States say FERC overstepped its bounds in PJM capacity market order
A broad group of state governments, market participants and environmental advocates on Monday asked the Federal Energy Regulatory Commission to revisit a June order reshaping the PJM Interconnection capacity market, writing that the ruling overstepped the commission’s jurisdiction and would hamper state clean energy policies.
Illinois, New Jersey and Maryland, along with nuclear and environmental advocates, wrote that FERC’s order improperly intervenes in state energy policies, such as nuclear subsidies or renewable energy mandates. FERC’s 3-2 ruling found that such policies improperly suppress wholesale electricity prices and suggested changes to limit their impact.
Many commenters, including the Organization of PJM States, Inc. (OPSI), argued the Commission misjudged those market impacts and pointed to overcapacity as the cause of low wholesale prices. Calpine Corp., which pushed for changes to the market rules, warned that FERC’s proposed solution could lead to a “purely residual capacity market,” while PJM asked for clarification about how to design changes that will win FERC approval.
FERC’s June order finding PJM’s market rules unjust and unreasonable is the product of years of debate among players in the mid-Atlantic electricity market over the impact of state energy policies.
Gas and coal generators argue policies like nuclear subsidies and renewable energy mandates allow those resources to bid into the capacity market at lower prices than they otherwise would, suppressing the clearing price for the whole market.
In response to those concerns, PJM in March proposed two options to reform its capacity market at FERC — a price floor and a two-part capacity auction that would separate out subsidized resources.
FERC’s decision sided with the generators, finding the state policies improperly altered market prices. But it also rejected both of PJM’s proposed solutions, directing it instead to devise a new market rule that would allow subsidized resources to opt out of the capacity market altogether.
PJM did not challenge FERC’s rejection of its proposals in its rehearing request, but asked for more detail on whether elements of its two-part capacity repricing proposal could be included in its final market fix. FERC approved a similar proposal in May for ISO-NE.
“Elements of, or some variant of, capacity repricing, should remain within the realm of possible just and reasonable solutions,” PJM wrote. “And, if the Commission finds such a new proposal which may borrow elements of capacity repricing just and reasonable, it should confirm in its final order16 that nothing in the June 29 Order bars adoption of such a proposal.”
The decision exerted FERC’s authority over wholesale electricity markets, but critics said it also edged into the territory of state governments, which have jurisdiction over the generation mix within their boundaries. One former FERC aide called it an “unprecedented federal intervention in state policy.”
Three state governments from the PJM market echoed that argument in filed comments.
FERC’s order “crosses the clear jurisdictional boundary between the states” and FERC, the Illinois Commerce Commission wrote. New Jersey regulators, meanwhile, asked FERC to clarify that its order does not preempt state clean energy policies. Both states have nuclear subsidy programs in place.
OPSI, which represents PJM states as a whole, did not make a direct jurisdictional claim in its comments, instead arguing that FERC’s order did not respond to the evidence in the proceeding…….