By Christen Smith

Wilmington, Del. — PJM on Thursday offered stakeholders four options for navigating its upcoming capacity auction, noting that each comes with risks and uncertainties.

“We are in a bit of quandary,” said Stu Bresler, PJM’s vice president of operations and markets. “There really are no obvious good answers as to how we can move forward at this point. I think it falls into the lesser of two evils category.”

Bresler’s comments come on the heels of PJM’s filing with FERC urging guidance for the Aug. 14 Base Residual Auction, given a previous commission decision that the RTO should revamp its minimum offer price rule (MOPR) to address price suppression resulting from rising state subsidies for renewable and nuclear power (ER18-2222). PJM filed changes in October and had hoped for a FERC response by March 15 to no avail. (See PJM to FERC: Hurry Up with Auction Guidance.)

“Absent from any other order from FERC in this regard, we are obligated to follow the Tariff,” Bresler told the Markets and Reliability Committee on Thursday.

The Choices

Bresler presented the four paths PJM staff identified as viable and solicited feedback from the MRC on each of them, including:

• • • Move forward with existing rules and accept the possibility that FERC will retroactively apply new rules, forcing PJM to rerun the August BRA.
    • File a waiver with FERC to delay the BRA until closer to the May 2020 auction, noting FERC has no timeline for ruling on such a request.
    • File a request for FERC to confirm existing rules for the interim, eliminating the risk of re-rerunning the auction after the commission decides on the MOPR. Bresler noted this option has very little chance of success.
    • Present an alternative interim rate in a Section 205 filing that would sunset after the August BRA, eliminating the risk of having to re-execute the auction at a later date. This type of filing bakes in a 60-day timeline for FERC to issue guidance but may require stakeholders to follow a “parallel path” in case FERC denies the filing.

Bresler said staff will return to the April 10 meeting of the Market Implementation Committee with its agreed-upon path forward.

“I don’t think there’s a drop-dead date [for delaying the auction],” he said. “But with some of these other options, the sooner the better.”

Stakeholders Torn

The anxiety expressed by stakeholders at the March 6 MIC meeting carried forward into Thursday’s MRC, with representatives across the board abandoning hope of a short-staffed FERC offering guidance anytime soon. (See FERC’s McIntyre Loses Cancer Battle.)

“One of the things we keep going back to is the uncertainty of when actual action will be taken,” said Neal Fitch, of NRG Energy, noting a fifth commissioner — capable of breaking any deadlocked rulings — has yet to be named. “We think it’s right to move along with an auction in August … simply because we have no idea when FERC will act.”

Others argued that delaying the auction until next spring remained the only prudent choice and appeared unconvinced by PJM’s assessment that FERC is unlikely to force the RTO to re-execute the auction under new rules. The commission in January ordered PJM to rerun the July 2018 FTR auction to liquidate GreenHat’s FTR positions, which could add $250 million to $300 million to the already $186 million projected cost to members from the default. Last month, the RTO requested a stay of that ruling. (See PJM Won’t Act on FTR Order Before Stay Ruling.)

Carl Johnson, representing the PJM Public Power Coalition, argued delaying the auction could impact the market negatively.

“Without any guidance from FERC, you’re shooting in the dark,” he said. “I think the idea of putting together some interim [Section] 205 [filing] bridge to justness and reasonableness might have some attraction.”