By Rory D. Sweeney
It’s a good bet the ongoing FERC paper hearing to revise PJM’s capacity construct will be a major topic of discussion at the annual meeting of the Organization of PJM States Inc. (OPSI) at the end of this month.
PJM CEO Andy Ott alluded to the looming debate last week in a letter to OPSI responding to the organization’s Sept. 26 correspondence on the issue. OPSI sent its letter to the Board of Managers just days before the first round of comments were due in the FERC docket. (See Little Common Ground in PJM Capacity Revamp Filings.)
FERC ordered the hearing June 29 after concluding that increasing state subsidies for renewable and nuclear power were suppressing capacity prices. The commission’s 3-2 ruling required PJM to expand the minimum offer price rule (MOPR) to cover all new and existing capacity receiving out-of-market payments, including renewable energy credits and zero-emission credits for nuclear plants. The MOPR currently covers only new gas-fired units.
The commission’s ruling rejected PJM’s April “jump ball” capacity filing (ER18-1314), granted in part a 2016 complaint led by Calpine (EL16-49) and initiated a Section 206 proceeding in a new docket (EL18-178). FERC also recommended creating an “FRR Alternative” allowing states to pull subsidized resources — and associated loads — from the capacity auction.
In its letter to PJM, OPSI contended “FERC erred in finding, absent evidentiary support, that PJM’s existing Tariff, the status quo, is unjust and unreasonable.”
In his response, Ott committed himself and other board members to “be available to discuss these matters with OPSI representatives” at the annual meeting, which begins Oct. 30 in Chicago.
He said PJM “understands the general concern” with accepting the RTO’s proposed resource carve-out (RCO) “before adequate resource compensation structures are established.” But he warned the organization that any alternative it suggests must be implemented by next year’s Base Residual Auction, which has been delayed until August.
“PJM is open to dialogue on this point but would urge OPSI to ensure that any OPSI proposal in this area reconcile these competing goals,” Ott wrote.
He said the alternative OPSI proposed in its letter to the board and supported in the Maryland Public Service Commission’s filing in the docket, a so-called competitive carve-out auction, requires that “critical implementation details must be developed before it may be implemented” and that “it is not expected these details can be resolved in time for the 2019 capacity auction.”