Southern Maryland Electric Cooperative, Inc. v. J.P. Morgan Ventures Energy Corporation

20160201-5513 FERC PDF (Unofficial) 2/1/2016 2:11:26 PM
UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION
Southern Maryland Electric Cooperative, Inc.,
Complainant,
v.
J.P. Morgan Ventures Energy Corporation,
Respondent.
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Docket No. EL16-__-000
NOTICE OF COMPLAINT
(February __, 2016)
Take notice that on February 1, 2016, Southern Maryland Electric Cooperative, Inc.
(SMECO) filed a formal complaint against J.P. Morgan Ventures Energy Corporation
(JPMVEC), pursuant to Sections 206 and 306 of the Federal Power Act, requesting that the
Commission determine that SMECO has the right to Capacity Performance (CP) credit under a
bilateral capacity purchase agreement that it entered into with JPMVEC. SMECO states that it is
submitting the complaint in order to preserve its right to CP credit under the Reliability Pricing
Model (RPM) of PJM Interconnection, L.L.C. (PJM), given the creation of two capacity
products, CP and Base Capacity, to replace the single capacity product, Annual Capacity.
SMECO states that it believes that JPMVEC does not intend to transfer CP credit to SMECO,
starting with the 2016-2017 Delivery Year that begins June 1, 2016. SMECO requests a
Commission decision on the complaint before June 1, 2016.
Complainant certifies that copies of the complaint were served on the designated
corporate officials for JPMVEC, as listed on the Commissions list of Corporate Officials.
Any person desiring to intervene or to protest this filing must file in accordance with
Rules 211 and 214 of the Commissions Rules of Practice and Procedure (18 CFR 385.211 and
385.214). Protests will be considered by the Commission in determining the appropriate action
to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing
to become a party must file a notice of intervention or motion to intervene, as appropriate. The
Respondents answer and all interventions, or protests must be filed on or before the comment
date. The Respondents answer, motions to intervene, and protests must be served on
Complainant.
The Commission encourages electronic submission of protests and interventions in lieu
of paper using the eFiling link at http://www.ferc.gov. Persons unable to file electronically
should submit an original and 14 copies of the protest or intervention to the Federal Energy
Regulatory Commission, 888 First Street, N.E., Washington, D.C. 20426.
This filing is accessible on-line at http://www.ferc.gov, using the eLibrary link and is
available for review in the Commissions Public Reference Room in Washington, D.C. There is
an eSubscription link on the web site that enables subscribers to receive email notification
when a document is added to a subscribed docket(s). For assistance with any FERC Online
service, please email FERCOnlineSupport@ferc.gov, or call (866) 208-3676 (toll free). For
TTY, call (202) 502-8659.
Comment Date: 5:00 pm Eastern Time on (insert date).
Kimberly D. Bose
Secretary

BEFORE THE

Complainant,
v.
Respondent.
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COMPLAINT OF
SOUTHERN MARYLAND ELECTRIC COOPERATIVE, INC.
Pursuant to Sections 206 and 306 of the Federal Power Act (the FPA), 1 and Rule 206
of the Rules of Practice and Procedure of the Federal Energy Regulatory Commission (the
Commission), 2 Southern Maryland Electric Cooperative, Inc. (SMECO) respectfully submits
this complaint (the Complaint) against J.P. Morgan Ventures Energy Corporation
(JPMVEC) requesting that the Commission determine that SMECO has the right to Capacity
Performance (CP) 3 credit under a bilateral capacity purchase agreement that it entered into
with JPMVEC.
SMECO is submitting the Complaint in order to preserve its right to CP credit under the
Reliability Pricing Model (RPM) of PJM Interconnection, L.L.C. (PJM), given the creation
of two capacity products, CP and Base Capacity, to replace the single capacity product, Annual
16 U.S.C. 824e, 825e (2012).
18 C.F.R. 385.206 (2015).
Capitalized terms not otherwise defined herein have the meanings set forth in the Open Access
Transmission Tariff of PJM Interconnection, L.L.C. (PJM Tariff).
Capacity. SMECO believes that JPMVEC does not intend to transfer CP credit to SMECO,
starting with the 2016-2017 Delivery Year that begins June 1, 2016.
Because the transfer transaction under the SMECO-JPMVEC agreement occurs shortly
before the start of each Delivery Year, SMECO respectfully requests a Commission decision on
the Complaint before June 1, 2016.
I.
CORRESPONDENCE AND COMMUNICATIONS

SMECO requests that all correspondence and communications regarding this filing be
addressed to the following persons, who should be placed on the Commissions official service
list in this proceeding:
Stephen L. Huntoon
Energy Counsel, LLP
1629 K Street, N.W., Suite 300
Washington, D.C. 20006
202-600-7840
huntoon@energy-counsel.com
Mark A. MacDougall
Senior Vice President,
External Affairs and General Counsel
Southern Maryland Electric Cooperative, Inc.
15035 Burnt Store Road
P.O. Box 1937
Hughesville, MD 20637
Mark.MacDougall@smeco.coop
II.
DESCRIPTIONS OF COMPLAINANT AND RESPONDENT

A. Complainant
SMECO is a distribution cooperative with its principal place of business in Hughesville,
Maryland, serving approximately 160,000 consumers located in the Maryland counties of

