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New Jersey BPU Petitions FERC To "Vacate" Footnote Related to Default Service In MOPR Order

November 17, 2020

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Copyright 2010-20
Reporting by Paul Ring •

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The New Jersey BPU has petitioned FERC to vacate a footnote in FERC's recent order on the Minimum Offer Price Rule which discussed the potential exemption (or lack thereof) of the New Jersey's BGS default service auction from the MOPR, as the BPU called the footnote, "non-binding dicta," that re-introduces uncertainty regarding application of the MOPR to default service auctions

The BPU sought rehearing to the extent FERC does not vacate the footnote

"[T]he Board is concerned that stray comments in footnote 134 of the Order could create uncertainty for market participants interested in supplying default service to New Jersey customers, and may lead to suppliers including an additional risk premium in their bids. To avoid this inadvertent harm to market participants and consumers, the Board seeks clarification that the footnote was dicta and requests that it be vacated. If neither of these requests are granted, then, in the alternative, the Board respectfully seeks rehearing," the BPU said

The footnote was discussed at length by in our prior story here

In brief, while the body of the order explicitly accepted PJM's proposed treatment of SOS auctions (exempting them from MOPR if they met certain competitive and non-discriminatory requirements discussed in our story linked above), the footnote stated that, "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.'"

The footnote then quoted language regarding BGS supplier compliance in the case of a change in RPS law, with the footnote stating, "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.'"

The BPU said that, "The Order unconditionally accepted the language PJM proposed in its Second Compliance Filing and expressly granted rehearing to hold that qualifying state default service auctions do not meet the definition of State Subsidy."

Citing the footnote, the BPU said, "In discussing New Jersey’s retail programs, that dicta unnecessarily threatens to introduce back into the market the very uncertainty the Commission resolved by accepting PJM’s proposed Tariff language."

"Because the Commission already found that PJM's compliance filing conformed to its earlier directive, the Board seeks clarification that nothing in footnote 134 should be read to the contrary. Once this clarification has been made, it naturally follows that the Commission also clarify that it will allow PJM to follow the Tariff-delineated process to determine when resources are subject to mitigation, as opposed to opining on specific state default auctions in its Order accepting PJM’s Tariff language. Therefore, the Board respectfully requests that the Commission clarify that footnote 134 is mere dicta and to vacate it. As the Commission has held previously, it is appropriate to vacate dicta where it speculates about a matter the agency does not have to decide to resolve the issue at hand," the BPU said

More specifically, with respect to SOS auction and renewables, the BPU noted (as did in our analysis) that the tariff language approved by FERC's Order explicitly states that the MOPR will not apply to any default service auction that, in relevant part, has, "no conditions based on . . . 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)."

The BPU noted that, "In its Second Compliance Filing, PJM explained that any default service auction with 'targeted procurement requirements for certain' resources would not be deemed resource neutral, but exogenous requirements to meet RPS standards would be exempt because 'the December 19 Order already contemplates treatment of RPS' programs."

In other words, "The approved PJM Tariff language found that resources separately subject to the MOPR through an independent RPS would not trigger the MOPR through a default service auction even if the suppliers in the default service auction must meet the RPS," the BPU noted

"While Commissioner Glick expressed concern that footnote 134 could apply to default service auctions unless a state 'has no renewable portfolio standards,' that would require the footnote to effectively undue the Commission’s approval of the tariff language; an outcome that is hardly supported by the other dozen paragraphs discussing the issue and the plain language of the approved tariff," the BPU said

In requesting rehearing to the extent necessary, the BPU succinctly noted that, "the Order accepted PJM's language allowing RPS requirements to be included in a non-discriminatory default service auction, so long as the individual units would themselves be subject to the MOPR," and that, "Footnote 134 stands in stark contrast to the Commission’s acceptance of the carefully-crafted process proposed by PJM in the Second Compliance Filing and accepted by the Commission."

In a separately filed request for rehearing several state consumer advocates stated, "The October 15 Order implies, in footnote 134, that a default-service auction cannot be considered fuel-neutral (and thus outside the definition of State Subsidy) if the auction requires winning bidders to comply with a state’s RPS. That implication rests on a misunderstanding of the nature of such auction requirements and how they relate to Capacity Resource participation in a BRA, and should be corrected on rehearing."

The consumer advocates noted, (as did in our analysis) that, "a default service supplier may buy and re-sell capacity and energy from any resource, potentially including fossil-fueled resources, to meet its supply obligation. In addition, default-service suppliers may be required to comply with a state’s RPS for the tranche of load the supplier serves. A supplier may fulfill its RPS obligation by purchasing RECs, including from non-PJM capacity resources, or by making ACPs. And, the RPS obligation notwithstanding, the default service supplier can utilize any resource to meet 'its provider of last resort obligations.'"

"Footnote 134 would have PJM treat as a State Subsidy the revenue that a default-service supplier pays to a PJM capacity resource for its capacity and energy merely because the state also requires the supplier to separately comply with its RPS and to buy other products to support renewable energy. Such a rule would throw state default service auctions into chaos, shrinking supply and spiking prices. And doing so would in no way help to achieve the ostensible purposes of a MOPR: to mitigate the actions of a resource that has the incentive and ability to exercise buyer-side market power," the consumer advocates said

Docket EL16-49 et al.

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