Commentary: FERC Doesn't Understand How Default Service Auctions Work (MOPR/Default Service Order)

FERC Baffled As To Why States Allow Suppliers To Meet POLR Obligations Without Specifying What Resources Will Be Used (Yes, Really)

Contrary To Spin, FERC Hasn't Found Any Current SOS Auctions To Be Exempt From MOPR; Glick Suggests Any Full Requirements SOS Auction With RPS Obligation May Trigger MOPR

FERC Does Not Allow Start Of PJM Capacity Market Pre-Auction Process, Auction Dates Still TBD

October 16, 2020

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Commentary by Paul Ring • ring@energychoicematters.com

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FERC has published its written order on rehearing and compliance with respect to revisions in PJM's minimum offer price rule (MOPR) in the capacity market, and FERC's discussion of the application of the MOPR to state default service auctions (or resources which may receive compensation under such auctions -- directly or indirectly) illustrates that FERC, at best, lacks a basic understanding of how default service auctions work, or else is intentionally mischaracterizing the auctions

In brief, FERC exposed its ignorance of how competitive retail markets work by noting, in a footnote discussing the MOPR and its application to default service auctions:

"It is not clear why a state would allow a supplier to meet its provider of last resort obligations without specifying what resources it will use to satisfy its supply obligations, but that question is beyond the scope of this proceeding." -- Federal Energy Regulatory Commission

[Note: context does not save FERC's rumination. The quote was directly footnoted to FERC's statement that, "...PJM and commenters argue, the suppliers chosen through the [state-directed default service] auction are not required to identify the resources they will use to satisfy their obligations." It's clear that FERC here means physical resources, and is not using the term more broadly to mean "source" (such as the spot market, auctions, etc.). In other words, FERC isn't saying that it would expect POLRs to be required to have plans in place to serve POLR load (e.g. reliance on the sport market or SOS auctions); FERC is expressly questioning why POLRs aren't required to show what resources they intend to use to supply load.]

It is also worth noting that in a 154 page order, this is the sole instance in which FERC uses the term, "provider of last resort." This publication is unsure what significance, if any, such decision to use the term POLR in this limited case has, but in every other instance of the discussion, FERC uses the term state-directed default service auctions (or a similar term), including the sentence to which the footnote including the POLR note is appended. Rather than being deliberate, this publication attributes the usage to the cursory analysis FERC devotes to retail market issues. As this publication's readers are aware, the distinction between POLR and default service provider is market dependent, but generally in states subject to FERC wholesale jurisdiction, the default service provider is currently also the POLR. In some states, however, the same "incumbent" LSE may charge different rates when serving in a POLR function versus a default service provider function, depending on customer class (e.g. "market" or monthly rates for returns to the incumbent LSE for larger customers), the nature of the return to the incumbent LSE, etc. Furthermore, if we take the strictest definition of POLR -- emphasis on "last resort", or "no-notice" backstop returns to an incumbent LSE -- it would be difficult if not impossible for the POLR to specifically identify the resources which it would intend to use for POLR load, given that, as a backstop service, POLR load is unknown in advance

In any event, turning to the substance of FERC's declaration, does FERC's left hand know what it's right hand is doing?

If FERC expects POLR (and default service) providers to have specific resources lined up to serve their POLR obligations, there would be absolutely no need for FERC's vaunted capacity market. POLR providers would be contracting with specific resources, ensuring those resources would have to "show up" whenever obligated to do so under the POLR contract. The very justification for the capacity market has been that retail load, due to retail restructuring, no longer has an obligation to pay for specific resources. That this fact is now apparently a surprise to FERC, and that FERC is confused that states allow POLR providers to serve load without making a showing of resources dedicated to serve such load, is an indictment of FERC's fitness as a regulator.

There is a further irony in FERC's statement, in that certain states have been seeking to procure and use specific resources to serve their distribution load (not necessarily POLR-only load), and that FERC is attempting to curb such procurements through the imposition of a minimum offer price rule in the PJM capacity market -- the subject of the instant proceeding.

