Energy Harbor, LLC v. Federal Energy Regulatory Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued January 31, 2025 Decided July 11, 2025
No. 24-1092
ENERGY HARBOR, LLC,
PETITIONER
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
OLD DOMINION ELECTRIC COOPERATIVE AND PJM
INTERCONNECTION, L.L.C.,
INTERVENORS
On Petition for Review of Orders of the
Federal Energy Regulatory Commission
Pamela T. Wu argued the cause for petitioner. With her on
the briefs was J. Daniel Skees.
Robert M. Kennedy, Senior Attorney, Federal Energy
Regulatory Commission, argued the cause for respondent. With
him on the brief were Matthew R. Christiansen, General
Counsel, and Robert H. Solomon, Solicitor. Angela X. Gao,
Trial Attorney, Federal Energy Regulatory Commission, entered
an appearance.

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Andrew T. Swers argued the cause for intervenor in support
of respondent. With him on the brief was Ryan J. Collins.
Wendy B. Warren entered an appearance.
Before: PILLARD and GARCIA, Circuit Judges, and
RANDOLPH, Senior Circuit Judge.
Opinion for the court filed by Senior Circuit Judge
RANDOLPH.
RANDOLPH, Senior Circuit Judge: PJM Interconnection,
L.L.C. operates the largest competitive wholesale energy market
in the country. It assessed $12 million in penalties on Energy
Harbor, LLC, the owner and operator of the W.H. Sammis
power plant, for failing to comply with PJM’s Tariff during a
major winter storm in December 2022. Energy Harbor filed a
complaint with the Federal Energy Regulatory Commission
contesting the penalties. FERC denied the complaint. Energy
Harbor now petitions for judicial review of that decision.
I.
A.
PJM operates an interstate transmission grid covering all or
parts of thirteen mid-Atlantic and Midwestern states and the
District of Columbia. PJM’s grid connects individual customers
to electricity generation companies via local utilities. PJM does
not itself produce electricity. Instead, its role is as a middleman.
End-users purchase electricity from their local utility, that utility
purchases electricity from PJM, and PJM purchases the
electricity from an electricity generation company. To complete
the transaction, the electricity is physically transmitted from
electricity generation companies, across high-voltage power

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lines operated by PJM, to the user’s local utility.
Because the demand for electricity is variable, the local
utilities and PJM require assurances that there will be sufficient
supply when demand is high. PJM solves this problem by
entering into futures contracts with generation companies. Each
company commits to produce up to a set amount of electricity
during a given time period, at a specified price. That price is set
at yearly auctions held by PJM. The rates, rules and operating
procedures for this system are FERC-approved and outlined in
PJM’s “Open Access Transmission Tariff.”
B.
In 2014, PJM proposed revisions to its Tariff to ensure that
generators would deliver electricity when needed.1 FERC
approved the changes in 2015, see PJM Interconnection, L.L.C.,
151 FERC ¶ 61,208, at P 2 (2015), and our court upheld FERC’s
decision in Advanced Energy Management Alliance v. FERC,
860 F.3d 656, 674 (D.C. Cir. 2017). In essence, the proposal
implemented a pay-for-performance model, charging generators
stiff penalties if they failed to perform during any emergency
period PJM declared. These penalties were then to be used to
fund bonus payments to generators that over-performed in
relation to their capacity commitments. See PJM
Interconnection, 151 FERC ¶ 61,208, at P 2.
1 Technically, PJM revised its “Market Rules,” which include “the
rules, standards, procedures, and practices of the PJM Markets set
forth in the PJM Tariff, the PJM Operating Agreement, the PJM
Reliability Assurance Agreement, the PJM Consolidated
Transmission Owners Agreement, the PJM Manuals, the PJM
Regional Practices Document, the PJM-Midwest Independent
Transmission System Operator Joint Operating Agreement,” and other
documents. J.A. 261.

