PJM Discusses Interpretation Of FERC MOPR Order & Impact On State Default Service Auctions

During a Markets & Reliability Committee meeting, PJM staff provided an update on implementation of FERC's recent Minimum Offer Price Rule order, and, in particular, its applicability to state default service auctions for electricity supply

As previously reported by EnergyChoiceMatters.com, FERC's order contained a cryptic footnote referencing a situation in which BGS wholesale suppliers in New Jersey must comply with any changes in the state RPS mandate for their existing contracts. FERC said this treatment, "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,'" and thus the footnote suggests that the BGS auction would be subject to the MOPR

FERC's failure to grasp the basics of default service auctions, as revealed by the MOPR order and this footnote, were previously addressed in our prior commentary

In discussing the MOPR order's treatment of state default procurement auctions that have an RPS component, PJM Staff interprets the footnote as, "Caution[ing] NJ BGS (and other states) regarding state default auction rules changing and that new renewable resources w/ RPS do not escape MOPR via this exclusion."

While previously this publication speculated that such a scenario (such as requiring SOS auctions to meet nuclear-only ZEC obligations as an end run around MOPR through the SOS exemption, for example) may have been FERC's underlying concern, FERC's citation to a wholly inapplicable situation concerning a legitimate change in RPS did not accomplish FERC's intent

The footnote does not communicate the interpretation proffered by PJM in any comprehensible manner, nor does the specific cite to a change in RPS compliance obligations for existing BGS contracts due to a change in law (and which does not address any new procurements, let alone any fuel-specific procurements) make any sense. FERC would have been better served with discussing a hypothetical, rather than trying to shoe-horn its concern into a prior legitimate activity

In any case, PJM said that it would provide further guidance to stakeholders on how it will treat SOS auction in the upcoming base residual auctions

PJM also confirmed auction timing for resumption of the base residual auctions, or lack thereof.

As previously reported, FERC indicated that upcoming Base Residual Auction dates cannot be set until an order on the pending Energy & Ancillary Services compliance filing in another proceeding is resolved.

PJM said in a presentation that, "Since associated pre-auction activities are pegged off of the BRA date, no deadlines for the pre-auction activities may be set at this time."

"PJM is evaluating which pre-auction activities may begin on a voluntary basis," PJM further said

PJM will discuss any pre-auction activities that may begin on a voluntary basis at upcoming MIC meetings