If 2019 was a turbulent year for PJM as it dealt with fallout from the GreenHat Energy default and the emergence of the minimum offer price rule (MOPR) issue, 2020 proved an even bigger challenge with a worldwide pandemic.
COVID-19 was the defining problem of the year as PJM worked with stakeholders to overcome logistical difficulties in coordinating complicated deliberations on a host of issues, including the MOPR. The year also saw the unfolding of political scandals involving some of the RTO’s largest utilities and the increasing number of renewable energy resources coming online and the new obstacles they provide for grid planning.
Here’s a review of some of the biggest PJM stories of 2020 and a peek at what stakeholders will be looking at in 2021.
MOPR Takes Shape
Last January, a wide range of stakeholders began asking FERC to reconsider its Dec. 19 order requiring PJM to overhaul its capacity market, saying the commission’s directive was unnecessary and overstepped federal jurisdiction. FERC said PJM had to expand its MOPR to counter the impact of growing state subsidies, primarily for renewables and nuclear generation. (See FERC Extends MOPR to State Subsidies.)
But state regulators, utilities and load-serving entities argued that the order went too far in attempting to control generation choices and failed to prove state-subsidized resources suppress capacity market prices. (See PJM MOPR Rehearing Requests Pour into FERC and Consumer Advocates Appeal MOPR Order to DC Circuit.)
By the end of January, PJM officials had announced they would not run a capacity auction until FERC approved the RTO’s compliance filing implementing the MOPR expansion, all but confirming that the delayed 2019 auction would not occur in 2020. (See PJM: BRA Unlikely in 2020.)
PJM’s Independent Market Monitor released analysis in March concluding that expanding the MOPR would not impact clearing prices or auction revenues for the 2022/23 Base Residual Auction because it won’t significantly change the treatment of gas-fired resources and also allow categorical exemptions for existing self-supply, demand response, energy efficiency and storage resources. The analysis also cited the “competitiveness of unit specific offers for existing subsidized nuclear resources.” (See MOPR May Not be Death Knell for Renewables in PJM.)
PJM submitted its proposed Tariff changes in March after discussing its planned compliance filing in several stakeholder meetings. (EL16-49, ER18-1314, EL18-178). (See PJM Makes MOPR Compliance Filing.)
As PJM continued refining its MOPR, several states began weighing the option of meeting resource needs outside the capacity market.
The New Jersey Board of Public Utilities (BPU) voted March 27 to investigate whether staying in the capacity market will impede Gov. Phil Murphy’s goals of 100% clean energy sources for the state by 2050 or increase consumer costs (Docket No. EO20030203). If the goals are not achievable, board members instructed their staff to examine alternatives to the market. (See N.J. Investigating Alternatives to PJM Capacity Market.)
Illinois and Maryland officials also started their own discussions on leaving the capacity market. MOPR’s extension to subsidized nuclear plants created problems for Illinois regulators, where nukes receive zero-emission credits (ZECs), while Maryland’s plans for offshore wind are also impacted. (See PJM’s MOPR Quandary: Should States Stay or Should they Go?)
The commission in April clarified that voluntary renewable energy credits and Regional Greenhouse Gas Initiative (RGGI) participation would not subject capacity resources to PJM’s expanded MOPR. FERC directed PJM to make a compliance filing within 45 days to set the default offer price floor for new energy efficiency resources at the net cost of new entry (CONE) and existing energy efficiency resources at the net avoidable cost rate. (See FERC: RGGI, Voluntary RECs Exempt from MOPR.)
By October, FERC approved most of PJM’s MOPR compliance filing while reversing its position on state-directed default service auctions (EL16-49-003, et al.). The commission said it agreed with PJM and commenters to exclude “independently evaluated, non-discriminatory, fuel-neutral, competitive state-directed default service auctions from application of the expanded MOPR.”
The commission also rejected PJM’s proposed revisions to the market seller offer cap as beyond the scope of the compliance proceeding. (See FERC Acts on PJM MOPR Filing.)
PJM then moved even closer to restarting its capacity auctions with FERC’s November approval of its new energy and ancillary services (E&AS) offset calculation (EL19-58-002). (See FERC Approves PJM Reserve Market Overhaul.)
