Wednesday, April 25, 2018

PJM Capacity Proposals to Duel at FERC

By Rory D. Sweeney

PJM’s Independent Market Monitor scored a victory Monday after the RTO announced it filed with FERC to consider both its two-stage capacity repricing proposal and the Monitor’s plan to expand the minimum offer price rule (MOPR) (ER18-1314).

As part of the filing, PJM requested that the commission choose one proposal — even if that requires more information for full approval — and to identify what aspects of it need to be revised, rather than send the issue to “trial-type proceedings.” The RTO instead suggested establishing settlement judge procedures, if necessary.

Minimum Offer Price Rule MOPR PJM FERC

Schneider | © RTO Insider

“PJM anticipates that if the commission makes the outstanding issues more manageable by accepting one of the two tariff alternatives, a good faith consensual effort could be the most productive means of resolving those outstanding issues,” the RTO said.

The RTO requested an effective date of Jan. 4, 2019, to be in place for the 2019 Base Residual Auction for delivery year 2022/2023. To that end, the RTO asked for an order be issued prior to July so that any necessary follow-up could be completed in time for January.

“Based on PJM’s showings in this filing, the commission has substantial evidence on which it could fully accept either of the two alternatives in an order issued by June 29, 2018,” the RTO said.

The filing is what former FERC Chairman Norman Bay called a “jump ball” on Twitter, as it asks the commission to settle a disagreement that divided the grid operator, its Monitor and stakeholders throughout 2017. PJM campaigned from the beginning for its plan to accept bids from subsidized resources in its capacity auctions, but then isolate them during a second stage and reset the price without them. The Monitor’s MOPR-Ex proposal would extend the MOPR to all units indefinitely, but in alternative versions included carve-outs for states’ renewable portfolios and public power self-supply. (See PJM Board Punts Capacity Market Proposals to FERC.)

Stakeholders, who saw the Monitor proposal as having the least impact on the current construct, backed it all the way to the Markets and Reliability Committee, but all its different versions stalled after PJM CEO Andy Ott announced he would be recommending the RTO’s plan to the Board of Managers no matter the outcome of the committee vote. Still, subsequent pressure from stakeholders forced staff to offer both proposals to the board, which in the end punted the decision to FERC.

PJM FERC MOPR

Andy Ott, PJM (left) and Bowring | © RTO Insider

The Monitor had vowed to file his proposal if it wasn’t recommended to the board, even though it would have meant meeting the tougher standards under Section 206 of the Federal Power Act of demonstrating not only that the proposed changes are just and reasonable, but that the existing rules are unjust and unreasonable. That’s a higher hurdle than proposals that receive board approval, which only have to show the proposal is just and reasonable under the standards of Section 205.

“The question raised by PJM’s filing in this case is not whether states have the right to [encourage development of preferred generation resources within their borders] but instead how the wholesale market should respond to such actions so that the goal of ensuring just and reasonable rates is not frustrated by an individual state’s actions,” PJM said in the filing.

However, some stakeholders remained unsatisfied with either option. Jennifer Chen, an attorney with the Natural Resources Defense Council’s Sustainable FERC Project, said PJM’s proposal “would funnel more money from consumers to power plants for no additional benefit” while the Monitor’s proposal “would discriminate against offshore wind and force consumers’ utilities to over-procure generation.”

“Either of PJM’s two competing pricing proposals will drive up the utility bills of 65 million electricity customers in 13 Mid-Atlantic and Midwestern states,” she wrote. “The proposals also ignore the real issue — that PJM’s capacity market commitment to supply electricity in the future forces utilities to purchase a specific amount today, but without the opportunity to choose the kind of energy customers want to power their homes and businesses tomorrow.”

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