Calvert, Charles, St. Marys, and Prince Georges. SMECO is a load serving entity and network
2
transmission customer taking service under the PJM Tariff in the Potomac Electric Power
Company transmission zone. SMECO purchases energy and capacity solely for the purpose to
serving its retail customers.
B. Respondent
JPMVEC is a Delaware corporation that is an indirect subsidiary of JPMorgan Chase &
Co., a financial holding company incorporated in Delaware with its principal place of business in
New York, New York.
JPMVEC is authorized by the Commission to make wholesale sales of capacity, energy,
and ancillary services at market-based rates pursuant to its market-based rate tariff accepted by
the Commission in a Letter Order issued September 20, 2005 in Docket No. ER05-1232-000,
112 FERC 61,322 (2005).
III.
BACKGROUND
On April 28, 2011, SMECO and JPMVEC entered into a Capacity Purchase & Day
Ahead Heat Rate Call Option on Physical Electricity (Brandywine PPA) 4 which, as relevant to
the Complaint, provides SMECO a 225 MW RPM capacity credit from the Brandywine
Generation Facility at Brandywine, Maryland, in exchange for a monthly payment by SMECO to
JPMVEC. The term of the Brandywine PPA is from January 1, 2014 to December 31, 2021.
The Capacity Product is:
"PJM Unit Specific Available Capacity" which means a Unit Specific Capacity
4
The Brandywine PPA is provided as Attachment 1. The portion addressing the Day Ahead Heat Rate
Call Option on Physical Electricity is redacted as not germane. Price information is redacted as
potentially commercially sensitive and not appearing to be essential to a decision on the matters raised
herein. The Brandywine PPA is in the nature of a Confirmation to a Master Power Purchase and Sale
Agreement entered into between SMECO and JPMVEC with an effective date of May 10, 2006, which
is comprised of the EEI Master Power Purchase and Sale Agreement and a Cover Sheet to same with
party-specific information, elections, terms and conditions.
3
Transaction for Available Capacity as such terms are defined in the Reliability
Pricing Model ( "RPM ") Business Rules of PJM Interconnection, L.L.C.
("PJM"), or any successor document issued by PJM and in effect from time to
time ( "RPM Rules "), subject to the terms and conditions specified in this
Confirmation.
The Delivery Point is the PEPCO Zone.
The Capacity Source is the Brandywine Generation Facility.
When the Brandywine PPA was entered into in 2011, only one type of RPM capacity
existed. In 2014, after the Polar Vortex, PJM proposed the creation of two types of capacity
resources, a CP Resource and a Base Capacity Resource. 5
With the pending creation of two types of capacity resources SMECO sought assurance
from JPMVEC that JPMVEC would transfer CP credit under the Brandywine PPA. On April 21,
2015, JPMVEC provided that assurance in an email stating (emphasis added): 6
Should PJMs most recent Capacity Performance Proposal be put into effect
prior to the upcoming Base Residual Auction slated to occur on May 11,
2015, JPMVEC intends to designate the Brandywine Facility as a Capacity
Performance product (as outlined in aforementioned Proposal) when bidding
into PJMs upcoming Base Residual Auction for the Planning Year 2018/19,
and to use Brandywine to fulfill our obligation to SMECO under the
Confirmation for the Planning Year 2018/19.
The new capacity construct proposed by PJM was substantially accepted by the
Commission in Docket Nos. ER15-623-000, et al. 7
The Brandywine Generation Facility (also Brandywine unit) has dual-fuel capability
CP Resources and Base Capacity Resources are defined as two types of Capacity Resources in the PJM
Tariff (sections 2.11A and 2.11B). Base Capacity is a transitional product. As of June 1, 2020, all
Capacity Resources in RPM will be CP Resources.
The email is provided as Attachment 2.
PJM Interconnection, L.L.C., 151 FERC 61,208 (2015) (Capacity Performance Order), rehg
granted in part, 152 FERC 61,064 (2015).
4
and qualifies as a CP Resource. 8 On information and belief JPMVEC offered and cleared the
Brandywine Generation Facility as a CP Resource in the three RPM auctions conducted last
year, involving the 2016-17, 2017-18, and 2018-19 Delivery Years. JPMVEC was required to
offer the Brandywine Generation Facility as a CP Resource in the auction for the 2018-19
Delivery Year, 9 and had a choice as to whether so offer in the other two auctions.
Notwithstanding JPMVECs assurance to SMECO, the Brandywine Generation Facilitys
qualification as a CP Resource, and JPMVEC clearing it as such in these RPM auctions, a more
recent communication from JPMVEC has raised doubt as to whether SMECO will in fact receive
the benefit of the bargain under the Brandywine PPA such that JPMVEC will transfer CP credit
starting with the 2016-17 Delivery Year.
Based of the doubt raised by the more recent communication from JPMVEC, SMECO is
submitting this Complaint requesting that the Commission determine that SMECO is entitled to
CP credit under the Brandywine PPA.
IV.
SUMMARY
The Commission should confirm SMECOs right to CP credit under the Brandywine
PPA. This requested relief is supported by the following considerations, all as detailed in the
sections to follow:
The dual-fuel capability is a matter of public record, e.g., Eastern Interconnection Planning
Collaborative, Gas-Electric System Interface Study: Existing Natural Gas-Electric System Interfaces,
April 4, 2014, Table E4-3 (plant listed as Panda Brandywine),
http://www.eipconline.com/uploads/Exhibit_4_-_PJM_Generator_Contracts_-_Final_Draft_4Apr14.pdf,
See also: U.S. Senate Permanent Subcommittee on Investigations, Wall Street Bank Involvement with
Physical Commodities, November 18, 2014, page 331, http://www.hsgac.senate.gov/download/reportwall-street-involvement-with-physical-commodities.
9
Capacity Performance Order, supra, PP 354 and 357.