The commission acknowledged the changes would increase the RTO’s reserve procurement and thus, the revenue resources received, affecting the capacity market’s E&AS offset. The offset is a key variable in calculating the net CONE for resources in the capacity market and is calculated using energy market results from the three calendar years prior to the BRA.
PJM’s revisions changed the offset to be forward-looking and included in its filing indicative E&AS and net CONE values for various resource types. These values are “based on the latest published and publicly available forward prices at that time,” FERC said, and would be revised using updated forward prices prior to the upcoming BRA for the 2022/23 delivery year. (See FERC Approves PJM Key Capacity Market Variable.)
PJM was finally able to announce that it will hold the 2022/23 BRA May 19-25 and will post results on June 2. (See PJM Sets BRA for May 2021.)
Political Scandals
Last year also saw major figures in the Illinois and Ohio legislatures caught up in alleged bribery schemes involving two of PJM’s largest stakeholders over controversial laws passed to help save costly nuclear plants. The evolving scandals took down company leadership and leaves several people facing the possibility of stiff jail sentences.
Exelon’s Commonwealth Edison agreed last July to pay a $200 million fine to settle allegations that it bribed Illinois House Speaker Michael Madigan (D) in return for legislation that increased the company’s earnings and bailed out its money-losing nuclear plants. Madigan is the longest-serving leader of any state or federal legislature in U.S. history, having held the speaker title for all but two years since 1983. (See ComEd to Pay $200 Million in Bribery Scheme.)
The U.S. Attorney’s Office in Chicago filed a one-count information alleging that to influence legislation favorable to the company, ComEd arranged no-work jobs for Madigan associates, including former Chicago Alderman Michael R. Zalewski, the father-in-law of Illinois Commerce Commission (ICC) Chair Carrie Zalewski.
In 2011 ComEd sought to persuade Illinois lawmakers to allow it to make billions in smart grid investments and switch to a formula ratemaking process to enable it to recover costs more quickly, investigators said.
ComEd also admitted to appointing a Madigan ally to its board of directors, retaining a law firm favored by the speaker and providing internships to students who resided in the speaker’s Chicago ward.
In return for the alleged bribes, the company won Madigan’s support for the 2011 Energy Infrastructure Modernization Act, which approved the formula rate mechanism, and the 2016 Future Energy Jobs Act, which authorized subsidies for Exelon’s Clinton and Quad Cities nuclear generators. (See How ComEd Got its Way with Ill. Legislature.)
Within weeks of the bribery announcement, ComEd officials apologized to the ICC at an open meeting, while Zalewski defended herself against the conflict-of-interest allegations. (See ComEd on Hot Seat at ICC Hearing.)
Illinois electric customers went on to file a federal class action civil racketeering lawsuit in August against ComEd and Madigan, seeking more than $450 million in damages and an order barring the longtime politician from participating in any electricity legislation related to ComEd or its parent company, Exelon.
The plaintiffs’ attorney Stuart Chanen said ComEd’s agreement to pay the $200 million fine settling criminal allegations did not prohibit customers from pursuing additional damages under the Racketeer Influenced and Corrupt Organizations Act. (See ComEd, Madigan Sued for $450M in Racketeering Suit.)
In November, several former ComEd executives, including former CEO Anne Pramaggiore, were indicted in connection to the ongoing bribery investigation. Investigators alleged the executives conspired with outside consultants to influence and reward a high-level elected official in Illinois to assist with the passage of legislation favorable to ComEd. (See Ex-ComEd CEO, Officials Charged in Ill. Bribery Scheme.)
Just days after the ComEd news broke, federal officials in Ohio alleged FirstEnergy spent $61 million in bribes and “dark money” campaign contributions to elect the speaker of the Ohio House of Representatives and allies, who won $1.5 billion in subsidies for the company’s struggling nuclear plants. (See Feds: FE Paid $61M in Bribes to Win Nuke Subsidy.)
Ohio House Speaker Larry Householder (R), FirstEnergy Solutions lobbyist Juan Cespedes, lobbyist Neil Clark, former state Republican Party Chair Matt Borges and political strategist Jeff Longstreth were arrested on racketeering charges in an alleged three-year scheme resulting in the passage of House Bill 6 in 2019, which authorized ZECs for FirstEnergy Solutions’ (FES) Perry and Davis-Besse nuclear plants.
