs versus benefits.

76 PJM cannot divine whether the loss of the adder, in and of itself, will drive a transmission owner to leave the RTO. However, at the very time the Commission is increasing obligations on RTO members through its multitude of new initiatives, changes in business structure, and the activities on PJM’s southern border, elimination of the incentive cannot be a positive development as transmission owners internalize the potential impact of the change and chart their respective future plans.

77 PSEG has announced plans to sell its generation fleet, with the exception of its nuclear resources. Jaren Andreson, PSEG Considers Shedding Its Non-Nuclear Assets; Cutting Merchant Generation, S&P Global (July 21, 2020), https://www.spglobal.com/platts/en/market-insights/latest-news/electric-power/073120- pseg-considers-shedding-its-non-nuclear-assets-cutting-merchant-generation.

78 See note 14, supra.

79 See, e.g., Supplemental NOPR at P 14.

80 For example, Southern Company Services, as agent for several of its generator or vertically integrated affiliates, is a member of PJM as a Generation Owner and a supplier, but has not contributed its significant

29 D. FERC’s Use of Adders to Incent Beneficial Behavior Is Consistent with Sound and Established Regulatory Principles.

Some have asserted that the application of the RTO-Participation Incentive leads to excessive rates of return that constitute a Commission exercise of market power.81 There are several responses to this argument. First, the United States Court of Appeals for the

District of Columbia Circuit has held that the RTO-Participation Incentive administered consistent with EPAct can be used to produce a just and reasonable rate.82 In Maine Public

Utilities Commission v. FERC, the court rejected arguments that the RTO-Participation

Incentive “creat[es] windfalls for public utilities” and was “outside of the ambit of FERC’s rate making authority under Section 205” of the FPA.83 The court also found “FERC did the necessary calibration [in] determining the 50 basis point adder to be within the zone of reasonableness.”84 This is because “in the RTO context, ‘it is appropriate . . . to adjust the allowed return for [transmission owners] that undertake commitments designed to enhance the overall competitiveness and efficiency of the wholesale markets, so long as the resulting rate of return is within the range of reasonable returns.’”85 This precedent, which remains good law, makes clear that the RTO-Participation Incentive is consistent with FPA

affiliated transmission resources to the operational control of PJM or any other Transmission Organization. Elimination of the RTO Adder only furthers this kind of positioning. Thus, several of the Southern Company generation or vertically integrated affiliates are members of PJM and enjoy the ability to sell electricity products into PJM at market-based rates without its transmission affiliates having to cede functional control to PJM.

81 Supplemental NOPR, concurring op. (Commissioner Christie) at P 11.

82 See Me. Pub. Utils. Comm’n v. FERC, 454 F.3d 278, 280 (2006) (“Finally, consistent with the court’s deferential review under § 205 of the FPA of FERC’s determinations regarding rate design, FERC’s ROE incentive adjustments were not arbitrary and capricious. Accordingly, we deny the petitions for review.”).

83 Id. at 288-290.

84 Id.

85 Id. at 289 (quoting ISO New England, Inc., 109 FERC ¶ 61,147, at P 207 (2004)).

30 section 219’s concurrent mandate that rates be just and reasonable and not unduly discriminatory or preferential.

The “excessive rate of return” claim is also hard to square with the established

Commission determination (consistent with determinations made by states) that there is an overall “zone of reasonableness” rather than a single point within the zone that renders all other points unreasonable. The Commission has further clarified that even with the addition of the incentive adders (not limited to the RTO Adder) the overall result must still be within the “zone of reasonableness.” The Commission could not simply conclude that the addition of adders make rates per se unreasonable. To do so would require repealing years of precedent holding that there is a zone of reasonableness and that the Commission’s choice of a point within that zone is an exercise of its reasoned decision-making based on the record evidence.86 The Commission should be cautious about de facto overturning years of precedent on the creation of “zones of reasonableness” in the context of this more narrow proceeding.

