By Rory D. Sweeney
PJM’s Board of Managers will ask FERC to choose between proposals by its staff and its Independent Market Monitor to insulate its capacity market from state-subsidized generation.
Rather than choose just one of the capacity reform plans on offer, the board instead voted Wednesday to direct PJM staff to file both the capacity repricing proposal it recommended and the MOPR-Ex proposal promoted by the Monitor.
“The board has decided that reform is necessary,” CEO Andy Ott wrote in a letter to stakeholders Friday. “The board has chosen a path that will definitively move the policy question to FERC while proposing a process that maintains opportunities for active, continuing involvement from stakeholders.”
Each proposal “represents a distinct, just and reasonable policy alternative to address the consequences of state intervention” in energy markets, Ott said.
“Deciding between these policy options requires a balancing of federal and state interests, raising questions of federalism and comity that have already presented themselves before the courts, including the U.S. Supreme Court.”
The board didn’t disclose its determination until Friday in order to develop an explanation for its decision. The vote came after a flurry of politicking over the past week from stakeholders, who sent seven letters to the board, almost all of which asking that the board not support PJM’s plan. Exelon was ambivalent about the RTO’s plan but asked that the board reject the Monitor’s plan.
The decision moves PJM another step closer to culminating the work of the Capacity Construct/Public Policy Senior Task Force (CCPPSTF) that dominated stakeholder activity in 2017. Stakeholders were at one point considering 10 different proposals, but the field eventually narrowed to proposals from PJM and the Monitor.
PJM said its plan would accommodate generator offers from state-subsidized plants by allowing them to bid into capacity auctions but ensure they don’t suppress competitive prices by removing those offers in a second “repricing” stage of the auction.
The Monitor’s proposal, known as MOPR-Ex, would extend the RTO’s minimum offer price rule (MOPR) to all units indefinitely, but in alternative versions it included carve-outs for states’ renewable portfolios and public power self-supply. Stakeholders, who saw the Monitor proposal as having the least impact on the current construct, backed it all the way to the Markets and Reliability Committee, but all of its different versions stalled there last month after Ott announced he would be recommending the RTO’s plan to the board no matter the outcome of the vote. (See “No Consensus on Capacity Revisions,” PJM MRC/MC Briefs: Jan. 25, 2018.)
The board’s decision represents a win for Monitor Joe Bowring, who had been maneuvering for months to navigate his proposal to stakeholder endorsement despite PJM’s clear indication that it would not support the proposal.
The board directed staff “to present the advantages and tradeoffs associated with each policy approach,” Ott said. Staff should make their preference known in the filing, but that “should the commission decide instead on a policy of mitigation, PJM believes MOPR-Ex would be effective in preserving competitive outcomes in PJM’s markets.”
The board also directed the filing to request “a time-bound settlement judge proceeding” after FERC chooses a proposal “with expectation that such a process will bring refinement, compromise and more consensus support for what ultimately will be presented to the commission later this year as a package of proposed rule changes.”
The board confirmed that the upcoming Base Residual Auction in May will proceed under the current capacity auction rules.