By Suzanne Herel
PJM last week asked FERC not to order changes to the RTO’s minimum offer price rule before May’s Base Residual Auction but agreed the standard should be changed to counter subsidized offers from existing generators. The RTO said revisions could be made for next year.
Eleven generating companies had asked FERC to expand the MOPR, which currently applies only to certain new resources (EL16-49).
The complaint was filed before the Public Utilities Commission of Ohio approved power purchase agreements for FirstEnergy and American Electric Power. PUCO unanimously approved modified versions of the PPAs, which the companies said are crucial to keeping underperforming members of their Ohio fleets running, on March 31 (14-1297-EL-SSO and 14-1693-EL-RDR). (See FERC Action Awaited Following PUCO OK on PPAs.)
In their complaint, the generators said they feared such agreements could lead to below-cost offers from existing resources that would suppress capacity clearing prices.
AEP and FirstEnergy told FERC last week that granting the complaint would lead to higher prices for consumers.
PJM: Don’t Rush Changes
In its answer, PJM said FERC should not rush to change the MOPR by next month.
“However, PJM agrees that under certain circumstances and given the existing PJM MOPR, sell offers in [Reliability Pricing Model] auctions submitted by existing generation capacity resources could result in unjust and unreasonable rates when such resources are subsidized by state-approved out-of-market payments,” the RTO said.
FERC could find the MOPR provisions to be “incomplete and unsustainable” and direct PJM to revise the rules in time for the May 2017 BRA, it said.
Delaying changes “would allow the commission to carefully and comprehensively identify the problem raised by complainants and allow an orderly process to consider alternatives through an open stakeholder process,” PJM said. The RTO suggested that FERC keep the issue open so that it could report back with results from its analyses.
“Such a ‘staging’ of this proceeding would provide stakeholders an inclusive role in formulating a rule having widespread application and send the appropriate signal that the issue requires further analysis and focus,” PJM said.
The RTO said that if the commission decides to take action before next month’s auction, it should consider two narrowly drawn, short-term alternatives: PJM could reject a sell offer that it believed would result in an unjust and unreasonable outcome, or FERC could order PJM to require a price floor for the PPA-related resources.
Higher Prices?
In its protest, AEP called the complaint “the latest in a continuing effort by various generators and marketers … to block AEP and FirstEnergy from implementing reasonable measures to benefit Ohio retail customers in a way that does not interfere with wholesale markets.”
There is no “emergency” requiring immediate FERC action, it said, calling “fanciful” the complainants’ notion that “the effect of the AEP PPA will be to dump thousands of megawatts of otherwise uneconomic generation into the upcoming capacity auction and materially suppress prices.”
On the contrary, it said, excluding 6,000 MW from the AEP and FirstEnergy PPA units “for no valid economic reason could cause a substantial unwarranted cost increase to consumers in the PJM region.”
It also said that because the complaint was filed before PUCO ruled, it doesn’t take into account the amendments the commission made to the company’s proposal.
FirstEnergy said the complaint was based on flawed assumptions.
“The complainants create a so-called market solution that is facially discriminatory and preferential and that would penalize and harm the retail customers of FirstEnergy and AEP while likely benefiting the complainants’ shareholders with increased market share,” the company said.
It, too, said there was no reason to address the issue before the May BRA.