Moreover, using the return on equity (“ROE”) determination within the zone of reasonableness to incent and award certain actions that the legislative body or the regulator views as important is not a new concept in ratemaking. For example, state commissions have chosen points within the various quartiles of the zone of reasonableness to recognize

86 See Emera Me. v. FERC, 854 F.3d 9, 21 (D.C. Cir. 2017) (“The zone of reasonableness is intended to balance the interests of investors and consumers, and typically results in a broad range of potentially reasonable ROEs, (citing Pac. Gas & Elec. Co. v. FERC, 306 F.3d 1112, 1116 (D.C. Cir. 2002) & Panhandle E. Pipe Line Co. v. FERC, 777 F.2d 739, 746-47 (D.C. Cir. 1985))); S. Cal. Edison Co. v. FERC, 717 F.3d 177, 179 (D.C. Cir. 2013) (“[T]he Commission assembles a zone of reasonable ROEs on which to base a utility's ROE.”; Canadian Ass’n of Petroleum Producers v. FERC, 308 F.3d 11, 12-13 (D.C. Cir. 2002); Williston Basin Interstate Pipeline Co. v. FERC, 165 F.3d 54, 57 (D.C. Cir. 1999); Boston Edison Co. v. FERC, 885 F.2d 962, 969-70 (1st Cir. 1989) (noting that because “[r]atemaking . . . is not a science,” however, FERC must use models “to inform, not rigidly to determine, [its] judgment” as to an appropriate ROE for a utility).

31 service quality improvements, punish poor performance, recognize cost efficiencies, or incent consideration of new technologies. Incentives such as of these have long been recognized as appropriate exercises of regulatory authority.87

Order No. 679’s reasoning about the merits of using an adder for the RTO-

Participation Incentive holds true today.88 Order No. 679 acknowledged that “utility rate regulation must adequately balance both consumer and investor interests” and that “there is no single formula for establishing a just and reasonable rate.” 89 Moreover,

“[Commission] precedents require the establishment of a range of returns and [the

Commission] select[s] an ROE within that range that reflects the facts and circumstances of a particular case.”90 Applying these principles allows the Commission to take into account and incentivize desirable behavior through rate adders, provided the end result is just and reasonable under the circumstances. 91 Thus, PJM respectfully urges reconsideration of the argument that the RTO-Participation Incentive per se renders unreasonable an otherwise just and reasonable return.

87 See, e.g., Order No. 2000 at 31,182 n.638 (“We note that [performance based rate] mechanisms have been widely used by state regulators . . . .”); James C. Bonbright et al., Principles of Public Utility Rates, 205 (“[A]llowed return may be designed, not just to enable a company to attract capital but also to reward efficiency and discourage inefficiency of management.”), 366-67 (1988).

88 Order No. 679 at P 27.

89 Id. at P 21.

90 Id. at P 22.

91 Id. at P 21.

32 E. The Commission Should Holistically Look at Transmission Incentives and Its Regulatory Burdens on RTO Versus Non-RTO Regions and Reconsider the Supplemental NOPR’s Piecemeal Approach.

In considering changes to the RTO-Participation Incentive, the Commission should consider its incentives policies holistically. For example, the Commission should consider the broader context of the FPA section 219 incentives and weigh the impact that the profound policy change will have on organized markets and the policies underlying them.

To address a host of policy issues, Congress embedded the RTO-Participation Incentive provision into a larger call for comprehensive transmission incentives found in FPA section

219.92

By the same token, the Commission issued the Supplemental NOPR in the same docket as the Transmission Incentives NOPR issued last year. The Transmission

Incentives NOPR proposes broad changes to several areas of the Commission’s transmission incentives policies.93 Yet, the Supplemental NOPR proposes to modify only one portion of the Transmission Incentives NOPR, namely, the portion relating to the RTO-

Participation Incentive.94 The Commission should not review the merits of the RTO-

Participation Incentive without also looking at other incentives and policies implicating transmission, including the country’s ambitious renewables goals and expansive infrastructure needs. Undertaking a piecemeal approach ignores Congress’s directive for a holistic rulemaking under FPA section 219. For these reasons, the Commission should

92 16 U.S.C. § 824s.

93 See Transmission Incentives NOPR.

94 Supplemental NOPR at PP 1, 13-14; see Transmission Incentive NOPR at P 97.

33 not move forward with only one aspect of its FPA section 219 rulemaking responsibilities without considering its impact on other incentives.

F. Should the Commission Proceed with a Final Rule, It Should Provide an Avenue for Parties to Petition for Regional Variation as to Application of the Rule Based on the Unique History and Circumstances of a Particular RTO Region.

