PJM board sends competing capacity market reforms to FERC RSS Feed

PJM board sends competing capacity market reforms to FERC

PJM’s decision to send two separate capacity market reforms to FERC reflects divides between the grid operator’s staff, its market participants and most states in its jurisdiction.

Both policies aim to adapt the market to state energy mandates and incentives. The worry is resources covered by these policies — like renewables or nuclear — could depress prices in wholesale power markets, forcing other plants offline and threatening reliability.

The PJM staff’s capacity repricing proposal aims to fix that by splitting capacity auctions in two. The first would operate like today, but a second phase would make adjustments to resources covered by government subsidies. PJM would recalculate prices after the first round by removing offers from subsidized resources and replacing them with reference prices, reflecting PJM’s estimates of a competitive offer.

PJM staff argues the capacity repricing will best integrate state policies, but it is largely unpopular with states and market participants. This month, states in the mid-Atlantic market voted 12-2 against the capacity repricing proposal. A Jan. 2018 vote of the PJM’s Markets and Reliability Committee, comprised of generators, customers and T&D utilities, showed less than 22% supported the staff plan.

An alternative plan from PJM’s Independent Market Monitor would expand the current Minimum Offer Price Rule (MOPR) to cover subsidized resources. That plan is more popular with market participants, but many stakeholders would rather see neither enacted.

A Nov. 2017 vote of the grid operator’s capacity task force — a voluntary group of market participants — showed that more than 60% supported the expanded MOPR against other reform alternatives, but more than 63% preferred to stick with the status quo.

The MOPR-ex plan has some powerful opponents, however. Exelon, the nation’s largest utility holding company and biggest nuclear generator, filed a last minute note with PJM this week urging it not to approve the plan.

FERC concern
Opposition from states attracted attention to PJM proposal in the days before its board meeting this week. On Monday, FERC Commissioner Robert Powelson told a regulatory conference in Washington that market reforms from grid operators would not get support at the commission without input from states, a point other regulators echoed later at the event.

Powelson reiterated those concerns on Wednesday, hours before the PJM board met to consider its repricing proposal.

“I’m a little troubled that states have not been addressed on this issue,” Powelson said. “Is it going to drive how I decide? I don’t know, but I think the states want to be heard. I went to the [Organization of PJM States] board … They feel like they’re being trampled on and that’s important to me too.”

In the face of those warnings and stakeholder opposition, the PJM board declined to choose one proposal to send to federal regulators for approval. The separate filings under section 205 of the Federal Power Act will argue that both represent “a distinct, just and reasonable policy alternative to address the consequences of state intervention,” PJM CEO Andy Ott said in a Friday letter to stakeholders.

“Deciding between these policy options requires a balancing of federal and state interests, raising questions of federalism and comity that have already presented themselves before the courts, including the U.S. Supreme Court,” Ott wrote. “Accordingly, the board concluded that this question should fall to the Commission as the federal policymaker not to the PJM board.”

Legal questions
The dual filings set up a rare head-to-head policy decision for FERC that energy lawyers say has happened only once in recent memory. In 2015, ISO-New England filed two versions of a winter reliability program, asking FERC to choose between them.

The commission responded to ISO-NE’s “jump ball” filing by deciding in September of that year that while both options were just and reasonable, the proposal from market participants was “preferable” to the alternative from ISO staff.

ISO-NE has special provisions in its rules to allow for dual filings and a finding of preference, but PJM only asks FERC to approve a policy direction, not a final proposal.

Read full article at Utility Dive