But that is only the topping to the morass of FERC's order, as FERC addresses whether default service auctions (or resources linked thereto or compensated from in any way) should be subject to the MOPR. Short answer: FERC's order doesn't dispositively resolve the issue, leaving uncertainty to further permeate the market

As more fully discussed below, the body of FERC's order broadly states that it accepts PJM's proposal to exclude, "independently evaluated, non-discriminatory, fuel-neutral, competitive state-directed default service auctions," from the MOPR. But what this means is not clear.

As highlighted by Commissioner Richard Glick yesterday, a footnote to this finding renders the exemption meaningless, because of how FERC ostensibly interprets the condition of being, "fuel-neutral" and/or "non-discriminatory".

Specifically, FERC in a footnote cites language from a New Jersey Basic Generation Service (BGS) auction FAQ concerning compliance with the RPS by winning BGS suppliers, and particularly compliance with changes in the RPS

FERC's footnote states, "While this order accepts the exemption that PJM has proposed, it does not constitute a ruling that any particular state-directed default service auction actually meets these requirements. For example, we note that the New Jersey Basic Generation Service (BGS) auction appears to give guidance that conflicts with the proposition it is 'non-discriminatory' or 'fuel neutral.' Specifically, in the section on frequently asked questions (FAQs), FAQ-24 addresses the question whether Supplier Master Agreements (SMAs) submitted to the state BGS must comply with renewable portfolio requirements. See Frequently Asked Questions # 24, New Jersey Statewide Basic Generation Service Electricity Supply Auction, http://www.bgs-auction.com/bgs.faq.item.asp?faqId=1100 (last visited Sept. 26, 2020). FAQ-24 instructs that '[t]here is no exemption under the SMAs from future increases in RPS requirements.' Id. Further, while FAQ-24 acknowledges that 'in the past, the Legislature, when increasing solar requirements, exempted existing BGS Suppliers from the increase,' it continues by stating that 'there is no guarantee that future legislation, Board Orders, or other changes would continue to provide such an exemption for BGS Suppliers.' Id. This guidance appears to conflict with the notion that the BGS auctions are either non-discriminatory or fuel neutral and may indicate that such auctions may be 'for the purpose of supporting the entry . . . of preferred generation resources.'"

FERC's footnote is, frankly, bizarre, so it's unclear what FERC's ultimate decision with respect to default service auctions and the MOPR is. That, in and of itself, is a problem, as retail markets need certainty.

First, it's unclear why FERC chose to focus on a potential increase in an RPS carve-out solar tier and the SOS suppliers' compliance thereunder. It's unclear if the issue is: (1) specifically a change in RPS during an SOS contract term, (2) that a single-fuel RPS tier exists, or (3) FERC is merely citing this an an example showing that SOS suppliers must comply with any RPS requirements, and that any RPS compliance through SOS invites MOPR consideration (Glick suggests that FERC's intent is the latter). If it is the latter, FERC's chosen citation is odd -- certainly it would have been more clear to simply cite any of a dozen pro forma supplier master agreements which specifically state that the supplier must meet applicable RPS tiers (including a technology-specific carve-out), rather than an FAQ about a discrete situation, from which market participants must now decipher FERC's intent.

Moreover, FERC's prior rehearing order had established that certain existing renewable resources receiving support from state-mandated or state-sponsored RPS programs are exempt from the MOPR.

Specifically, FERC's December 2019 Order, as modified by a Rehearing Order, directed PJM to include an RPS Exemption from the MOPR for renewable resources receiving support from state-mandated or state-sponsored RPS programs that fulfill at least one of these criteria: (1) have successfully cleared an annual or incremental capacity auction prior to December 19, 2019; (2) have an executed interconnection service agreement, interim interconnection service agreement, interconnection construction service agreement, or wholesale market participant agreement on or before December 19, 2019; or (3) have an unexecuted interconnection service agreement, interim interconnection service agreement, interconnection construction service agreement, or wholesale market participant agreement filed by PJM for the resource with the Commission on or before December 19, 2019. The Rehearing Order clarified that the resource eligible for the RPS Exemption include all existing resources that were included in an RPS program as of the date of the December 2019 Order.