5
V.
The purpose of the Brandywine PPA is to enable SMECO to meet its

RPM obligation, which requires recognition of the Brandywine generation
facility as a CP Resource.
The Brandywine unit is the specified unit under the Brandywine PPA and
is a CP Resource; with the creation of two types of RPM resources the
type of capacity to be transferred to SMECO under the Brandywine PPA
should be the type of capacity of the specified unit.
Because the Brandywine unit is a CP Resource it necessarily does, and

will continue to, provide PJM and the PJM system the reliability benefit of
a CP Resource for which SMECO is paying; if SMECO were somehow
denied CP credit for a CP Resource it is paying for, then other entities
would be unjustly enriched at SMECOs expense.
JPMVEC previously assured SMECO that it should and would use the
Brandywine unit to fulfill its obligation to SMECO under the Brandywine
PPA; this is highly probative of the parties mutual intent.
The Commission should exercise its primary jurisdiction over the

Brandywine PPA, which is an FPA-jurisdictional sale for resale of energy
and capacity in interstate commerce, being made by JPMVEC pursuant to
its market-based rate tariff on file with the Commission.
THE COMMISSION SHOULD CONFIRM SMECOS RIGHT TO CP

CREDIT UNDER THE BRANDYWINE PPA.
A. The Purpose of the Brandywine PPA Is to Enable SMECO to Meet Its
RPM Obligation, Which Requires Recognition of the Brandywine
Generation Facility as a CP Resource.
The Brandywine PPA is intended to enable SMECO to meet 225 MW of its RPM
obligation. This purpose is evident from the commercial role of SMECO as a load-serving
electric cooperative, purchasing energy and capacity to meet its load-serving obligations. 10 As
10
This purpose is illustrated in the Material Changes section of the Brandywine PPA by the specific
obligation of JMPVEC, in the event of any material changes in the PJM capacity market structure making
its performance illegal or impossible, to provide Unforced Capacity that satisfies the resource
adequacy requirements of the PJM Tariff with JPMVEC and SMECO cooperating to to satisfy any
administrative requirements necessary for the capacity sold and purchased hereunder to satisfy Buyers
load obligations, if any. (emphasis added). This underscores the purpose of the Brandywine PPA as
going towards meeting SMECOs RPM capacity obligations.
6
discussed in the attached Affidavit of Chamroeun Kong, SMECOs lead negotiator for the
Brandywine PPA: this PJM RPM hedge was the purpose for SMECO entering the
Brandywine transaction with JPMVEC. SMECO only procures capacity towards its RPM
obligation and would not procure any capacity product in excess of that obligation. 11
This purpose would be decimated if SMECO were to receive Base Capacity instead of
CP credit under the Brandywine PPA. 12 Among other things, this is because approximately 80%
of a load-serving entitys RPM obligation for the 2018-19 and 2019-20 Delivery Years is
required to be CP capacity, 13 and 100% of a load-serving entitys RPM obligation for 2020-21
and later Delivery Years is required to be CP capacity. SMECOs overall RPM obligation is
884.9 MW (2015-16 Delivery Year), and thus its Base Capacity allowance for the first two years
is approximately 177 MW (177 MW is 20% of 884.9 MW).
If the 225 MW of the Brandywine PPA were to be Base Capacity rather than CP:
Only 177 MW would be a hedge against SMECOs RPM obligation for the
2018-19 and 2019-20 Delivery Years, and that hedge would be solely for the
inferior Base Capacity product.
The residual 48 MW (225 MW less the 177 MW applied to Base Capacity)

would have no hedge value in meeting SMECOs RPM obligation for the
2018-19 and 2019-20 Delivery Years, and would only have residual financial
value at the discounted Base Capacity price.
11
Attachment 3, P. 9.
12
Id.
13
PJM December 12, 2014 Transmittal Letter in Docket Nos. ER-623-000, et al., pages 27-28. PJM
states that the actual resource splits for the 2018-19 and 2019-20 Delivery Years will be determined by
the Base Capacity Resource Constraint (id., at n. 67 and pages 69-70, and proposed section 2.2F of
Attachment DD of the PJM Tariff); Capacity Performance Order, supra, PP 222 and 253.
7
Such outcomes would fundamentally undermine the purpose of the Brandywine PPA,
contrary to the legal principle of giving great weight to such purpose. 14
Furthermore, starting with the 2020-21 Delivery Year, the Capacity Product under the
Brandywine PPA must be CP because Base Capacity no longer exists. 15 It would not make
sense for the Capacity Product to be considered Base Capacity for the 2018-19 and 2019-20
Delivery Years and somehow be transformed into CP after those Delivery Years. Only a unitary
interpretation of the Capacity Product as CP would avoid such a bizarre outcome.
B. The Brandywine Generation Facility Is the Specified Unit under the
Brandywine PPA, and Its Nature as a CP Resource Should Be Preserved.

