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New Jersey BPU Opens Resource Adequacy Proceeding To Consider Leaving PJM Capacity Market

Seeks Comments On Changes To Default Service; State Power Authority, Portfolio Manager

March 27, 2020

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Copyright 2010-20
Reporting by Paul Ring •

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The New Jersey Board of Public Utilities formally initiated a proceeding, "to examine whether New Jersey can achieve its long-term clean energy and environmental objectives under the current resource adequacy procurement paradigm and, if not, recommend how best to meet New Jersey’s resource adequacy needs in a manner consistent with the State’s clean energy and environmental objectives, while considering costs to utility customers."

"The investigation will evaluate alternatives to the State participating in the regional capacity market administered by PJM Interconnection (PJM) as the means of ensuring adequate electric generation resources for New Jersey ratepayers," the BPU said in a news release

The investigation follows FERC's recent order on the minimum offer price rule in the PJM capacity market

The BPU noted that the state's energy master plan discusses a variety of options for the Board’s consideration. For one, the 2019 EMP discusses the possibility of "leaving the PJM capacity market," through a Fixed Resource Requirement (FRR). The 2019 EMP also discusses the possibility of the State requiring load serving entities to procure a higher percentage of clean energy through a Clean Energy Standard. The 2019 EMP also discusses the potential for other clean energy markets or mechanisms to competitively source carbon-free energy and ensure appropriate decision-making for resource adequacy. Ultimately, the 2019 EMP envisions a proceeding that investigates all possible options'.

Board Staff, which was assigned to conduct an investigation of the issues, commenced the process with a series of questions including:

1. Can New Jersey utilize the Fixed Resource Requirement (FRR) alternative to satisfy the State’s resource adequacy needs?

2. Can New Jersey utilize the FRR to accelerate achievement of New Jersey clean energy goals?

3. Can modifications to NJBPU’s Basic Generation Service construct facilitate resource adequacy procurements aligned with the Energy Master Plan clean energy objectives?

4. Can other mechanisms, such as a Clean Energy Standard or Clean Energy Market, facilitate achievement of New Jersey’s clean energy goals?

As subparts to these questions, Staff asked for comment on several issues directly related to the retail market, including a "state power authority" (which would conduct or otherwise manage or direct procurements), a portfolio management approach to default service, and changes to the BGS default service

Staff asked for comment on the pros and cons of a State Power Authority (SPA), "looking at examples from across the country, including discussion of any legislative and regulatory limitations and potential amendments necessary to pursue an SPA."

With respect to the Basic Generation Service Construct, Staff asked for comment on a portfolio manager approach as a means of providing for a wider range of resource options

Staff further sought comment on potential changes to the BGS competitive processes to facilitate procurement of resources that meet the State’s long-term clean energy objectives, such as:

(i) Clean Energy Standard, utilizing certificates to demonstrate compliance.

(ii) Obligations on BGS Bidders to procure clean capacity resources, potentially with locational requirements.

(iii) Billing capacity obligations to BGS Bidders from a state FRR portfolio.

(iv) Other potential BGS construct modifications to meet the state’s resource adequacy needs and advancing the state’s clean energy agenda

With respect to the FRR and any BGS changes, Staff asked for comment on any affiliate relations or market power concerns related to implementation

Staff will issue a report on its findings

The BPU in a news release said that, "If the investigation determines that the State cannot achieve its goals through the existing paradigm, then NJBPU Staff will recommend how best to meet the State’s energy needs and emissions-reductions goals in the future. The Energy Master Plan acknowledges that, among many options, Staff’s recommendation could include New Jersey leaving the PJM capacity market to ensure that the State can realize a clean energy future at reasonable prices. At the conclusion of the investigation, which is currently anticipated to occur in the third quarter of 2020, the Board will consider Staff’s recommendations and will order the appropriate action consistent with the Energy Master Plan."

Docket No. EO20030203

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