Note that this RPS exemption seemingly applies to resources -- in any form of RPS tier -- that meet the above conditions, including single-fuel tiers, and there are no qualifiers about single-fuel tiers (indeed, any RPS is inherently not fuel neutral insofar as not all fuels qualify for the RPS, although some RPS tiers may allow multiple fuels to qualify, such as wind, solar, hydro, etc).

Furthermore, PJM's proposed SOS auction MOPR exemption, which FERC said it accepted (discussed below), specifically does not consider compliance with RPS as rendering the auction as being not fuel neutral (with PJM further noting that, regardless of the SOS auction, an RPS resource may or may not be subject to MOPR under FERC's RPS exemption discussed above).

Indeed, PJM's proposal specifically contrasts a full requirements auction in which suppliers must comply with RPS, with a separate carve-out SOS auction specifically for the procurement of renewable generation resources (such as the D.C. PSC's 5% SOS load carve-out for renewable generation contracts), with PJM stating that the latter carve-out design would not qualify for the MOPR exemption (as it would not be fuel neutral).

If FERC truly accepted PJM's proposed default service auction MOPR exemption proposal, any discussion of the BGS RPS issue would ostensibly be rendered moot, since the PJM MOPR exemption already addresses RPS. This publication can think of only two possibilities: (1) FERC doesn't understand the situation that the BGS FAQ was addressing, or (2) notwithstanding language in the FERC order accepting PJM's proposed default service auction MOPR exemption which allows full requirements auctions to procure RPS attributes without triggering MOPR, FERC envisions ruling that procurement of RPS attributes in a full requirements auction would trigger MOPR (Glick speculates the latter to be the case as noted below)

Moreover, as discussed further below, a full requirements SOS product does not provide any additional 'subsidy' to an RPS resource beyond what the resource may already receive under its status as an RPS eligible resource -- such RPS revenue stream exists regardless of whether an SOS provider must procure the RPS attribute, or another entity must do so.

As such, an SOS auction requiring suppliers to meet RPS obligations would not seem to implicate the MOPR -- particularly if the RPS obligations are not a "new resource" RPS tier (under existing RPS programs, even though some RPS resources will be subject to MOPR, many will not be, and SOS suppliers could meet their RPS obligations solely from exempt RPS resources)

So then what concerns FERC about the BGS auction FAQ?

While this publication can only speculate, it may apparently be the reference to the solar RPS and/or the increased obligation

But if that is FERC's concern, it has misconstrued how default service auctions and the RPS (to date) have worked

First, other than reciting stakeholder comments that the Commission never internalizes in its own findings, FERC never addresses the fact that SOS auctions are, generally, for all requirements (full requirements) service, and the assumption of an obligation to serve load. States (nor their utilities) do not procure energy, capacity, etc. in SOS auctions; they award the right to serve tranches of load, and all the attendant obligations, at an auction-based price. As noted in PECO's SMA, "Default Suppliers for a Class will serve the Company’s Default Load for that Class. Default Service for one of these Classes is the Company’s full requirements service including, without limitation, energy, capacity, transmission (excluding Network Integration Transmission Service), ancillary services, AECs for compliance with the AEPS Act, transmission and distribution losses, congestion management costs, and such other services or products that are required to serve the specified percentage of Default Load for that Class (except for distribution service)." [emphasis added]. "A Default Supplier for a product will be paid a supplier-specific price for each MWh of electric load," PECO's SMA further notes (i.e., suppliers are not paid for energy, capacity, etc., they are paid for serving load).

As such, competitive full requirements default service procurements are inherently fuel neutral and non-discriminatory. As long as a supplier can provide the full requirements product, the supplier may compete to serve the tranche.