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To illustrate the concept, take the following example.
Imagine a generator with a 100-megawatt capacity commitment.
During an emergency period, PJM calls on that plant to provide
90 megawatts—a request clearly within the 100-megawatt
commitment. If the generator cannot deliver the full request, it
owes a penalty proportional to the shortfall. Thus, if the
generator is only able to produce 80 megawatts, it owes PJM a
penalty on 10 megawatts. And if it cannot deliver at all, it owes
a penalty for the full 90 megawatts. See Advanced Energy, 860
F.3d at 665 (describing this hypothetical).
The actual penalty scheme is more complex—and that
complexity led to this litigation.
The Tariff defines the owner of an electricity generation
company as a “Capacity Market Seller.” See J.A. 221. Each
Capacity Market Seller owns a facility that produces a set
number of megawatts and pledges that capacity through PJM’s
auctions. A Capacity Market Seller’s pledged capacity is termed
the “Capacity Resource.” See J.A. 302. But since generation
companies sometimes fail to live up to their commitments, the
Tariff imposes a penalty for nonperformance. PJM evaluates a
Capacity Market Seller’s nonperformance by looking both at its
“Expected Performance,” or promised output, and its “Actual
Performance,” or metered output of energy actually delivered to
PJM. See J.A. 291-93.
The Tariff creates a multi-step process for determining
Expected Performance. The initial step is to determine what a
Capacity Resource can produce in ideal conditions, or the
“[I]nstalled [C]apacity.” See Keyspan-Ravenswood, LLC v.
FERC, 474 F.3d 804, 807 (D.C. Cir. 2007). But recognizing that
electrical generation is often interrupted by technical problems,
the Tariff decreases Expected Performance below the level of a

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facility’s Installed Capacity in two ways.
First, PJM accounts for a Capacity Resource’s past
performance when calculating Expected Performance. The
“Forced Outage Rate” represents the historical rate at which a
Capacity Resource performs, relative to its Installed Capacity.
Id. Multiplying the inverse of the Forced Outage Rate—one
minus the Forced Outage Rate—by the Installed Capacity
produces an estimate of a generator’s likely capacity based on its
past results. This is termed “Unforced Capacity.” J.A. 324.
Resource Committed Capacity is the total megawatts of
Unforced Capacity of the Capacity Resource committed by a
Capacity Market Seller. J.A. 292.
Next, the Tariff adds an additional buffer by looking to the
average performance of all generators within the PJM grid. This
is the “Balancing Ratio,” which is calculated by dividing PJM-
wide Actual Performance by PJM-wide Unforced Capacity. Id.
If, for example, all PJM members committed 1,000,000
megawatts but only produced 800,000 megawatts, the Balancing
Ratio for that period would be 0.8.
Multiplying the Balancing Ratio by Resource Committed
Capacity produces Expected Performance. Said differently,
Expected Performance is the total megawatts that a Capacity
Resource can produce in ideal conditions (Installed Capacity),
adjusted for (i) that Capacity Resource’s historical performance
(Forced Outage Rate), and (ii) the performance of all of PJM’s
members (Balancing Ratio). Or more simply:
Unforced Capacity = Installed Capacity * (1 - Forced Outage
Rate)
Resource Committed Capacity = total megawatts of

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committed Unforced Capacity
Expected Performance = Resource Committed Capacity *
Balancing Ratio
Having calculated a generator’s Expected Performance, PJM
assesses whether the Capacity Resource’s Actual Performance
was sufficient. Any difference between Expected Performance
and Actual Performance is a “Performance Shortfall.” See J.A.
291.
Performance Shortfalls are particularly concerning during
periods of peak demand or extreme weather conditions.
Accordingly, the Tariff enables PJM to declare “Emergency
Action” periods, split into a series of five-minute “Performance
Assessment Intervals.” During each Performance Assessment
Interval, PJM assesses Capacity Resource performance to
determine whether any penalties should be charged or bonuses
awarded. Id. And given the math behind the Expected
Performance calculation, PJM effectively penalizes Capacity
Resource Sellers only when their Capacity Resources
underperform both their own track records and the actual
performance of similarly situated Resources across PJM.
One final twist. Even in an Emergency Action, a
Performance Shortfall may be excused in circumstances
involving a scheduled outage approved by PJM. Section 10A(d)
of the Tariff provides that:
“[A] Capacity Resource . . . shall not be considered in the
calculation of a Performance Shortfall for a Performance
Assessment Interval to the extent such Capacity Resource
. . . was unavailable during such Performance Assessment
Interval solely because the resource on which such Capacity

