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FERC Rejects Capacity Market Load Carve-out Under PJM's RCO and Extended RCO Options, Expands Minimum Offer Price Rule

FERC Says Fixed Resource Requirement Remains Unchanged

Illinois Stakeholders Press For State To Assume Capacity Procurement Responsibility

December 19, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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FERC today issued an order directing PJM to expand its current Minimum Offer Price Rule (MOPR) in the capacity market

A written order was not immediately available

In a news release, FERC said that it adopted an expanded MOPR, "rather than PJM’s Resource Carve-Out (RCO) and Extended RCO proposals."

The RCO and Extended RCO would have essentially removed load from the PJM capacity market under a "carve-out" for load associated with state subsidized resources. The carve-out mechanisms included proposals to allocate credit for such a resource to LSEs such as retail suppliers (credit against the LSE's otherwise required capacity obligation). See our prior story for more background on the carve-out proposals

The RCO option (standalone RCO) generally would have removed the load (demand) associated with a state-subsidized resource from the PJM capacity market, as well as the resource. In contrast, the Extended RCO would have removed the subsidized resource from the capacity market, but would have essentially kept the load associated with the subsidized resource in the capacity market, thereby raising prices relative to the RCO

FERC in a news release said, "FERC determined that those proposals would unacceptably distort the markets, inhibiting incentives for competitive investment in the PJM market over the long term."

FERC said that, "PJM’s longstanding Fixed Resource Requirement Alternative remains unchanged in the PJM tariff."

The issue is most acute in Illinois, in which certain stakeholders had been primed to seek to use any carve-out, for load associated with nuclear units receiving subsidies

In response to FERC's order, the Illinois Clean Jobs Coalition urged state lawmakers to pass the Clean Energy Jobs Act (CEJA), which the Coalition said, "would authorize the state to assume the responsibility for managing its capacity needs."

"Instead of Illinois relying on PJM’s capacity auction, a state agency, the Illinois Power Agency (IPA), would be put in charge of running Illinois’ own capacity auction," the Illinois Clean Jobs Coalition said (presumably under the existing FRR)

With regards to the expanded MOPR, FERC in a news release said that, "FERC built on PJM’s April 2018 MOPR-Ex proposal to address the impact of state subsidies on the wholesale capacity market."

The Illinois Citizens Utility Board also issued a statement urging passage of the Clean Energy Jobs Act

FERC directed PJM to expand its MOPR to apply to any new or existing resource that receives, or is entitled to receive, a state subsidy, unless an exemption applies.

Per a news release FERC outlined the following exemptions from the expanded MOPR:

• Existing renewable resources that are participating in state renewable portfolio programs;

• Existing demand response, energy efficiency, and storage resources;

• Existing self-supply resources; and

• Competitive resources that do not receive state subsidies.

In a news release, FERC said that FERC provided additional guidance regarding exemptions:

• A new or existing resource that does not otherwise qualify for an exemption may seek a unit-specific exemption.

• The expanded MOPR only applies to state-subsidized resources. Resources with federal subsidies will not be subject to the MOPR.

As quoted in a news release, FERC defined subsidies as a direct or indirect payment, concession, rebate, subsidy, non-bypassable consumer charge, or other financial benefit that is (1) a result of any action, mandated process, or sponsored process of a state government, a political subdivision or agency of a state, or an electric cooperative formed pursuant to state law, and that (2) is derived from or connected to the procurement of (a) electricity or electric generation capacity sold at wholesale in interstate commerce, or (b) an attribute of the generation process for electricity or electric generation capacity sold at wholesale in interstate commerce, or (3) will support the construction, development, or operation of a new or existing capacity resource, or (4) could have the effect of allowing a resource to clear in any PJM capacity auction

FERC directed PJM to file a schedule to conduct the previously delayed base residual capacity auction for the 2022-2023 delivery year

FERC's MOPR order was adopted 2-1, with Commissioner Richard Glick dissenting

EL16-49-000 et al.

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