According SMECO CP credit under the Brandywine PPA is further supported by the
designation of the Brandywine Generation Facility as the Capacity Source and by the Capacity
Product as PJM Unit Specific Available Capacity which means a Unit Specific Capacity
Transaction for Available Capacity as such terms are defined in the Reliability Pricing Model
("RPM ") Business Rules . Thus, the Brandywine unit is the specified unit under the
14
if the principal purpose to the parties is ascertainable it is given great weight. Restatement
(Second) Contracts 202 (1). A contracting partys demonstrated, contemporaneous needs and
expectations are relevant to interpretation of a power purchase agreement. Doswell Limited Partnership,
Opinion No. 496, 120 FERC 61,011, at P 48 (2007).
15
PJM December 12, 2014 Transmittal Letter in Docket Nos. ER-623-000, et al., page 28 (Finally, in
the 2020/2021 Delivery Year, only Capacity Performance Resources will be used to meet the PJM
Regions reliability and resource adequacy needs.). See also, PJM Manual 18, section 1.5: Effective
with the 2018/2019 Delivery Year [footnote omitted], PJM will procure two capacity product types
through RPM Auctions, Capacity Performance and Base Capacity. The Base Capacity product-type will
be phased out such that only resources that meet the requirements of the Capacity Performance producttype will be used to meet the PJM Regions reliability and resource adequacy needs effective with the
2020/2021 Delivery Year.
8
Brandywine PPA. For the last three Delivery Years JPMVEC has transferred unit-specific
capacity from the Brandywine Generating Facility. 16
The Brandywine unit is a CP Resource. With the creation of two types of RPM resources
the type of capacity to be transferred to SMECO should be the type of capacity of the specified
unit under the Brandywine PPA. 17
SMECO notes that the Replacement Product provision of the Brandywine PPA in no
way undercuts the foregoing discussion. The provision is as follows:
Seller shall have the right to replace all or a portion of the Capacity Product
from a Capacity Resource within the PEPCO Zone, or within any other PJM
Zone if Seller agrees to reimburse Buyer for the price differential between
such PJM Zone and the PEPCO Zone with regard to such Delivery Year.
This provision allows JPMVEC to replace the Brandywine Generation Facility with
another Capacity Resource within the PEPCO Zone, or alternatively to allow JPMVEC to
replace the Brandywine unit with a Capacity Resource in another PJM Zone if JPMVEC
makes SMECO whole for any price difference between the PEPCO Zone and the other PJM
Zone in a given Delivery Year. The purpose of this provision is to enable JPMVEC to replace
the Brandywine unit with a unit of equivalent RPM value (same zone) or a unit of different RPM
value (different zone) so long as SMECO is held harmless by such replacement. 18
In order to replace the Capacity Product, a CP Resource, with a unit of equivalent RPM
value, the replacement also must be a CP Resource.
16
Attachment 3, P. 10.
17
This proposition is supported by the inverse: If the specific unit under a capacity purchase agreement
were not a CP Resource (i.e., a Base Capacity Resource), it would not appear reasonable to require the
owner/seller to transfer CP capacity credit to the purchaser.
18
9
Given that the purpose of this provision is to protect SMECO from replacement of the
Brandywine unit that would give SMECO less capacity value than that of the Brandywine unit, it
would stand this provision on its head to interpret it as giving JPMVEC, upon the creation of two
types of capacity, carte blanche to substitute an inferior resource for the specified unit under the
Brandywine PPA. Not only would such an interpretation be inconsistent with the purpose of the
provision itself as protecting SMECO in the event of replacement, but also with the overall
purpose of the Brandywine PPA because it would allow JPMVEC to decimate the purpose of the
agreement.
A specific contract provision should be interpreted in a manner consistent with the
contract taken as a whole, 19 and here the overarching purpose of the Brandywine PPA is the sale
and purchase of capacity towards SMECOs RPM obligations.
C. Recognizing the Brandywine Generation Facility as a CP Resource Is Just

and Reasonable.
Recognizing the Brandywine Generation Facility as a CP Resource not only is compelled
by the purpose and provisions of the Brandywine PPA, but such recognition is the only outcome
that is just and reasonable under the Federal Power Act which governs wholesale sales of energy
and capacity such as the capacity under the Brandywine PPA.
Because the Brandywine Generation Facility is a CP Resource it necessarily does, and
will continue to, provide PJM and the PJM system the reliability benefit of a CP Resource.
SMECO is paying for the reliability benefit that PJM and the PJM system receive. If SMECO
19
A fundamental tenet of contract interpretation is that a contract provision should be interpreted, where
possible, as consistent with the contract as a whole and that the contract must be interpreted as a whole.
Newmont Nevada Energy Investment LLC v. Sierra Pacific Power Co., 147 FERC 61,030, at P 38
(2014).
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were somehow denied CP credit for a CP Resource it is paying for, then other entities
(presumably JPMVEC) would be unjustly enriched at SMECOs expense. This would be
patently unjust and unreasonable.
D. JPMVECs Statement to SMECO Is Highly Probative.

