FERC to act on capacity market rules

PJM pushes FERC to act on capacity market rules, citing ‘uncertainty’ and ‘confusion’

8 May, 2019

Last June, FERC invalidated PJM’s capacity market structure, ruling that state-subsidized resources like renewables and nuclear plants were artificially suppressing market prices.

PJM responded in October with a two-pronged plan that would remove the subsidized resources from the market and raise clearing prices for the remaining resources, largely coal and gas plants.

The plan sparked major debate among market participants at FERC throughout the autumn, but federal regulators have yet to weigh in on the proposal.

Now, PJM says time is running short. With deadlines approaching, the grid operator said its market participants are

“proceeding with all pre-auction activities under both the existing and PJM’s proposed replacement rules.”

The two sets of rules carry important differences for generators considering capacity market participation.

By March 17, for instance, PJM must file market floor prices under its Minimum Offer Price Rule (MOPR). If FERC approves PJM’s repricing plan, the MOPR would apply to more resources — like subsidized nuclear plants — than it currently does.

Other rule discrepancies exist between the two sets. On April 16, participants must file exemption requests to PJM’s Must Offer rules, as well as submit information about the Market Seller Offer Cap, which PJM warned “under the proposed rules covers more resource types than the current rules.”

If FERC does not approve new capacity market rules soon, PJM said it has informed market participants that

“existing capacity market rules could still be regarded effective.”

“Thus, PJM will have to consider conducting the auction under PJM’s existing … rules in the event the Commission does not issue an order prior to the commencement of the upcoming [base residual auction].”

FERC has already allowed the grid operator to delay its 2019 capacity market auction from March to August 14-28, ruling last summer that the time would be needed to prepare the new rules. Failure of FERC to act would put the grid operator in an unprecedented position, officials wrote.

“[PJM] has not conducted an auction when there has already been a Commission finding that its existing capacity market rules are unjust and unreasonable with no established just and reasonable replacement rate in place,”

they warned.

When FERC will rule on the PJM proposal remains unclear. The five-member commission has had one vacancy since the death of former Commissioner Kevin McIntyre in January, allowing Democrats to deadlock votes at 2-2.

Last month, FERC regulators gave no indication of timing for the PJM case in a series of appearances at a state regulatory conference in Washington. Democrat Commissioner Richard Glick, however, called for a “new approach” to capacity markets in general.

“It’s incredibly complex what’s going on in PJM and we constantly get proposed changes not only to capacity markets but also to energy markets,”

Glick said,

“and I just worry that we’re making it a lot more complicated than it is and not necessarily producing the results.”

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