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Resource . . . is based was on a Generator Planned Outage or
Generator Maintenance Outage approved by the Office of the
Interconnection . . ..” J.A. 294.
This exception, and the definition of the term Capacity
Resource, are the subject of the present dispute.
C.
Energy Harbor owns and operates the W.H. Sammis Plant,
a coal-fired generation facility within the PJM region. The
Sammis Plant consists of three units totaling 1,490 megawatts of
Installed Capacity. Unit 5 has 290 megawatts, and Units 6 and
7 have 600 megawatts each. Energy Harbor bid the three
Sammis units in the capacity auction for the June 2022 through
May 2023 delivery year and secured a Resource Committed
Capacity of 1,164 megawatts.2
In December 2022, as a result of a severe winter storm, much
of PJM’s geographic footprint, including the Sammis Plant,
faced severe weather conditions and record cold temperatures
approaching ten degrees Fahrenheit. PJM issued “Emergency
Actions” on December 23 and 24, triggering Performance
Assessment Intervals.
From November 27 through December 26, 2022, the Sammis
Plant was on a PJM-approved maintenance outage to repair a
boiler feed pump at Unit 6. This reduced Unit 6’s available
capacity by 300 megawatts. Thus, heading into the storm, the
2 Energy Harbor’s Resource Committed Capacity (1,164 megawatts)
divided by its Installed Capacity (1,490 megawatts) produces the
inverse of the Forced Outage Rate (78.1%). Therefore, the Forced
Outage Rate is 21.9%.

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Sammis Plant had 1,190 megawatts of Installed Capacity
available to fulfill Energy Harbor’s commitments. For reasons
not specified in the record, Energy Harbor had previously paid
other market participants to take on a portion of its
commitments. Those transactions lowered the Sammis Plant’s
Resource Committed Capacity to 1,012 megawatts on December
23 and 1,036 megawatts on December 24. On those two days,
the Plant had an Expected Performance of approximately 865
and 840 megawatts, respectively, based on PJM-wide Balancing
Ratios of approximately 85% and 81%, respectively.
Nonetheless, Energy Harbor did not meet its commitments.
As the storm hit, Units 5 and 7 experienced unexpected failures,
also known as “forced outages.” The Sammis Plant’s Actual
Performance averaged 490 megawatts on December 23 and 698
megawatts on December 24. PJM ultimately assessed Energy
Harbor $12,157,111.91 in nonperformance penalties.
On April 27, 2023, Energy Harbor filed a complaint with
FERC alleging that PJM’s penalty calculation was inconsistent
with the terms of the Tariff. Later that year, the Commission
denied Energy Harbor’s complaint, finding that PJM had not
misinterpreted the Tariff or miscalculated the penalties assessed
to Energy Harbor. See Energy Harbor LLC v. PJM
Interconnection, L.L.C., 185 FERC ¶ 61,203, at P 25 (2023)
(Complaint Order). Energy Harbor requested rehearing but this
was denied by operation of law. See Energy Harbor LLC v. PJM
Interconnection, L.L.C., 186 FERC ¶ 62,070 (2024). Energy
Harbor then timely petitioned for review.
II.
A.