As set forth in the Background section above, with the pending creation of two types of
capacity resources SMECO sought assurance from JPMVEC that JPMVEC would transfer CP
credit under the Brandywine PPA. 20 On April 21, 2015, JPMVEC provided that assurance in an
email from Brian Anast to Chamroeun (Cham) Kong stating (emphasis added): 21
Cham
This note is to recap our conversation regarding the amended and restated
Confirmation between Southern Maryland Electric Cooperative, Inc.
(SMECO) and J.P. Morgan Ventures Energy Corporation (JPMVEC)
dated May 5, 2011.
Should PJMs most recent Capacity Performance Proposal be put into effect
prior to the upcoming Base Residual Auction slated to occur on May 11,
2015, JPMVEC intends to designate the Brandywine Facility as a Capacity
Performance product (as outlined in aforementioned Proposal) when bidding
into PJMs upcoming Base Residual Auction for the Planning Year 2018/19,
and to use Brandywine to fulfill our obligation to SMECO under the
Confirmation for the Planning Year 2018/19.
As you are aware, the final rules have yet to be put in place. Once we
received clarity on the final rules, we are happy to have further discussions
regarding the capacity product referenced in the confirmation.
Nothing changed in final rules as approved by the Commission that could be
reasonably claimed to affect this commitment.
This assurance by JPMVEC is a highly probative statement. JPMVEC is acknowledging
20
21
Attachment 2.
11
that it should and would use the Brandywine unit to fulfill its obligation to SMECO under the
Brandywine PPA. The value of such admissions as evidence is reflected in the Federal Rules of
Evidence.
Federal Rule of Evidence 801(d)(2)(C) and (D) exclude from the hearsay an opposing
partys statement as follows:
(d) Statements That Are Not Hearsay. A statement that meets the following conditions
is not hearsay:
(2) An Opposing Partys Statement. The statement is offered against an opposing
party and
(C) was made by a person whom the party authorized to make a statement on the
subject; [or]
(D) was made by the partys agent or employee on a matter within the scope of
that relationship and while it existed .
When the statement was made Brian Anast was a JPMVEC employee and authorized
representative of JPMVEC in discussions with SMECO (and SMECOs representative ACES).
In addition, Federal Rule of Evidence 804(b)(3) excludes from the hearsay rule a
statement against interest as follows:
(b) The Exceptions. The following are not excluded by the rule against hearsay if the
declarant is unavailable as a witness .
(3) Statement Against Interest. A statement that:
(A) a reasonable person in the declarants position would have made only if the
person believed it to be true because, when made, it was so contrary to the
declarants proprietary or pecuniary interest or had so great a tendency to
12
invalidate the declarants claim against someone else or to expose the

declarant to civil or criminal liability .
Mr. Anast is unavailable to SMECO which has no means to compel his testimony. The
statement by Mr. Anast in his representational capacity was contrary to JMPVECs pecuniary
interest in providing JPMVECs interpretation of the Brandywine PPA as requiring JPMVEC to
use the Brandywine unit to fulfill its RPM obligation to SMECO. The difference in value for the
2018-19 Delivery Year between the CP Resource and the Base Capacity Resource for the 225
MW of Capacity Product under the Brandywine PPA is $1,214,629. 22 JPMVEC would not have
provided the statement in April 2015 that it would use the Brandywine unit to fulfill its
obligation to SMECO, foregoing potential revenue, if it did not believe that it had such an
obligation.
For the foregoing reasons the Commission should consider and give great weight to the
statement by Mr. Anast as acknowledging that JMPVEC should and will use the Brandywine
unit to fulfill its obligation to SMECO under the Brandywine PPA.
E. The Commission Should Exercise Its Primary Jurisdiction.

The Brandywine PPA is an FPA-jurisdictional sale for resale of energy and capacity in
interstate commerce, being made by JPMVEC pursuant to its market-based rate tariff on file
with the Commission. Commission authority over such wholesale contracts as the Brandywine
22
The PJM Rest of RTO CP clearing price for the 2018-19 Delivery Year was $164.77/MW-day and the
Base Capacity Resources clearing price was $149.98/MW-day, PJM News Release (August 21, 2015),
http://pjm.com/~/media/about-pjm/newsroom/2015-releases/20150821-rpm-auction-results.ashx.
Although the BRA occurred in August 2015, after the April 21, 2015 statement by JPMVEC, a material
price difference between CP and Base Capacity was generally anticipated, see id. (The auction prices are
in line with the costs of securing this dependable [CP] capacity.).
13
PPA is pervasive as the Supreme Court has emphatically described: 23

In particular, the FPA obligates FERC to oversee all prices for those interstate
transactions and all rules and practices affecting such prices. The statute provides
that [a]ll rates and charges made, demanded, or received by any public utility for
or in connection with interstate transmissions or wholesale salesas well as all
rules and regulations affecting or pertaining to such rates or chargesmust be
just and reasonable. 824d(a). And if any rate [or] charge, or any rule,
regulation, practice, or contract affecting such rate [or] charge[,] falls short of
that standard, the Commission must rectify the problem: It then shall determine
what is just and reasonable and impose the same by order. 824e(a).
SMECO is paying for a CP Resource in the Brandywine PPA and has the right to receive
CP credit for that payment. Making that determination is a matter squarely within the
Commissions authorityand, indeed, the dutyto ensure that rules or practices affecting
wholesale rates are just and reasonable. 24
SMECO acknowledges that in matters involving jurisdictional contracts that the
Commission shares its jurisdiction with courts. The Commission has applied a three-factor test
to determine whether to exercise its primary jurisdiction: 25
(1) whether the Commission possesses some special expertise which makes
the case peculiarly appropriate for Commission decision; (2) whether there is
a need for uniformity of interpretation of the type of question raised in the
dispute; and (3) whether the case is important in relation to the regulatory
responsibilities of the Commission.
Applying these factors to the circumstances of this case, the Commission should exercise
its primary jurisdiction. The Commission has special expertise in this area: The dispute arises
exclusively from a fundamental change in the pervasively regulated PJM capacity market. There
23
Electric Power Supply Assoc. v. FERC, S. Ct. Nos.18-840 et al., 577 U. S. ____ (2016) (January 25,
2016, slip op.at 14-15).
24
Id., slip op. at 15.
25
Richard Blumenthal, Attorney General of the State of Connecticut v. NRG Power Marketing Inc., 103
FERC 61,344 (2003), citing Arkansas Louisiana Gas Co. v. Hall, 7 FERC 61,175 at 61,322, rehg
denied, 8 FERC 61,031 (1979).
14
is a need for uniformity in the event this issue should arise under other PPAs involving the sale
and purchase of capacity. Whether buyers of capacity pay just and reasonable rates is important
to the Commissions regulatory responsibilities; indeed the Supreme Court has just held, as
quoted above, that the Commission has a duty to ensure that rules or practices affecting
wholesale rates are just and reasonable.
For these reasons the Commission should exercise its primary jurisdiction.
VI.
RULE 206(b) 26 REQUIREMENTS

