On December 19, the US Federal Energy Regulatory Commission (FERC) directed PJM Interconnection to dramatically expand its Minimum Offer Price Rule (MOPR) to nearly all state-subsidized capacity resources, including renewables backed by state portfolio standards. It’s the latest of a series of dramatic revisions to the grid operator’s rule, which essentially functions to provide a minimum offer screening process to bar new market entrants from artificially depressing capacity auction clearing prices.
Reaction has been divided among the different market participants affected.
Electric Power Supply Association (EPSA) President and CEO Todd Snitchler said that the competitive wholesale markets have delivered tangible benefits both for energy consumers and the environment by “maintaining system reliability but also by encouraging efficiency, flexibility, and innovation in the power generation sector that has led to lower costs and reduced emissions through retirement of outdated facilities and investment in new technologies.” This “centralized procurement” shouldn’t be minimized or abandoned, he said, but opportunities still exist for further reform of the PJM capacity market.
General reactions from non-IPP generators, however, indicated disappointment with the order.
The American Public Power Association (APPA), the trade group for not-for-profit, community-owned utilities, said the expanded MOPR is especially dismal for public power. “It is the ultimate irony that the public power business model has been deemed a subsidy and a threat to competitive markets,” said Marc Gerken, PE, American Municipal Power president and CEO. “Our approach to new resources is closer to a true market than PJM’s Reliability Pricing Model has ever been. This order leaves no question that RPM is nothing more than an administrative construct with prices set in Valley Forge, [Pennsylvania,] with no enduring features of a competitive market.”
APPA President and CEO Sue Kelly also railed against what she called protections for a “select group of sellers.” The expanded MOPR means that every new resource built in the future—whether it is a renewable, storage, or energy efficiency resource—“will run the risk of not clearing the capacity auction (even after they have initially cleared an auction), causing public power utilities and their customers to face the risk of paying twice for that resource every year and directly interfering with public power’s fundamental business model,” the group explained. “Similarly, state-sponsored resources will be subject to the MOPR, raising the same risks for the states and impeding the states’ rights to make their own resource choices.”
The Solar Energy Industries Association (SEIA) said the decision was “bad” for renewables, states, and customers. Katherine Gensler, Vice President of Regulatory Affairs for SEIA, said it would set up barriers that “make it more difficult and expensive to choose renewable resources in the PJM capacity market.” The Sierra Club called it “disastrous”—and cited disputed figures from energy experts when it said the order “could cost the Midwest, Appalachia, and Mid-Atlantic regions almost $6 billion annually and increase dangerous fossil fuel emissions.” The American Wind Energy Association (AWEA) called the order detrimental to state rights, undermining Congressional authority established under the Federal Power Act. Reporting on the development in Power Magazine, Sonal Patel noted that voting on the decision fell along the commissioners’ political affiliations, with FERC—an independent regulatory government agency that is officially organized as part of the Department of Energy—becoming increasingly mired in partisanship and politicization.
Legal experts who have been following the case suggested to POWER the order’s lack of clarity on some issues will likely prompt requests for rehearing.
“According to critics, expanding the MOPR in this manner creates an artificial price floor that does not reflect the actual (i.e., lower) marginal costs of renewable resources.” That could ultimately limit opportunities for renewables to earn revenue from the PJM market for the value of their capacity, said Law firm Davis Wright Tremaine.