PJM files competing capacity market reforms at FERC
PJM’s announcement in February that it would file two competing capacity market reforms with FERC was unexpected in the power sector. Only once before had a regional grid operator taken that step — and it was ISO-NE, which has a specific provision in its bylaws authorizing the action.
In an interview, PJM CEO Andy Ott told Utility Dive he made the decision due to consternation over the capacity proposals in his stakeholder group.
“I talked about it with the [PJM Board of Managers], and we made the decision that the policy call should be made by the regulator, not by us,” Ott said. “I know it’s a bit odd, a bit surprising, but we thought it was such a crossroads of which way should we go, and then … the third option is to do nothing and we need to make a call on that, too.”
Both capacity market proposals aim to handle the impacts of subsidized resources — like renewables or nuclear — that PJM worries will depress capacity market prices.
In the split auction approach, the first part 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.
The expanded MOPR would be a simpler construct, applying a minimum pricing rule to any subsidized resource in the market. That plan was more popular among PJM member companies in the stakeholder process, but most members indicated they would rather stick with the status quo and see neither enacted.
Meanwhile, some market observers question whether either reform is necessary…..