Given FERC's finding with respect to RPS resources discussed above, the inclusion of RPS compliance in the full requirements product should, but-for FERC's footnote, not jeopardize the MOPR exemption for SOS auctions (except in the case of a hypothetical RPS limited to new resources, which would not be the case for any existing SOS auctions)

Moreover, even putting aside the RPS exemption, the fact that a wholesale SOS auction requires the winner to comply with RPS does not violate the fuel diversity or non-discriminatory provisions of the MOPR SOS exemption. As FERC should know, compliance for most states' RPS is done through unbundled RECs (or even an alternative compliance payment). The wholesale SOS auction does not procure, or even support, any fuel-specific resource in assigning an RPS obligation to winning bidders. Any resource may compete to serve the SOS auction load, and all winning bidders would have the same RPS obligation (which they would meet through their own strategies, which may not even include the purchase of RECs if they elect the ACP). The SOS auction, by including RPS in the full requirement product, does not favor any resource type nor does it discriminate against any suppliers.

FERC may be seeking to stress that cloaking the intent to procure new build resources and/or resources of a specific fuel type through a new RPS-like mechanism cannot survive the MOPR exemption just because the procurement is conducted under the guide of an SOS auction. That may have some internal logic with FERC's approach to the MOPR -- but if that is the intent, the citation to New Jersey is not on point in that respect. Moreover, the issue would seemingly be better addressed through the RPS MOPR exemption, rather than throwing uncertainty into the default service MOPR exemption.

Indeed, the New Jersey FAQ addresses an example that is the opposite of FERC's concerns! FERC is ostensibly concerned with SOS auctions that are conducted to procure a discriminatory product such as from a specific fuel type, or a new resource only

But the New Jersey BGS FAQ addresses a situation in which the RPS changes during the SOS contract term (currently three years for the fixed price auction).

All the FAQ states is that BGS suppliers are not exempted from any change in the RPS, such as future increases, and therefore must comply with any increases (with no guarantee of legislation to create an exemption).

Does FERC understand what this means?

It means that if the RPS increases, such as if the solar RPS increases, wholesale BGS suppliers must meet those new obligations. That's it. In such a case, prices for default service had already been set in the prior, forward BGS auction. And these prices are fixed (whether the entire price is fixed for small customers, or the adder which covers, among other things, RPS costs, is fixed for hourly customers). So the BGS wholesale suppliers must comply with an increased RPS without any change in their compensation. There's no additional procurement for a specific fuel type. There's no new subsidy to the solar resources from the BGS suppliers. The wholesale suppliers actually lose money as a result of an increased RPS, since they likely did not include such new costs in their previously constructed fixed price bids.

This publication is at a loss to understand how making BGS suppliers pay for any increase in RPS costs, without granting them additional compensation (higher rates), conflicts with the notion that the BGS auctions are non-discriminatory and fuel neutral, nor how it may indicate that such auctions may be, "for the purpose of supporting the entry ... of preferred generation resources," as suggested by FERC, or at least how such case is any different from the PJM proposal allowing RPS compliance procurement to occur under the SOS MOPR exemption, which FERC said that it accepted. If anything, the example proves that the BGS auctions are non-discriminatory and fuel neutral, as the state is relying on existing BGS suppliers to meet a higher RPS target, rather than conducting a separate, fuel-specific procurement of new renewable generation to serve default service customers and meet the higher RPS obligation.