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At the heart of the parties’ dispute is the penalty exception
found in Section 10A(d) of PJM’s Tariff. As stated above,
Section 10A(d) provides that a “Capacity Resource . . . shall not
be considered in the calculation of a Performance Shortfall . . .
to the extent such Capacity Resource . . . was unavailable . . .
solely because the resource on which such Capacity Resource
. . . is based was on a Generator Planned Outage or Generator
Maintenance Outage approved by the Office of the
Interconnection . . ..” J.A. 294.
PJM interpreted the Tariff as excusing nonperformance only
“to the extent” that a Capacity Resource is “unavailable solely
because” of a maintenance outage. J.A. 132 (emphasis added).
To determine whether the maintenance outage was the “sole”
cause of Energy Harbor’s nonperformance, PJM first calculated
the amount of Installed Capacity not then-subject to a
maintenance outage. PJM then compared that amount, 1,190
megawatts, to Energy Harbor’s Expected Performance of 865
megawatts on December 23, and 840 megawatts on December
24. Because the Plant had sufficient capacity to meet its
Expected Performance but failed to do so, PJM determined that
the maintenance outage could not be the “sole” cause of the
Plant’s Performance Shortfall. In its view, the forced outages
were each causes of the Shortfall as well. PJM concluded that
the Section 10A(d) exemption, therefore, did not apply. The
Commission concurred in PJM’s interpretation of the Tariff.3
3 The Commission argues that its interpretations of filed tariffs are
owed “substantial deference.” FERC Br. at 24 (quoting E. Tex. Elec.
Coop. v. FERC, 90 F.4th 579, 587 (D.C. Cir. 2024)). It is true that,
“[i]n the past, we have deferred to FERC’s reasonable interpretation
of ambiguous tariffs and contracts within its jurisdiction” but it is an
open question whether those deference principles “survive the
overruling of Chevron.” NextEra Energy Res., LLC v. FERC, 118
F.4th 361, 368 (D.C. Cir. 2024) (citing Loper Bright Enters. v.

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J.A. 189-90.
Energy Harbor argues, as it did before the Commission, that
Section 10A(d) requires PJM to deduct any capacity that was
unavailable due to an approved Maintenance Outage from the
Performance Shortfall. This interpretation would provide any
Capacity Market Seller undergoing a “Generator Planned Outage
or Generator Maintenance Outage approved by the Office of the
Interconnection,” J.A. 294, with a credit against any
Performance Shortfall. Energy Harbor argues separately that
PJM’s interpretation is foreclosed by the fact that Energy Harbor
had not committed to supply the Sammis Plant’s entire Installed
Capacity, just its Resource Committed Capacity. In Energy
Harbor’s view, because Expected Performance, and thus
Performance Shortfall, is calculated using the Resource
Committed Capacity—a measure that accounts for the Forced
Outage Rate—PJM’s deduction from the Plant’s Installed
Capacity makes little sense.
PJM’s interpretation of the Tariff was proper, as was the
Commission’s endorsement of it. The text of the Tariff
compelled PJM to start with the Sammis Plant’s Installed
Capacity. Section 10A(d) applies “to the extent [a] Capacity
Resource . . . was unavailable . . . solely because the resource on
which such Capacity Resource is based” was on a maintenance
outage. Id. Performance Shortfall represents a Capacity
Resource’s unavailability. As discussed infra, the Sammis Plant,
and its entire Installed Capacity, is the “resource” on which
Energy Harbor’s Capacity Resource is based. PJM correctly
evaluated whether the maintenance outage reduced the Sammis
Raimondo, 603 U.S. 369 (2024)). That question is not presented in
this case. Energy Harbor has not disputed the Commission’s deference
claim.

