FERC Calls for More Comments on Building PJM Capacity Market and Possible Reforms

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Open comments window until May 10

Ask a number of questions about the minimum price rules of the PJM offer

Following discussions at a technical conference in March, the Federal Energy Regulatory Commission seeks additional information on capacity market builds, as state policies increasingly affect entry and the exit of resources, in particular if new market rules could be implemented in PJM Interconnection without delaying its December date. capacity auctions.

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Grid operators and stakeholders have mostly supported the removal of minimum bid price rules, as currently constructed and imposed on capacity markets in regional transport organizations in the East, when of a technical conference led by the Commissioners on March 23, the first in a series planned to help modernize the design of the electricity market. Conversations focused on PJM’s expanded MOPR revealed mixed opinions on what should come next, with attendees offering a range of perspectives on how the 13 network operator’s multibillion-dollar capacity market. States can support the various State decarbonization strategies.

In an April 5 notice (AD21-10), FERC invited interested parties to submit post-technical conference comments by April 26, with reply comments expected on May 10.

While the notice stated that comments could be filed on any subject discussed at the technical conference, which also covered the capacity markets of ISO New England and the Independent System Operator New York , the committee specified 22 questions it would like to answer on the implications of maintaining PJM’s existing MOPR. and prospective alternative approaches that could replace the current framework.

FERC, through the notice, asked commentators to reflect on the urgency in which they feel that the rules of the PJM capacity market need to be reconciled with state policies. One of the questions was whether a phased approach should be taken and, if so, should short-term actions include phasing out extended MOPR and replacing it with targeted MOPR.

“Negligible” impact

S&P Global Platts Analytics maintains that the impact of the current MOPR on upcoming PJM capacity auctions for delivery year 2022-2023 will be “negligible”.

“The amount of renewables subject to MOPR and thus removed as price takers from the supply curve is not sufficient to have a significant impact on RTO-wide compensation prices,” said analyst Kieran Kemmerer in an April 6 email. “In addition, the existing nuclear resources benefiting from subsidies and subject to a non-zero floor offer price [in Illinois and Ohio] have struggled to compensate in recent auctions, and therefore the imposition of a floor bid price is unlikely to change bid behavior or influence compensation prices relative to the delivery year 2021-22. “

Kemmerer added that Platts Analytics is bearish in its outlook for RTO clearing prices, “primarily driven by updates from [PJM’s demand curve, or variable resource requirement,] and an influx of next-generation gas into western PJM. “

PJM’s capacity auctions were suspended after a FERC split in 2018 determined that the grid operator’s capacity market rules were unfair and unreasonable because they did not take into account the alleged price distortion caused by own energy resources subsidized by the State (EL16-49, EL18-178).

FERC subsequently ordered PJM to expand its MOPR to establish administrative floor prices for all new resources and certain existing resources seeking to bid on its capacity market that receive significant state subsidies. PJM received final approval in February of its compliance files for the implementation of the expanded MOPR.

PJM is expected to hold its first capacity auction since 2018 in May for the 2022-2023 delivery year, followed by four-and-a-half-month pre-auction schedules for the next commitment periods until the grid operator is catching up on its three-year deadline. provisional timetable. According to this schedule, the auction for the 2023-24 delivery year is expected to take place in December.

FERC has made it clear in various commissioner statements and recent actions that it does not intend to do anything that could disrupt the May auction. But the FERC in the notice asks for an explanation of “the time frame within which a proposed replacement rate could be implemented to avoid delaying the December 2021 base residual auction.”

The advisory seeks new and additional information on the benefits of the expanded MOPR, the impact of MOPR on states’ willingness to remain in the market for PJM capacity, the type or amount of resources funded by the State that are unlikely to offset the capacity auction as a result of MOPR, whether MOPR will cause excessive capacity purchase and what impact this might have on PJM customers.

Potential alternatives

The commission, according to the opinion, also questions whether further changes to the PJM tariff would be necessary if the expanded MOPR is revised or eliminated, and whether it is “appropriate to combine these changes with reforms to ensure that capability are properly accredited for their reliability value. “

FERC also asks whether serving entities should be allowed to source capacity outside the capacity market, allowing PJM in turn to only hold a residual capacity auction to meet remaining capacity requirements.

Other questions about alternative approaches include to what resources should a targeted MOPR apply to, what exemptions should be considered, and whether there are any differences between the short, medium and long term effects of removing the extended MOPR. on the adequacy of resources.

In addition, the opinion invites comments on the impact of publicly funded resources on the ability of market resources to obtain funding and on FERC’s accountability to non-resource subsidy states that instead matter. in the competitive market.

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