Further supporting Glick's concern that the footnote will serve to render any SOS auctions procuring RPS compliance attributes as being subject to the MOPR, is that the footnote is not seemingly meant to address any type of SOS "carve-out" procurement for renewable generation, which would not be fuel neutral (unless, again, FERC simply misunderstands the FAQ). This publication reaches this conclusion because FERC is well-aware of what an SOS carve-out procurement limited to renewable generation contracts looks like, as FERC specifically discusses in its order the D.C. PSC's carve-out for renewable PPAs for 5% of SOS load. Indeed, FERC states that so long as the carve-out auction is truly separate, the existence of such carve-out renewable auction would not impact a decision regarding whether a separately conducted SOS auction, which is fuel neutral and non-discriminatory, is subject to the MOPR. As such, citing to the BGS full requirements FAQ should not be seen as addressing a separate carve-out, but rather that it does create uncertainty for full requirements auctions and whether those with RPS compliance are truly fuel neutral and non-discriminatory in FERC"s eyes

FERC's inclusion of the footnote is simply baffling. Whatever FERC's intent, it's clear that the agency tasked with regulating competitive wholesale markets has no idea how competitive retail markets work and how load is procured and served in such markets (note, this wouldn't be the first time such an infirmity was apparent, dating back to FERC's assignment of SECA obligations).

Perhaps it is this publication which is dense, but this publication sees no logical nexus between an increase in the New Jersey solar RPS, and any provision related to the MOPR exemption for default service auctions.

It's unclear how the reference to the New Jersey BGS FAQ came into FERC's order; specifically, was it something raised by a stakeholder in comments, or was it something FERC found on its own accord. This publication suspects the latter, and if so, it perfectly illustrates the danger of relying on non-contested "evidence" in proceedings. While this publication stresses that FERC's instant proceeding was not a trial-type evidentiary proceeding (hence the quote marks around "evidence"), the principle is the same. As was the case when FERC, generally on its own, introduced the concept of subjecting SOS auctions to the MOPR in the first place (through an overly broad definition in December 2019 and then explicitly in April 2020), the specific citation to the New Jersey BGS FAQ did not have the benefit of any stakeholder analysis or rebuttal to address the apparent misunderstanding of the FAQ and auction process by FERC.

In any case, FERC, somehow, has injected more uncertainty with respect to the application of the MOPR to SOS auctions

While, under this publication's reasoning above, the conclusion should be that a full requirements SOS product that includes an RPS obligation should not lose the MOPR exemption, FERC's footnote is so incomprehensible that no conclusion can safely be reached.

As previously reported, Commissioner Richard Glick warned of a broad interpretation of the footnote, stating that the footnote, "suggests that the default service programs that take into account state RPS targets will indeed be subject to the MOPR.

In a dissent, Glick was equally confused by the intent of the footnote.

"In a bizarre footnote, the Commission goes out of its way to suggest that New Jersey’s default service auction—the Basic Generation Service or BGS auction— would constitute a State Subsidy based on the possibility that the auction winners would have to comply with the requirements of the state’s renewable portfolio standard. It is hard to know exactly what the Commission’s cursory review of BGS Auction FAQ sheets might mean in future proceedings or how the Commission will apply that discussion to other states’ default service auctions," Glick said

"Nevertheless, the Commission’s discussion of the BGS auction provides every reason to believe that the grant of rehearing on state default service auctions will end up being almost meaningless. Several other PJM states’ descriptions of their default service auctions also mention renewable portfolio standards or similar programs applying to entities that provide default service. Taken seriously, the Commission’s discussion of the BGS auction would seem to suggest that payments from those other states’ auctions would also trigger the MOPR. That would severely, if not entirely, undercut any benefits from today’s limited grant of rehearing," Glick said

Glick ultimately concludes that, "Today’s order ... explain[s] that the Commission is not concerned with default service auctions per se -- even though it concluded that they fall neatly within the Commission’s overbroad definition of State Subsidy -- but only with the possibility that a state might use a default service auction to further its public policy goals. Today’s order indicates that a state default service auction will trigger the MOPR only if it could conceivably be construed as an exercise of the state’s reserved authority over generation facilities. And, as if to underscore that point, the Commission clarifies that states may impose certain restrictions that the majority deems 'reasonable' on default service auctions without triggering the MOPR, as long those restrictions do not appear to be attempts to shape the resource mix."