To the extent the Commission does decide that modifications to its policies or regulations related to the RTO-Participation Incentive may be in order, the Commission should avoid making a sweeping nationwide ruling that ignores region-specific issues such as the degree of vertical integration in a particular RTO, whether the RTO already has formal exit fees applicable to transmission owners, how particular transmission owners came to join the RTO, whether the region is dominated by restructured or traditional regulation states, and other aspects of transmission owner’s profiles that differ across the nation. If it fails to do so, the Commission may be making assumptions about affiliate relationships, the history of how particular transmission owners came to join RTOs as it relates to the “voluntariness” issue, and other matters that do not necessarily fit for a large and mature multi-state RTO such as PJM.

As a result, any rulemaking should avoid absolutes and provide an opportunity for region-specific variations in its application based on individual applications filed by transmission owners or RTOs in a given region. Such an approach would be consistent with due process guarantees and it would allow individual transmission owners and RTOs to demonstrate on the record the applicability of any general rule to their unique circumstances.

Therefore, should the Commission decide to proceed with the Supplemental NOPR as a final rule it should provide for region-specific variances and set forth the criteria that

34 should be demonstrated to permit such variances consistent with the attributes proposed above.

II. CONCLUSION

PJM appreciates the Commission’s consideration of these comments and urges thoughtful reconsideration of its proposal to limit recovery of the RTO-Participation

Incentive as proposed in the Supplemental NOPR.

Respectfully submitted,

/s/ Victoria M. Lauterbach Craig Glazer Paul M. Flynn Vice President-Federal Government Policy Victoria M. Lauterbach 1200 G Street, N.W. Wright & Talisman, P.C. Suite 600 1200 G Street, N.W., Suite 600 Washington, D.C. 20005 Washington, D.C. 20005 (202) 423-4743 (202) 393-1200 [email protected] [email protected] [email protected] Mark J. Stanisz Senior Counsel Attorneys for PJM Interconnection, L.L.C. PJM Interconnection, L.L.C. 2750 Monroe Boulevard Audubon, PA 19403 (610) 666-4707 (phone) [email protected]

June 25, 2021

35

Attachment A PJ M Value Proposition PJM Interconnection’s operation of the high-voltage power grid, wholesale electricity markets and its long-term planning process provide significant value to the 65 million people in the region it serves.

PJM operations, markets and planning result in annual savings of $3.2−4 billion. These savings represent the vital functions that PJM provides and that lead to less cost to consumers:

• Ensuring reliable power • Managing generation and • Lowering emissions by 24 hours a day, 7 days other resources in real time encouraging generator a week to meet consumer demand efficiency • Providing capacity for • Procuring specialized • Offering additional benefits the future and reserves services that protect the including training, compliance for emergencies stability of the grid audits and knowledge sharing

Ene ent rgy stm Pro ve du In c n tio io n t C ra o e s n $1.2–1.8 B t e SAVINGS s G $600 M SAVINGS

$300 M Total Annual SAVINGS PJM Value

s

n

$3.2–4 o i R s e s l i i a +10 M m b fewer tons of E il it y emissions $1.1–1.3 B (annual avg.) SAVINGS

s ce I ur nte so gra t Re ting More Eff i c ien

All numbers are estimates.

Working to Perfect the Flow of Energy 1 Reliability Regional Planning Efficiencies

Transmission enhancements PJM’s regional planning process assesses the need for in PJM are expected to transmission upgrades to ensure reliability, increase efficiency and reduce costs by nearly support public-policy goals. $300 million a year by alleviating congestion. PJM’s large footprint makes the transmission planning process more effective by considering the region as a whole, rather than by individual states or separate transmission-owner territories, in determining transmission needs.

Investing in the transmission system can increase its ability to move more power, which can decrease congestion costs. Transmission enhancements in PJM are expected to reduce costs by nearly $300 million a year by alleviating congestion.