A. (1)-(5). The information in Sections III-IV of this Complaint and in the Affidavit in
Attachment 3 explain why SMECO should receive CP credit under the Brandywine PPA
and that JPMVECs refusal to do so is unjust and unreasonable in violation of the
Brandywine PPA. The estimated financial impact on SMECO from loss of CP credit is
as follows for the specified Delivery Year under RPM (with Delivery Years after 201819 based on assumption that 2018-19 is indicative of later years:
Delivery Year 2016-17:
$1,221,198.75
$2,586,937.50
$1,214,628.75
$1,214,628.75
B. (6). The issues raised in this Complaint are not pending in an existing Commission
proceeding or a proceeding in any other forum in which SMECO is a party.
C. (7). As stated above SMECO requests a Commission Order before June 1, 2016, the
effective date of the transfer of capacity credit.
D. (8). All documents that support the facts in this Complaint that are in the possession of,
or otherwise attainable by, SMECO, are referenced in the Complaint and/or included as
attachments.
E. (9). SMECO invoked informal dispute resolution under the EEI Master Power Purchase
and Sale Agreement that is incorporated into the Brandywine PPA. This has been
unsuccessful. SMECO is not opposed to a Commission-directed settlement process but
would request that the schedule for any such process be designed to end, one way or the
other, in sufficient time to allow for a Commission decision before June 1, 2016 for the
reason given above.
26
18 C.F.R. 385.206(b)(2015).
15
F. (10). A form of notice of the Complaint suitable for publication in the Federal Register
is provided in Attachment 4.
G. (11). SMECO is requesting a Commission Order before June 1, 2016 for the reason
given above.
VII.
RULES 206(c), 2010(f) AND (k) SERVICE

In accordance with Rules 206(c), 2010(f) and (k), 27 SMECO has served the Complaint
via electronic means (email) upon the following designated corporate officials of JPMVEC as
posted on the Commissions Corporate Officials webpage:
Armand Nakkab
Chief Compliance Officer, Managing Director
J.P. Morgan Chase Bank, N.A.
383 Madison Ave., Floor 10
New York, NY 10179
Telephone: 212-648-0291
Email: armand.x.nakkab@jpmchase.com
Paul Tramonte
Executive Director, Compliance
J.P. Morgan Chase Bank, N.A.
1111 Fannin St., Floor 11
Houston, TX 77002
Telephone: 713-236-3079
Email: paul.tramonte@jpmorgan.com
VIII.
CONCLUSION
SMECO respectfully requests that the Commission determine that SMECO has the
right to CP credit under the Brandywine PPA. As shown above the requested relief is
supported by the purpose and terms of the Brandywine PPA and is just and reasonable under
the Federal Power Act. SMECO respectfully requests a Commission decision before June 1,
2016.
27
18 C.F.R. 385.206(c), 385.2010(f) and (k) (2015).

16
Respectfully submitted,
/s/ Stephen L. Huntoon
Stephen L. Huntoon
Energy Counsel, LLP
202-600-7840
Mark A. MacDougall
Senior Vice President,
External Affairs and General Counsel
15035 Burnt Store Road
P.O. Box 1937
Hughesville, MD 20637
Mark.MacDougall@smeco.coop
Attorneys for
February 1, 2016
17
CERTIFICATE OF SERVICE
I hereby certify that I have this day served the foregoing document upon each designated
corporate official of Respondent as set forth above. Dated this 1st day of February, 2016.
/s/ Stephen L. Huntoon

Stephen L. Huntoon
Energy Counsel, LLP
202-600-7840
18
Attachment 1
Attachment 2
From: Anast, Brian [mailto:Brian.Anast@jpmorgan.com]