FirstEnergy no longer owns the nuclear plants, as FES emerged from bankruptcy in February as Energy Harbor. But the utility’s then-CEO Charles Jones and others face legal jeopardy based on the 81-page affidavit that said Jones was in regular contact with Householder.
Ohio Gov. Mike DeWine (R) said in July the state should repeal House Bill 6 considering the federal bribery charges were against Householder and called for the politician’s resignation. DeWine had previously said that the law, which he signed last July, should remain intact to save the nuclear plants’ jobs and carbon-free power. (See Ohio Gov. Calls for Repeal of Nuke Bailout.)
Without any debate, House members voted unanimously to remove Householder as speaker after his arrest. Householder retained his seat in the house despite calls for his resignation. (See Householder Removed from Ohio Speaker Post.)
By October, FirstEnergy announced it had fired Jones and two other officials after an internal investigation determined they had violated the company’s code of conduct in the alleged bribery scheme.
Jones’ firing was announced after Cespedes and Longstreth pleaded guilty earlier that day to participating in a racketeering conspiracy. (See FirstEnergy Fires Jones over Bribe Probe.)
In November, Public Utilities Commission of Ohio Chair Sam Randazzo resigned, less than a week after the FBI raided his Columbus home. Randazzo, who served as the chair of the PUCO since his appointment by DeWine in 2019, made the announcement in a letter sent to the governor.
The move came one day after FirstEnergy told the U.S. Securities and Exchange Commission that it made a $4 million payment to an “entity associated with an individual who subsequently was appointed to a full-time role as an Ohio government official directly involved in regulating [companies regarding] distribution rates.” (See PUCO Chair Randazzo Resigns.)
COVID-19 Impacts
As the U.S. was gearing up to shut down significant sectors of the economy in early March over the spread of COVID-19 from China, PJM was trying to determine how to keep its workers safe while still maintaining grid reliability.
The System Operations Subcommittee (SOS) began holding weekly conference calls in March to discuss how the coronavirus was impacting generation and transmission operators locally and the steps PJM and stakeholders were taking to handle the situation.
“I recognize that many of you are competitors in our markets … on a normal day-in-and-day-out basis,” PJM’s Paul McGlynn said about the meetings. “But our industry has a long tradition of working together to operate the grid reliably and … keep the lights on through some pretty challenging conditions.”
PJM canceled all business travel, restricted access to its buildings and limited stakeholder meetings to WebEx video conferencing. (See “SOS to Meet Weekly on COVID-19 Impacts,” PJM Operating Committee Briefs: March 12, 2020 and PJM to Hold Weekly Calls on COVID-19.)
Within the first week of lockdown measures across the region, PJM officials reported seeing changes in energy use. The data from March 17-19 showed the normal 8 a.m. morning peak shifted to 9-10 a.m., and the evening peak was about 5% lower than expected, the RTO said.
On March 16, load came in at about 95,500 MW compared to an expectation of about 100,000 MW.
PJM implemented a work-from-home policy through April 10, except for system operators and other shift personnel, and employees began working longer shifts to minimize shift changes. The RTO also canceled its May 4-5 annual meeting in Chicago.
Crews began prepping the PJM campuses for sequestration in early April, with healthy workers required to remain on site if the pandemic became worse. Crews installed temporary bedding, entertainment, food and other accommodations for employees.
A team also converted PJM’s control room simulator into a potential third control room in case of an emergency. (See PJM Preps 3rd Control Room, Plans for Sequestration.)
Analysts began working on worst-case scenarios in the early stages of the pandemic, with PJM engineers saying the RTO could support the loss of up to 40% of installed generation capacity on a summer day and up to 60% on a spring day in a worst-case scenario in which units were knocked offline from a COVID-19 outbreak among plant workers.
PJM officials presented the generator availability analysis to stakeholders, saying it was intended to determine the maximum generation loss PJM could handle without curtailing power to the hardest hit areas. The analysis began by considering the impact of an outbreak at one plant spreading and disabling a generating company’s entire fleet. (See PJM Analyzes Potential COVID-19 Generation Losses.)
According to a report issued in August by the Monitor, COVID-19 depressed PJM energy prices in the first half to the lowest levels of any comparable six-month period since the creation of the RTO’s markets in 1999.
