On February 22, 2011, demand side management (“DSM”) company EnerNOC, filed a Petition for Declaratory Order requesting that FERC find that EnerNOC and other companies may continue to register customers and settle under PJM’s GLD baseline methodology as they have in previous periods without enforcement action being threatened. GLD is one of three baseline methods prescribed in the PJM business rules for measuring event compliance. GLD is achieved by a customer reducing its load by a predetermined amount (i.e., by the Guaranteed Load Drop or GLD). PJM Tariff, Attachment DD, section H.

EnerNOC’s filing was in response to a joint statement issued by PJM and Monitoring Analytics, LLC, PJM’s Independent Market Monitor (“IMM”), that addresses a double counting issue. The Joint Statement says in part:

The following example illustrates the issue:

  1.  5,000 kW PLC (10/11 Delivery Year) – PLC represents how much capacity has been purchased for customer to ensure reliability. Since the customer actively reduces load during the peaks (“peakshaver”) the PLC is significantly lower than normal amount of load for the customer, which is 28,000 kW.
  2. 4,000 kW Nominated Installed Capacity – CSP commitment for quantity of customer load reduction when PJM needs during an emergency. The nominated amount may not exceed the PLC based on current market rules.
  3. Real time estimated load reduction = 25,000 kW measured as the difference between a baseline estimate based on recent days, 28,000 kW, less actual consumption during the event, or 3,000 kW.
  4. 21,000 kW over compliance – CSP resource will be deemed to have met nominated Installed Capacity commitment of 4,000 kW AND also receive an additional 21,000 kW of over compliance credit which may be used to offset resources within the zone than did not perform.

In addition to substantially overstating the demand side savings and overpaying CSPs, this behavior also provides a non-competitive advantage to CSPs in attracting customers. A CSP that is aware of this Program discrepancy may identify large customers with managed PLCs and offer such customers out of market revenues for any load reduction in excess of the nominated amount. This is profitable because once such a customer has been procured, the CSP has the ability to sign up customers in the same zone with no or only limited ability to reduce load when called upon and receive capacity revenues based on the apparent over compliance of the customers with managed PLCs.

In its Order, FERC states that the Commission does not intend to institute any enforcement actions against EnerNOC (or other similarly situated ARCs) for registering customers in good faith and settling under the GLD baseline methodology. Good faith participation in the PJM load management programs, including accurate customer GLD registration and aggregation during emergency events, is permitted. The Commission goes on to warn that this finding here does not exempt from challenge conduct prohibited under section 1c.2 of the Commission’s regulations. 18 C.F.R. § 1c.2 (2010).