Sent: Tuesday, April 21, 2015 5:01 PM
To: Chamroeun Kong
Subject: Capacity delivery to SMECO
Cham
This note is to recap our conversation regarding the amended and restated Confirmation between
Southern Maryland Electric Cooperative, Inc. (SMECO) and J.P. Morgan Ventures Energy Corporation
(JPMVEC) dated May 5, 2011.
Should PJMs most recent Capacity Performance Proposal be put into effect prior to the upcoming Base
Residual Auction slated to occur on May 11, 2015, JPMVEC intends to designate the Brandywine Facility
as a Capacity Performance product (as outlined in aforementioned Proposal) when bidding into PJMs
upcoming Base Residual Auction for the Planning Year 2018/19, and to use Brandywine to fulfil our
obligation to SMECO under the Confirmation for the Planning Year 2018/19.
As you are aware, the final rules have yet to be put in place. Once we received clarity on the final rules,
we are happy to have further discussions regarding the capacity product referenced in the confirmation.
We intend to be communicative during this time of uncertainty, and will contact you should any
circumstances warrant further changes or clarifications. We acknowledge SMECO and ACES desire and
intention to do the same.
Regards,
Brian
____________________________________________________________________________________________
_______________________________________________________________________________________
Brian Anast | Global Commodities | Principal Investments | J.P. Morgan |
1111 Fannin, Floor 11, Houston, TX 77002 | T: 713 236 4195 | F: 713 236 5000 | M: 646-280-9493 |
brian.anast@jpmorgan.com | jpmorgan.com
This email is confidential and subject to important disclaimers and conditions including on offers
for the purchase or sale of securities, accuracy and completeness of information, viruses,
confidentiality, legal privilege, and legal entity disclaimers, available at
http://www.jpmorgan.com/pages/disclosures/email. This message has been prepared by
personnel in the Sales and Trading Departments of one or more affiliates of JPMorgan Chase &
Co. and is not the product of JPMorgans Research Department. It is not a research report and is
not intended as such. This material is for the general information of our clients and is a
"solicitation" only as that term is used within CFTC Rule 1.71 and 23.605 promulgated under the
U.S. Commodity Exchange Act.
This email is confidential and subject to important disclaimers and conditions including on offers
for the purchase or sale of securities, accuracy and completeness of information, viruses,
confidentiality, legal privilege, and legal entity disclaimers, available at
http://www.jpmorgan.com/pages/disclosures/email
Attachment 3

BEFORE THE

Complainant,
)
)
v.
Respondent.
)
AFFIDAVIT OF CHAMROEUN KONG
1. My name is Chamroeun Kong. My business address is 4140 West 99th Street, Carmel,
Indiana 46032.
I am employed by the Alliance for Cooperative Energy Services Power
Marketing LLC (ACES) as Executive Director of Origination.

2. ACES is owned by 20 generation and transmission electric cooperatives and one (1)
distribution cooperative which participate in wholesale electric markets including the PJM
Interconnection, L.L.C. (PJM). Southern Maryland Electric Cooperative, Inc. (SMECO)
is an ACES member and PJM market participant for which ACES, as agent, performs market
services related to SMECOs PJM participation, including origination services.
3. I began my energy career in 1998 with Wabash Valley Power Association. In 1999 I joined
ACES and progressed through positions of increasing responsibility, from Hourly Trader and
Manager of Origination to my current position of Executive Director of Origination. I earned
a Bachelor of Science Degree in Microbiology with a minor in Spanish from Indiana
University in 1999 and an MBA from the University of Indianapolis in 2015.
4. I am submitting this affidavit to accompany SMECOs complaint in the above-captioned

proceeding.
The SMECO complaint relates to SMECOs Power Purchase Agreement
(PPA) with J.P. Morgan Ventures Energy Corporation (JPMVEC), relating to the
Brandywine Generation Facility (Brandywine PPA). I was the chief negotiator of the
Brandywine PPA for SMECO. My affidavit provides an overview of the PPA, the intent and
purpose of the PPA and summarizes the adverse financial impact to SMECO if SMECO were
not to receive Capacity Performance capacity from the Brandywine PPA.
5. The Brandywine PPA confirmation was signed on April 28, 2011. The term of the
Brandywine PPA is January 1, 2014 through and ending on December 31, 2021.
The
Brandywine PPA became effective between SMECO and JPMVEC on January 1, 2014.
6. JPMVEC transferred PJM Reliability Pricing Model (RPM) capacity from the Brandywine
facility into SMECOs PJM RPM account for the remainder of the 2013/2014 Delivery Year
(DY), i.e., January 1, 2014 May 31, 2014. For the 2014/2015 DY and 2015/2016 DY,
JPMVEC also transferred PJM RPM credits from the Brandywine Generation Asset into
SMECOs account.
For these periods, the only PJM RPM product-type for a generating
capacity resource like the Brandywine Generation facility was Annual capacity.
Purpose of Brandywine PPA
7. SMECO uses the Brandywine PPA as a financial (mitigates price volatility) and physical
(mitigates PJM RPM capacity obligation) hedge for both energy and PJM RPM capacity for
a portion of its approximately 900 MW PJM load obligation. The 225 MW PPA provides
SMECO with a daily fixed heat rate option for energy and a PJM RPM capacity credit with
the Brandywine Generation Facility as the Capacity Source.
8. The Brandywine Generating Facility receives PJM RPM revenue credit that is similar to the
PJM RPM revenue charge that SMECO pays to PJM. JPMVEC transfers that credit to
2
SMECO before the start of each Delivery Year under RPM. SMECO relies on this PPA to
hedge a portion of its RPM charges from PJM.
9. As chief negotiator for SMECO of the Brandywine PPA, this PJM RPM hedge was the
purpose for SMECO entering the Brandywine transaction with JPMVEC. SMECO only
procures capacity towards its RPM obligation and would not procure any capacity product in
excess of that obligation. The complaint correctly shows that if the Brandywine PPA were
not interpreted to make Capacity Performance the Capacity Product then the transaction
would not be serving this purpose.
10. The Capacity Product that JPMVEC provided for the first three Delivery Years was unitspecific capacity from the Brandywine Generating Facility, which is the unit-specific
Capacity Source under the Brandywine PPA.
11. The PPA has a replacement product provision (page 4 of the PPA) which states as follows:
Seller shall have the right to replace all or a portion of the Capacity Product from a
Capacity Resource within the PEPCO Zone, or within any other PJM Zone if Seller
agrees to reimburse Buyer for the price differential between such PJM Zone and the
PEPCO Zone with regard to such Delivery Year.
This replacement product provision was intended to make SMECO whole in the event that
the Brandywine Generating Facility was unable to perform on its RPM obligation and
JPMVEC had to source PJM RPM capacity from another PJM zone. The replacement
product provision was intended to compensate SMECO for the difference between the RPM
price of capacity in the PEPCO zone vs. the clearing price received by the replacement
resource in a different zone.
JPMVEC Assurance
12. As described in SMECOs complaint, with the pending creation of two types of capacity
products SMECO sought assurance from JPMVEC that JPMVEC would transfer Capacity
Performance credit under the Brandywine PPA. On April 21, 2015, Brian Anast of JPMVEC
provided that assurance to me in an email that is provided with the complaint as Attachment
2.
Financial Impact to SMECO
13. As described in SMECOs complaint, SMECO is paying for the RPM Capacity Performance
resource attributes of the Brandywine facility in the PPA and should receive Capacity
Performance RPM credit for that payment.
Table 1 calculates the financial impact to
SMECO if it were to not receive RPM Capacity Performance capacity but instead to receive
the inferior Annual or base product type of RPM capacity, as applicable.
Table 1: Financial Impact if SMECO receives Annual or Base capacity
vs. Capacity Performance capacity1 (capacity prices in $ MW-day)
Delivery Year
Brandywine PPA MW
Annual or Base
product type clearing
price (as applicable)
CP Clearing Price
Damage to SMECO
16/17 DY
225 MW
$119.13
17/18 DY
225 MW
$120.00
18/19 DY
225 MW
$149.98
19/20 DY2
225 MW
$149.98
$134.00
$1,221,198.75
$151.50
$2,586,937.50
$164.77
$1,214,628.75
$164.77
$1,214,628.75
Conclusion
14. This concludes my Affidavit.
RPM clearing price data by product type is from: http://www.pjm.com/~/media/markets-ops/rpm/rpm-auctioninfo/rpm-auctions-resource-clearing-price-summary.ashx (RPM Auction clearing price summary, Pepco).
2
Calculations for the 19/20 DY assuming the same clearing prices as in the 18/19 DY.