$300 M SAVINGS

Generation Lower Reserve Margin and Competition Investment from Alternative Resources

This results in savings The fact that PJM plans for resource In addition, the large and varied of $1.2–1.8 billion. adequacy over a large region results resource fleet across the entire PJM in a lower reserve margin than region spreads the generator outage otherwise would be necessary. risk across a larger collection of generators, improving reliability. Resource adequacy means having enough generating resources PJM’s Reliability Pricing Model available to meet the demand for capacity market promotes electricity, plus a reserve margin competition between traditional to cover emergencies. generation and alternative supply resources such as demand response. There is considerable diversity in With more cost-effective alternatives electrical use patterns in the large to maintain adequate power PJM footprint; not all areas peak supplies, less investment is needed at the same time of the year. in new generation. This results in savings of $1.2–1.8 billion. As a result, resources in one area of the system are available to help serve other areas at peak times, and a smaller reserve is required. $1.2–1.8 B SAVINGS

2 Integrating More Efficient Resources Replacement of Less Efficient Resources

More efficient units PJM’s efficient generation interconnection process, combined with the demonstrate a savings of competitive RPM capacity market, has enabled less efficient generation $1.1–1.3 billion a year resources to retire and to be replaced with more efficient, less costly, plants.

From the annual RPM auction from 2011 through 2018, nearly 30,000 megawatts of new, increasingly efficient natural gas combined- cycle generation either has already commenced operation or is committed to be built through the RPM auctions.

These resources operate more efficiently, with lower heat rates and in most cases lower fuel costs, than the older, less efficient resources they have replaced through retirement.

Simulations of the increased cost that would be associated with continuing to operate the retired resources instead of the new, more efficient units demonstrate a savings of $1.1–1.3 billion a year.

$1.1–1.3 B SAVINGS Energy Production Costs Expanded Dispatch Area

Operating the larger market PJM’s dispatch process enables energy to be exchanged economically and creates production cost savings automatically when less expensive resources in one area can be used to of $600 million a year meet consumer electricity demand in another area.

Prior to the expansion of the PJM footprint more than a decade ago, energy usually was exchanged between areas only when energy sales transactions were scheduled between two suppliers.

Without the operation of the centralized market structure that exists today, economic energy exchanges occurred much less frequently and efficiently.

Simulations of the economic dispatch and energy exchange before and after the PJM market expansion show that operating the larger market creates production cost savings of $600 million a year. $600 M SAVINGS

3 Emissions Savings

Annual average reduction of more than 10 million fewer tons PJM contributes to climate policy goals while maintaining of CO emissions reliability through the efficient operation of the wholesale 2 power markets.

Competition in organized markets results in greater energy efficiency. Efficient plants burn less fuel and produce fewer emissions. Since 2005, PJM has seen an overall reduction in emissions of approximately 30 percent as a result of an increase in wind generation, other renewables and the inexpensive shale gas boom in the PJM region. This translates to an annual average reduction of more than 10 million

fewer tons of CO2 emissions.

+10 M Fewer Tons of Emissions (annual avg.)

Additional Benefits Training

PJM is a source of neutral, PJM is dedicated to continuing education and providing training independent data, analysis, for industry professionals. knowledge and expertise for • PJM offers more than • 17,000 of the continuing the industry, lawmakers and regulators. In this role, PJM 160 training days a year, education hours are simulation facilitates information sharing attended by 7,000 trainees, training, which prepares trainees and informs decisions that help including 1,000 member for real-world experiences in strengthen the grid and drive company operators system and market operations the power industry forward. • PJM awards 45,000 NERC continuing education hours annually

4

Compliance Audits

As a regional transmission organization, PJM is audited periodically (every three years) by ReliabilityFirst, NERC and SERC Reliability Corporation. These audits review PJM’s compliance with Critical Infrastructure Protection standards, operations and planning standards. The approximate cost for PJM to complete an audit is $2 million. Because PJM is registered as the transmission operator and is audited by ReliabilityFirst, NERC and SERC, individual transmission owners do not have to participate in the audits on their own. The cost for an audit for a transmission owner would vary but could total more than $2 million for one individual transmission owner alone.

Innovation

PJM provides opportunities and PJM supports and facilitates a marketplace for innovators – such emerging technology programs as PJM member organizations, to integrate batteries, electric research and academic institutions, vehicles and other power storage and industry experts – to into PJM’s markets, as well as strengthen and enhance the ongoing initiatives to explore how power grid. PJM also conducts the burgeoning development of in-depth research and produces distributed energy resources can detailed white papers on various be integrated more effectively topics to promote information with grid operations. and knowledge sharing.

