By Michael Brooks
WASHINGTON — FERC Commissioner Richard Glick told state energy officials that he thinks the commission needs to holistically revisit the concept of mandatory capacity markets or risk putting “in peril the future of RTOs in general.”
Speaking at the National Association of State Energy Officials’ Energy Policy Outlook Conference and Innovation Summit at the Fairmont Washington hotel Wednesday, Glick said he was “a big believer that regional markets can provide a lot of benefits,” such as efficient dispatch of generation and integrating renewable energy.
But he said “certain recent orders of the commission” are threatening to make state renewable or clean energy standards “ineffective” and lead states to reevaluate whether they want their utilities participating in the markets.
“I think the commission needs to think twice before we go down that path,” Glick said. “FERC needs to accommodate state policies, not override them.”
Glick was referring to FERC’s December order expanding PJM’s minimum offer price rule (MOPR) to include all new state-subsidized resources, on which he strongly dissented. Because of the commission’s rules on ex parte communication, Glick could not discuss the specifics of the case, which is still open. (See PJM MOPR Rehearing Requests Pour into FERC.)
Instead, he criticized MOPRs in general and lamented the fact that PJM, along with ISO-NE and NYISO, “come to FERC constantly with proposals to change the way we deal with various issues in the capacity markets.”
“I used to think that competition was really about competition; that if there’s an auction, everyone bids in and the most cost-effective generation resources … get chosen and they go along their merry way and that sets the price for everybody,” Glick said. “That’s not actually the way it works at all. We’re telling almost every entity bidding in what they can bid in at, whether it’s because of state policies or because of market power or because of the various curves. … We’re micromanaging every single aspect of these capacity markets, so nobody’s bidding in what they want to bid in at. This makes managing competition in health care look like a small thing.”
“It’s just really frustrating, and I’m not entirely sure we’re achieving anything, because all we’re doing is bringing everything to FERC and litigating every last issue.”
Glick’s rhetoric echoed the criticism that former Chair Norman Bay lobbed at MOPRs three years ago. (See Bay Blasts MOPR on Way Out the Door.) He said he “was still struggling” with what exactly the commission should do but that he would “look at what’s going on in California, maybe MISO [or] even Texas, which doesn’t have a capacity market at all.”
It’s not just states pulling out of the RTOs that Glick is concerned about.
“I think we’re just going to create more and more litigation,” he said.
The more energy prices fall, the more that companies will look to make up for it in the capacity markets and petition FERC to further change the rules, he said. “That’s not what people intended when they started talking about competitive energy markets 20, 30, 40 years ago.”
Mary Beth Tung, director of the Maryland Energy Administration, asked Glick what difficulties he could foresee in states pulling out of RTOs.
Glick said it would be difficult for deregulated states to “put Humpty Dumpty back together again.” The states would have to reassess whether they want to return to the vertically integrated model, he said. Tung, who in introducing Glick said that Maryland was watching the MOPR proceeding closely, acknowledged “that is definitely an issue we’ve been having discussions about as well.”
Speaking to reporters after he answered several audience questions, Glick said he thinks “there are several items or errors” in the MOPR order “that I think the court could easily use to overturn that decision.”
“We can’t continue doing what we’re doing because the future of the RTOs is at stake.”