BEFORE THE

Complainant,
)
)
v.
Respondent.
)
VERIFICATON OF AFFIDAVIT
Pursuant to 18 C.F.R. 385.2005(b)(3), I verify under penalty of perjury that the foregoing
Affidavit is true and correct.
Executed on February 1, 2016.

By: /s/ Chamroeun Kong
Attachment 4

Complainant,
v.
Respondent.
)
)
)
)
)
)
)
)
)
NOTICE OF COMPLAINT
(February __, 2016)
Take notice that on February 1, 2016, Southern Maryland Electric Cooperative, Inc.
(SMECO) filed a formal complaint against J.P. Morgan Ventures Energy Corporation
(JPMVEC), pursuant to Sections 206 and 306 of the Federal Power Act, requesting that the
Commission determine that SMECO has the right to Capacity Performance (CP) credit under a
bilateral capacity purchase agreement that it entered into with JPMVEC. SMECO states that it is
submitting the complaint in order to preserve its right to CP credit under the Reliability Pricing
Model (RPM) of PJM Interconnection, L.L.C. (PJM), given the creation of two capacity
products, CP and Base Capacity, to replace the single capacity product, Annual Capacity.
SMECO states that it believes that JPMVEC does not intend to transfer CP credit to SMECO,
starting with the 2016-2017 Delivery Year that begins June 1, 2016. SMECO requests a
Commission decision on the complaint before June 1, 2016.
Complainant certifies that copies of the complaint were served on the designated
corporate officials for JPMVEC, as listed on the Commissions list of Corporate Officials.
Any person desiring to intervene or to protest this filing must file in accordance with
Rules 211 and 214 of the Commissions Rules of Practice and Procedure (18 CFR 385.211 and
385.214). Protests will be considered by the Commission in determining the appropriate action
to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing
to become a party must file a notice of intervention or motion to intervene, as appropriate. The
Respondents answer and all interventions, or protests must be filed on or before the comment
date. The Respondents answer, motions to intervene, and protests must be served on
Complainant.
The Commission encourages electronic submission of protests and interventions in lieu
of paper using the eFiling link at http://www.ferc.gov. Persons unable to file electronically
should submit an original and 14 copies of the protest or intervention to the Federal Energy
Regulatory Commission, 888 First Street, N.E., Washington, D.C. 20426.
This filing is accessible on-line at http://www.ferc.gov, using the eLibrary link and is
available for review in the Commissions Public Reference Room in Washington, D.C. There is
an eSubscription link on the web site that enables subscribers to receive email notification
when a document is added to a subscribed docket(s). For assistance with any FERC Online
service, please email FERCOnlineSupport@ferc.gov, or call (866) 208-3676 (toll free). For
TTY, call (202) 502-8659.
Comment Date: 5:00 pm Eastern Time on (insert date).
Kimberly D. Bose
Secretary
Document Content(s)
Notice of Complaint - SMECO v JPMVEC.DOCX.............................1-2
Complaint with Attachments.PDF........................................3-36

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20160201-5513 FERC PDF (Unofficial) 2/1/2016 2:11:26 PM

UNITED STATES OF AMERICA

Docket No. EL16-__-000

20160201-5513 FERC PDF (Unofficial) 2/1/2016 2:11:26 PM

20160201-5513 FERC PDF (Unofficial) 2/1/2016 2:11:26 PM

UNITED STATES OF AMERICA