The IMM 2020 State of the Market Report showed average energy prices fell over 29% from already historically low levels in 2019, to $19.40/MWh. Monitor Joe Bowring attributed the decrease to lower fuel costs, which accounted for more than half the decline. Also contributing was a significant decrease in demand because of mild winter temperatures throughout the region and the stay-at-home orders arising from the pandemic. (See PJM Monitor Reports Record-low Energy Prices.)
PJM Vice President of State and Member Services Asim Haque said late last year that the RTO will continue its cautious measures this year, with most employees continuing to work from home while its campus remains closed until at least June 2021. (See PJM Official Reflects on COVID-19 Impacts.)
State Clean Energy
PJM states continue to advance ambitious clean energy goals, causing conflicts among the RTO, stakeholders and government officials over the best ways to achieve the goals.
New Jersey Gov. Phil Murphy in January released an updated 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.
Murphy also issued an executive order directing the Department of Environmental Protection to issue regulations to reduce emissions and adapt to climate change. The regulations require a monitoring and reporting program to identify all significant sources of GHG emissions and integrate climate change considerations — such as sea level rise — into the department’s land-use permitting and other regulatory programs. (See NJ Unveils Plan for 100% Clean Energy by 2050.)
Indicating a desire for a new transmission strategy, New Jersey regulators voted in November to ask PJM to conduct a competitive solicitation for upgrades to connect 6,400 MW of OSW to the regional grid.
The New Jersey BPU unanimously requested that PJM integrate the state’s OSW goals into the RTO’s Regional Transmission Expansion Plan process under the “state agreement approach,” making it the first state do so since the approach was approved by the FERC under Order 1000. PJM expects to open a competitive solicitation window in the first quarter of 2021. (See NJ Asks PJM to Seek Bids for OSW Tx.)
In April, Virginia Gov. Ralph Northam (D) signed legislation committing the state to closing most of its coal-fired generation by 2024 and making it the first southern state to adopt a 100% clean energy standard.
The Virginia Clean Economy Act (House Bill 1526 and Senate Bill 851) creates a CO2 cap-and-trade program to reduce emissions from power plants and amends the Clean Energy and Community Flood Preparedness Act, committing the state to joining RGGI. (See Va. 1st Southern State with 100% Clean Energy Target.)
The PJM Carbon Pricing Senior Task Force, which began meeting in 2019, heard analysis in February on the impact of Virginia and Pennsylvania joining RGGI and the effect on emissions, prices and interregional trading of a “carbon price region” composed of up to five PJM states. (See PJM Panel Weighs Impact of Pa., Va. Joining RGGI.) Virginia officially became a RGGI state Jan. 1, 2020.
Pennsylvania Gov. Tom Wolf issued an executive order in 2019 directing state officials to develop a rulemaking by July of 2020 for joining RGGI, although a Republican-controlled legislature has challenged his authority to do so. (See Critics: Pa. RGGI Hearing Stacked with Detractors.)
In July, the Pennsylvania House passed House Bill 2025 by a bipartisan majority of 130-71, requiring the legislature’s approval before Pennsylvania can enter any multistate program like RGGI that imposes taxes.
The Department of Environmental Protection would need to submit “a description of the economic and fiscal impacts that would result” from joining such a program to aid the legislature in its decision. The bill would also require legislative authorization before the state can impose a carbon tax on employers engaged in electric generation, manufacturing or other industries. (See Pa. House Passes Bill Limiting RGGI Entry.)
On the renewable energy side, the governors of Maryland, North Carolina and Virginia said in October they will collaborate to promote their states as a hub for the OSW industry. (See Md., NC, Va. to Team up on Offshore Wind.)
The Southeast and Mid-Atlantic Regional Transformative Partnership for Offshore Wind Energy Resources (SMART-POWER) will seek to increase regulatory certainty, encourage manufacturing of components, reduce project costs through supply chain development and share best practices.
OSW can “drive economic development and job creation as well as reduce the emission of greenhouse gases and other harmful air pollutants,” the group said in a press release, citing Department of Energy estimates that the Atlantic Coast OSW project pipeline could support 86,000 jobs, $57 billion in investments and generate up to $25 billion in economic output by 2030.
Virginia (5.2 GW) and Maryland (1.2 GW) have pledged to build 6.4 GW of the 29.1 GW in OSW capacity targeted by East Coast states.