PJM Interconnection © 2019 Working to Perfect the Flow of Energy www.pjm.com | (610) 666-8980 | (866) 400-8980

5

Attachment B

June 2, 2021

Chairman Richard Glick Commissioner Neil Chatterjee Commissioner James P. Danly Commissioner Allison Clements Commissioner Mark C. Christie Federal Energy Regulatory Commission 888 First Street, NE Washington, DC 20426

Re: Organized Wholesale Power Markets

Dear Chairman Glick and Commissioners: As former FERC Commissioners and Chairs, appointed by both Republican and Democratic Presidents over the past three decades, we are united in our strongly held view that organized regional wholesale power markets, known as RTOs and ISOs, provide compelling platforms for renewable energy development and are achieving considerable consumer benefit. Organized markets do not exist in some regions of the country, and customers in those regions cannot enjoy the benefits they provide. Yet organized markets are more essential than ever as our nation decarbonizes the power sector. As the pace of decarbonizing the grid accelerates, we are convinced that the time for organized market expansion is now. Hence, we are writing to urge the Commission to use the broad authorities and tools available under the Federal Power Act to move toward well-structured organized power markets in all regions of the country. These market platforms have been proven to attract substantial clean energy investment and will be the key to implementing needed climate solutions and achieving the goal of clean, reliable and affordable electricity for our entire nation.

Customer preferences, broad electrification of our economy, falling costs of clean technologies, and climate-related grid emergencies will drive changes that FERC will have to anticipate and address. We recommend that FERC get ahead of the curve by getting the basic foundations in place everywhere. Promoting the expansion of organized wholesale markets now ensures that the grid is a powerful enabler of our clean electricity future. At this stage of electricity market evolution, our recommendation is a compelling one and well inside the mainstream of sound energy policy. Indeed, the approach FERC has championed for over two decades to ensure a well-functioning and dynamic grid is organized wholesale markets. There is no longer any doubt that these markets are reliable, resilient and highly attractive to innovative new technologies and clean energy resources, and the Commission is

Page 1 of 3 aware of the ongoing initiatives in the West to expand market platforms and growing interest in the Southeast for more ambitious market reform. More than 80% of renewable generation has been deployed in the organized market regions, and emissions are falling faster in such regions. Organized wholesale markets are defined by features that are critical foundations for a least-cost, customer-centric transition to a low carbon or zero-carbon grid: large footprints able to handle the variability of renewable resources, level playing fields for all providers, non-discriminatory grid access, robust markets and efficient congestion management. A considerable body of data, published in highly credible studies, establishes that substantial customer benefits would flow from expansion of organized wholesale markets.1 In addition, as we seek infrastructure resilience in all sectors of the economy, we note that organized markets, properly planned and focused on grid integration across the country, are critical. Finally, we need robust expansion and operation of transmission over large areas to integrate and take advantage of large amounts of remote renewable generation and offshore wind resources. To prepare the grid for a rapid evolution toward the low carbon future, we urge you to finish the job of setting up organized wholesale power markets and ensure that they flourish in all regions of the country. We know you have a full plate of electricity issues to address; it is our collective opinion that this one is foundational. Sincerely,

/s/ Nora Mead Brownell /s/ James J. Hoecker Nora Mead Brownell James J. Hoecker Commissioner 2001-2006 Commissioner 1993-1997, Chairman 1997-2001

/s/ William L. Massey /s/ Elizabeth Anne Moler William L. Massey Elizabeth Anne Moler Commissioner 1993-2003 Commissioner 1988-1993, Chair 1993-1997

/s/ John R. Norris /s/ Robert F. Powelson John R. Norris Robert F. Powelson Commissioner 2010-2014 Commissioner 2017-2018

1 SUMMARY REPORT: ECONOMIC AND CLEAN ENERGY BENEFITS OF ESTABLISHING A SOUTHEAST U.S. COMPETITIVE WHOLESALE ELECTRICITY MARKET; https://brattlefiles.blob.core.windows.net/files/16092_nc_wholesale_power_market_whitepaper_april_2019_fina l.pdf; https://www.caiso.com/documents/sb350study_aggregatedreport.pdf

Page 2 of 3

/s/ Branko Terzic /s/ Jon Wellinghoff Branko Terzic Jon Wellinghoff Commissioner 1990-1993 Commissioner 2006-2009, Chairman 2009-2013

/s/ Pat Wood, III Pat Wood, III Chairman 2001-2005

Page 3 of 3