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Plant’s Installed Capacity enough to constitute the “sole” cause
of the Performance Shortfall.
Even accounting for the approved maintenance outage, the
Sammis Plant had enough Installed Capacity to meet Energy
Harbor’s Expected Performance during the emergency but failed
to do so because of forced outages. So, it cannot be said that the
maintenance outage was the “sole” cause of the shortfall. This
interpretation does not foreclose the application of the Section
10A(d) exemption when a Capacity Resource faces both a forced
outage and a Maintenance Outage. If the forced outage is
insufficient to account for the entirety of the Performance
Shortfall, then the Maintenance Outage would be the sole reason
for the rest of the shortfall. The Tariff excuses such
nonperformance ‘to the extent’ that the forced outage did not
cause the Performance Shortfall.
Moreover, the Tariff treats Capacity Resources as
underwritten by the full Installed Capacity of their supporting
facilities. Energy Harbor was not permitted to withhold any of
the Sammis Plant’s Installed Capacity from PJM. Capacity
Market Sellers are required to offer the “[Installed Capacity]
equivalent of the Market Seller’s cleared [Unforced Capacity]
commitment” into the Day-ahead Energy Market every day. J.A.
271; see also PJM Interconnection, L.L.C., 186 FERC ¶ 61,080,
at P 130 (2024) (“PJM requires resources to offer their full
physical capability into the energy market, and this physical
capability generally exceeds the [Unforced Capacity].”).
B.
Energy Harbor’s next argument—that “eligibility for the
excusal under Section 10A(d) must be assessed for each
generating unit”—also fails. Pet’r Br. at 31. This argument stems
from Energy Harbor’s mistaken interpretation of a phrase in

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Section 10A(d): “resource on which such Capacity Resource . . .
is based.” Energy Harbor writes that the phrase “necessitates
consideration of unavailability at the ‘resource’ level—i.e., by
generating unit and not at the Capacity Resource level—to
determine ‘the extent such Capacity Resource . . . was
unavailable during the Performance Assessment Interval.’” Pet’r
Br. at 30-31.
This interpretation requires one to distinguish between
Section 10A(d)’s use of the words “resource” and “Capacity
Resource.” In Energy Harbor’s view, the Sammis Plant, as a
whole, is a Capacity Resource and the separate Sammis
generating units are each supporting “resources.” Pet’r Br. at 31.
If true, “[t]he unavailability at Sammis Unit 6 during the
Performance Assessment Intervals was solely due to the
Generator Maintenance Outage” and would be excusable under
Section 10A(d). Pet’r Br. at 20.
FERC had good reason to reject Energy Harbor’s position,
stating that “the entire Sammis Facility is the ‘resource’ at issue
in Section 10A(d).” J.A. 189. This reading does not render
“superfluous” the word “resource.” Pet’r Br. at 31. The Tariff
defines a Capacity Resource as the amount of net megawatts
committed from one or many generating units, not a physical
facility. J.A. 302. Therefore, the Sammis Plant has a Capacity
Resource of 1,490 megawatts, but it is not itself a Capacity
Resource. The Sammis Plant is instead a lowercase-r “resource”
that supports Energy Harbor’s Capacity Resource—the net
megawatts available from the Sammis Plant.
Another piece of evidence against Energy Harbor’s
interpretation is that the PJM capacity auction makes no
distinction between Capacity Market Sellers whose Capacity
Resources rely on a single or multiple separate units. J.A. 189-

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90.
C.
Energy Harbor casts and recasts its Tariff argument into
various other APA challenges. See, e.g., Pet’r Br. at 36-41. For
the reasons already stated, these challenges also fail.
Energy Harbor then challenges the Commission’s denial of
its rehearing request by operation of law as arbitrary and
capricious because the order did not address “any of the
arguments that Energy Harbor raised.” Pet’r Br. at 42. The
Denial Notice merely states that, absent action by the
Commission within 30 days, Energy Harbor’s request “may be
deemed to have been denied.” Energy Harbor, 186 FERC
¶ 62,070. The Commission cites a statute, a regulation and a
precedent of this court, each of which recognizes that FERC may
decline to issue a rehearing order in this manner without running
afoul of the APA. Id. (citing 16 U.S.C. § 825l(a); 18 C.F.R.
§ 385.713(f) (2023); Allegheny Def. Project v. FERC, 964 F.3d
1 (D.C. Cir. 2020) (en banc)).
III.
For the foregoing reasons, we deny Energy Harbor’s petition
for review.
So ordered.

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