By Christen Smith

VALLEY FORGE, Pa. — Exelon said Wednesday that a report from the PJM Independent Market Monitor uses faulty assumptions and anti-subsidy rhetoric to exert undue policy influence and cast a negative light on the fixed resource requirement (FRR) alternative some members may pursue in the face of an expanded minimum offer price rule (MOPR).

The Monitor himself responded to concerns at a Market Implementation Committee meeting when he presented his analysis of how capacity prices would change if Commonwealth Edison’s zone opted for FRR instead of participating in PJM’s capacity auctions.

ComEd, a subsidiary of Exelon, supplies more than 4 million customers across northern Illinois. The state is one of several in PJM that could consider the FRR construct to shield its portfolio of subsidized resources from the new MOPR rules. Exelon’s Quad Cities plant, one of five nuclear facilities in the state, began receiving zero-emission credits (ZECs) in 2017 — the very type of subsidy that FERC said in December could suppress capacity prices if not subjected to the MOPR. (See FERC Extends PJM MOPR to State Subsidies.)

Exelon itself has been a vocal proponent of state legislation that would value resources based on emissions attributes, implement rate caps to better protect consumers and support expanding Illinois’ ZEC program to the four other nuclear plants. Exelon’s merchant generation subsidiary owns all five facilities.

The Monitor’s report “really isn’t a credible or useful tool for understanding the value of an FRR for Illinois customers,” said Jason Barker, director of wholesale development for Exelon. “It’s telling that no one asked the IMM to develop this report.”

Monitor Joe Bowring noted that there had not been an explicit request for the report. The Monitor “routinely creates reports in order to provide facts and objective analysis to the market participants so that they can make reasonable decisions,” he said. “We plan to do additional analyses of the impacts of the MOPR order, including additional FRR analyses.”

Bowring’s report concludes that net load charges would increase 23.6% if ComEd procured all of its capacity obligations outside of the Base Residual Auction at the same rate as the offer cap — $254.40/MW-day — assigned to the zone in the 2021/22 delivery year.

In a second scenario, the Monitor calculated that ComEd’s load charges would decrease just 5% if the price negotiated for its capacity were equal to the zone’s 2021/22 BRA clearing price of $195.55/MW-day. In the report, Bowring said that the first scenario seemed more reasonable, “given Exelon’s assertions that the current total revenue from energy, ancillary and capacity markets is not adequate for its nuclear plants.”

The report also found that carving ComEd’s load delivery area out of the auctions would reduce capacity payments across the rest of the RTO, regardless of the prices charged in the FRR area.

Barker pushed back against the report’s methodology and argued that it ignored the political situation in Illinois, as well FRR rules that don’t dictate a single price be paid to resources with “different attributes.”

“These faulty assumptions and repeated anti-ZEC rhetoric indicate that the purpose of the report is to cast a negative light on the development of a ComEd FRR and its impact on customers, rather than to objectively and independently analyze potential policy outcomes,” Barker said. “The report confuses debate instead of advancing it.”

‘Reasonable Range’ Sought

In response to Exelon’s assertion that the specifics of the state’s varied FRR legislative packages had not been included in the report, Bowring said, “We very consciously and explicitly tried not to incorporate the details of the various forms of draft legislation.

“We were not trying to tell Illinois what to do,” he said. “Who knows what may happen? What we did was very simple. We tried to define a reasonable range of the impacts of the FRR option. We think we did that in a clear and non-rhetorical way.”

Bowring reiterated that the report was meant to educate and that he was open to doing additional sensitivity analyses for Exelon or any other market participant.

“Our primary point about the FRR option is that once you’ve chosen to do that, you are giving some degree of market power to the owners of that capacity,” he said. “The state will have to negotiate with one or two generators to set the compensation for the generation that the state requires for reliability.

“We are not saying we know what the exact compensation would be; we are just showing what the impact of taking ComEd out of the auction would be for a range of prices,” Bowring added. “Ultimately the price paid would be a function of the price negotiated between the owners and the state entity. We think market power is an issue in the creation of any FRR.”