The New Jersey Board of Public Utilities held a daylong technical conference Friday to consider its resource adequacy alternatives and whether it should remain in PJM’s capacity market or go on its own through the fixed resource requirement (FRR) alternative.

The conference comes on the heels last month of a bill making its way through the New Jersey Senate that would require the BPU to study the implications of withdrawing from PJM and either going it alone or joining NYISO. (See NJ Senate Exploring Exit from PJM.)

BPU President Joseph Fiordaliso said the board’s investigation stems from Gov. Phil Murphy’s Energy Master Plan outlining how the state will meet its goal of 100% clean energy and an 80% reduction in statewide greenhouse gas from 2006 levels by 2050. (See NJ Unveils Plan for 100% Clean Energy by 2050.)

Fiordaliso said the purpose of the investigation is to consider whether New Jersey can achieve its long-term clean energy objectives under the expanded minimum offer price rule (MOPR) ordered by FERC in December 2019. If it can’t, Fiordaliso said, the board has asked its staff to recommend the best alternative. (See N.J. Investigating Alternatives to PJM Capacity Market.)

Fixed Resource Requirement

The first panel during the conference featured a discussion of the FRR option for New Jersey with panelists debating various proposals, including full- and partial-FRR options, as well as the option of staying in the PJM capacity market.

PJM Independent Market Monitor Joe Bowring said competition is more effective than state or federal regulations in ensuring outcomes, creating incentives for innovation and ensuring the lowest possible costs for consumers.

“Markets are actually good for all unit types,” Bowring said. “Markets are in fact good for renewables. Markets create incentives for creative responses.”

Bowring said FERC’s MOPR ruling has been mischaracterized by stakeholders and its actual impact exaggerated. (See Commenters Weigh in on MOPR Compliance Filing.)

There has been no demonstration that the expanded MOPR will raise capacity prices, Bowring said, and analysis done by his firm, Monitoring Analytics, has found prices in the Base Residual Auction for the 2022/23 delivery year should stay stable. Bowring said the assumption that prices will rise is based on the assumption that renewable resources aren’t competitive in the market, with which he said he disagrees.

While he said he disagreed with significant parts of FERC’s order, especially the definition of a “competitive offer,” Bowring said the point of the MOPR is to “draw clear lines” between the areas of federal and state jurisdictions.

Bowring said one of the alleged advantages of states moving to an FRR alternative is that current rules allow for a lower reserve margin. But he said there’s no guarantee reserve margin rules won’t change and result in a more balanced capacity market obligation for states with an FRR.

“FRRs create, exacerbate and do not address market power,” Bowring said. “Market power is a key issue right now in the capacity market, and the only reason that it’s offset is because of the broad capacity market and because there are clear market power mitigation rules in the market.” (See PJM Monitor Finds Capacity Exit Costly for NJ.)

Glen Thomas of the PJM Power Providers Group said he came with a simple message to the BPU: to “put a fork” in the FRR option.

The FRR is a “risky venture” that will increase costs for consumers and leave ratepayers “virtually defenseless” against market power, Thomas said. Once the conversation moves past it in New Jersey, Thomas said, more productive conversations can be had about the positions the state can take to achieve its energy goals.

Thomas said there’s little reason for New Jersey to move quickly on a decision, insisting that FERC’s order does not mean the “sky is falling,” as portrayed by many.

“Don’t be bullied into bad ideas, especially when those ideas appear to be changing very quickly,” Thomas said. “This is the future of New Jersey’s power sector. People want power; they need power; and we have to do it right.”

Rob Gramlich of Grid Strategies said his group has written several reports regarding the high costs of the MOPR, the inefficiencies of the current PJM capacity construct and the opportunity for states to use the FRR option to avoid those perceived problems. (See Report: Imports Key to Successful FRR.) Gramlich also pointed to a recent paper dealing with ways states that have retail competition can improve their ability to achieve low-cost decarbonization by making sure “well equipped buyers” are in the wholesale markets.

“The FRR is a way and a means to achieve greater reliance on markets and to achieve state energy goals in a cheaper way than the current construct,” Gramlich said.

Non-FRR Procurement Strategies

The conference also featured a panel exploring non-FRR procurement strategies for New Jersey to achieve its clean energy goals and ensure resource adequacy.

Stu Bresler, PJM’s senior vice president of market services, said that while the current capacity market structure and the FRR alternative represent the existing options for New Jersey, they don’t need to be the only options.

Bresler said New Jersey’s clean energy direction is “clear” to PJM and that the RTO is committed to working with the state and other stakeholders to advance their objectives.

“While PJM is not here to drive policy and will support New Jersey’s policy choices, we want to continue to engage with New Jersey to develop market-based solutions to help achieve goals at the lowest possible cost to consumers while maintaining a reliable grid,” Bresler said.

Katie Guerry, head of regulatory affairs for Enel North America, said transparent and liquid markets, stable policies and access to regional markets drive her company’s investments in the types of renewable resources New Jersey is attempting to incentivize and develop.

Guerry said that while Enel has several projects it is considering in PJM, questions over whether New Jersey and other states will remain in the RTO has hampered the decisions to move forward. The state can’t achieve its clean energy goals on its own and that its decision on the FRR and its future with PJM could have “far reaching impacts” on investments, she said. She urged the BPU to send a clear signal that they plan to remain in the PJM capacity market.

“Regional markets yield value and attract investment into our economy,” Guerry said. “When you pull one piece of that puzzle out of that regional nature, both pieces suffer.”