"The upshot of all this is that the only way a state’s default service auction can escape the MOPR is if the state either has no renewable portfolio standards or if the state exempts the default service providers from complying with those standards, which would seem to give those providers a preference of a different sort. Why that is a desirable outcome, much less something that should concern this Commission, is never explained. Instead, the discussion of default service only reinforces the extent to which this proceeding is part of a concerted campaign to stamp out state efforts to shape the resource mix," Glick said

Mocking the order's statement which questions why states wouldn't require POLRs to identify the resources they intend to use to serve POLR obligations (noted above), Glick writes, "I, for one, suspect that the states know a great deal more about how to regulate retail service than this Commission."

"[P]erhaps the most egregious shortcoming in today’s order is the Commission’s failure to wrestle with the eventual fall out from subjecting default service auctions to the MOPR -- a result that seems likely, if not inevitable, given its suggestions about the BGS auction. Numerous parties detailed the litany of problems that having default service auctions trigger the MOPR would cause. Those problems include everything from the fact that default service auctions typically take place after the relevant Base Residual Auction (BRA), making it impossible to know at the time of that BRA which resources are 'subsidized,' to the near impossibility of tracing payments from a default service auction to individual generators. Today’s order does not discuss, much less resolve, those issues even as it indicates that the MOPR will apply to at least some states’ default service auctions. True to form in this proceeding, the Commission is again kicking the most important can down the road, further undermining what is left of its once-well-deserved reputation for the sort of careful, detailed analysis needed to make modern electricity markets work," Glick said

Apart from the footnote, FERC attempts to craft an order which provides that SOS auctions, "that qualify to be excluded from the definition of State Subsidy under PJM’s proposal," won't be subject to the MOPR, though Glick says such guidance has been undone by the footnote

FERC's order states, "Based on the record in this proceeding, we find that competitive and nondiscriminatory state-directed default service auctions -- i.e., those state-directed default service auctions that qualify to be excluded from the definition of State Subsidy under PJM’s proposal -- do not require mitigation at this time, as explained below. We therefore accept PJM’s proposal in its second compliance filing to exclude independently evaluated, non-discriminatory, fuel-neutral, competitive state-directed default service auctions from application of the expanded MOPR."

"We agree with PJM that state-directed default service auctions that qualify to be excluded from the definition of State Subsidy under PJM’s proposal (i.e., state-directed default service auctions that are non-discriminatory, competitive, resource neutral, and do not require a contract with a specific resource or type of resource to meet the obligation) do not provide State Subsidies to particular resource or technology types and therefore cannot be used to 'support the entry or continued operation of preferred generation resources that may not otherwise be able to succeed in a competitive wholesale capacity market.' Such auctions do not give suppliers chosen through the auction the ability to offer resources into the market below cost, because, as PJM and commenters argue, the suppliers chosen through the auction are not required to identify the resources they will use to satisfy their obligations," FERC said

"We also agree with commenters that the link between a state-directed default service auction that would qualify for exclusion from the definition of State Subsidy under PJM’s proposal and the resource ultimately receiving any subsequent payment is too attenuated to constitute a State Subsidy. Where a state-directed default service auction does not require auction bids to be linked to a specific resource, because any resource could end up serving load through the PJM markets to satisfy default load obligations, the payment to such resources is too attenuated and indirect. As stated in the December 2019 Order, the State Subsidy definition is not intended to cover every form of state financial assistance that might indirectly affect Commission-jurisdictional rates or transactions; rather, the concern is with those forms of State Subsidies that are most nearly directed at or tethered to new entry or continued operation of generating capacity in the PJM capacity market," FERC said

FERC's order states that it accepts the default service auction exemption that PJM had proposed

PJM had proposed that transactions or obligations associated with a state-directed default service auction where the underlying state auction is competitive and fuel-neutral will be excluded from the State Subsidy definition (and thus excluded from the MOPR). PJM proposed that to qualify, state-directed default service auctions must be subject to the oversight of a consultant or manager, independent of the market participants, who certifies that the auction was conducted through a non-discriminatory competitive bidding process.

