On October 17, 2019, FERC denied Public Citizen, Inc.’s (“Public Citizen”) complaint alleging that PJM Interconnection, L.L.C. (“PJM”) recovered improper campaign contributions and lobbying expenses through its filed rate and failed to disclose its spending on political activity. In doing so, FERC concluded that PJM could recover the expenses in question through its rates because they represent an educational, outreach, or informational function essential to PJM’s core operations and because PJM determined that such expenditures are in the collective best interests of PJM’s stakeholders.

On February 20, 2018, Public Citizen filed a complaint alleging that PJM violated the Federal Power Act, FERC precedent, and the PJM Amended and Restated Operating Agreement (“Operating Agreement”) by financing partisan political activities through its filed rate. Specifically, Public Citizen stated that PJM donated at least $456,500 to political action committees, i.e., the Democratic Governors Association (“DGA”) and the Republican Governor’s Association (“RGA”), made payments to various individual lobbyists and lobbying firms with the intent of financing partisan electoral politics, and then improperly included these expenses in its rates. Public Citizen also argued that PJM potentially violated its Operating Agreement and FERC precedent by not disclosing certain details on payments to outside lobbying firms, allegedly made for lobbying purposes, to FERC or the PJM Finance Committee. Public Citizen thus requested that FERC find PJM’s rate to be unjust and unreasonable and require PJM to submit an itemized report of all of its political-related spending.

In denying the complaint, FERC found that Public Citizen failed to demonstrate that the fees PJM paid to the DGA and RGA, as well as various individual lobbyists and lobbying firms, are unrecoverable. FERC found that PJM’s payments to DGA and RGA were membership fees that are recoverable in PJM’s rates under FERC precedent because they perform an educational or informational function essential to PJM’s core operations. Specifically, FERC found these fees allow PJM to maintain access to these organizations to keep informed on policy initiatives affecting wholesale markets and to educate state policy makers on PJM activities. FERC also noted that PJM does not directly contribute to political campaigns and that PJM determined these fees were for the collective benefit of PJM stakeholders, as PJM and other regional transmission organizations “lack[] a profit motive.” FERC similarly found that PJM’s expenses to various lobbying firms were recoverable as Public Citizen failed to provide evidence showing that such expenses do not represent an educational or informational function of PJM or do not support policies that PJM determines to be in the best interests of its stakeholders.

Finally, FERC rejected Public Citizen’s request to require PJM to submit an itemized report of its political-related spending. FERC found that it had no reason to deviate from its prior approval of the structure of PJM’s rate, which included such expenses and was overseen by the PJM Finance Committee.

A copy of the order is available here.