Further, PJM proposed to define a competitive bidding process as auctions that:

(i) have no conditions based on the ownership (except supplier diversity requirements or limits), location (except to meet PJM deliverability requirements), affiliation, fuel type, technology, or emissions of any resources or supply (except state-mandated renewable portfolio standards for which Capacity Resources are separately subject to the minimum offer price rule or eligible for an exemption);

(ii) result in contracts between an Entity Providing Supply Services to Default Retail Service Provider and the electric distribution company for a retail default generation supply product and none of those contracts require that the retail obligation be sourced from any specific Capacity Resource or resource type as set forth in subsection (i) above; and

(iii) establish market-based compensation for a retail default generation supply product that retail customers can avoid paying for by obtaining supply from a competitive retail supplier of their choice

FERC stressed that, "While this order accepts the exemption that PJM has proposed, it does not constitute a ruling that any particular state-directed default service auction actually meets these requirements."

FERC accepted PJM's definition of state subsidy (largely tracking a prior FERC order), which defines state subsidy as, "a direct or indirect payment, concession, rebate, subsidy, nonbypassable consumer charge, or other financial benefit that is a result of any action, mandated process, or sponsored process of a state government, political subdivision or agency of a state or an electric cooperatives formed pursuant to state law, and that (1) 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 (2) will support the construction, development, or operation of new or existing Capacity Resource; or (3) could have the effect of allowing a unit to clear in any PJM capacity auction."

Auction Timing

In terms of timing for the resumption of the PJM capacity auctions, as reported yesterday, FERC noted that some pre-auction activities may not yet commence due to other ongoing FERC proceedings, and therefore FERC did not approve PJM's proposal to start the pre-auction process contingent on the instant MOPR order

"PJM states that it expects to begin the pre-auction process two weeks after the Commission issues this order, with the next annual auction to be conducted 6.5 months after this order. However, the reserves proceeding pending before the Commission influences the default offer price floors and therefore, some pre-auction activities cannot be conducted until a final order in that proceeding is issued. Specifically, and as noted above, the Commission has found PJM’s existing E&AS Offset methodology unjust and unreasonable and directed PJM to file new methodologies on compliance, including proposing an implementation schedule that will allow the new E&AS Offsets to be effective for the 2019 BRA. That compliance filing is pending before the Commission. The default offer price floors, and therefore the auction date, cannot be established until the Commission has issued an order on PJM’s compliance filing in the reserves proceeding. Therefore, we grant PJM’s requested waiver, but not PJM’s proposal to start the pre-auction process contingent on this order," FERC said

While FERC did not establish dates for the start of the auction process, or the auctions themselves, FERC generally accepted PJM's proposal for a condensed auction schedule once the process starts (e.g., how many days before the auction date certain events occur).

"[W]e find that PJM’s proposal appropriately balances the need for stakeholder and investor certainty against the need to ensure that all market participants can prepare for the auction rules that will be in effect for the next auction, and PJM adequately justified the proposed auction timeline ... We similarly accept PJM’s proposal to slightly shorten the auction schedules for the following BRAs, relative to the 2019 BRA as PJM has appropriately balanced implementing new Tariff provisions and the importance of running an auction as soon as possible, as well as putting forth a schedule to ensure the orderly resumption of BRAs," FERC said

However, FERC did reject PJM’s proposal to reduce the number of days that planning parameters must be posted from 100 to 60 days prior to the impacted BRAs, a change that would have re-ordered the deadlines to allow PJM to post the planning parameters after certain other deadlines have passed

FERC also noted that, "The Commission previously found the auction should be delayed until the Commission establishes a replacement rate, and PJM’s Tariff changes implementing that rate are made effective by this order. Given PJM’s proposed schedule and the Commission’s agreement thereof, there is insufficient time to run the 2019 BRA in 2020, as suggested by some commenters," FERC said

Docket Nos. EL16-49-003 et al.

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