Load and supply factions deadlocked Thursday, as members rejected three proposed changes to the Minimum Offer Pricing Rule. The score was nil-nil-nil for proposals by PJM, PSEG and a joint plan backed by Maryland regulators and consumer advocates.
At issue was the MOPR unit-specific review process, which sets a floor price for capacity resources that do not qualify for the self-supply or competitive entry exemptions.
PJM and the Independent Market Monitor had proposed changes they said would standardize some parameters and reduce the subjectivity in the review. Market Monitor Joe Bowring said “it’s difficult to tease out” questionable developer cost assumptions in the 30 days the Monitor has to conduct the MOPR review.
The PJM-IMM proposal would have required use of nominal levelized values, a 20-year asset life and a residual value of zero. It would also bar inclusion of sunk costs. Although it received wide support in a poll by the Capacity Senior Task Force, it received only a 44% endorsement support in sector-weighted voting at the Markets and Reliability Committee Thursday.
Inconsistent with FERC Order
Walter Hall of the Maryland Public Service Commission said the proposal was “inconsistent” with a Federal Energy Regulatory Commission order requiring PJM to maintain the unit-specific review and would increase prices as much as 30%.
By assuming that any new generation came from merchant generators with B-rated debt, it prevented generation developers from offering prices that reflected capital cost advantages, Hall said. PJM and the IMM also chose a nominal levelized costing formula that inflates costs and has been rejected by PJM’s consultant, The Brattle Group, Hall said.
The proposal would have also barred inclusion of revenues from power purchase agreements outside of PJM and required developers to recover the costs of turbines and other equipment that typically operates for 40 years in only 20 years, with an assumption of no residual value at the end of that period. By contrast, ISO New England rules recover costs over 35 years and allow for residual value, Hall said.
Pamela Quinlan of Rockland Electric also criticized the 20-year recovery without residual value, saying it was “overly conservative.” Quinlan said, however, that her company supported the PJM-IMM proposal.
An alternative by PSEG Energy Resources & Trade also fell short at 41%. PSEG’s Ken Carretta said it would have used the best available evidence of the developer’s costs, while the PJM-IMM proposal would provide developers incentives to understate costs.
Hall said the PSEG proposal included most of the features that Maryland found objectionable in the PJM-IMM proposal.
Generation Owners and Transmission Owners generally supported the PJM and PSEG proposals, which won only 45% support from Other Suppliers and no votes from End Use Customers and Electric Distributors.
Suppliers Turn the Tables
After the PJM-IMM and PSEG proposals failed, suppliers turned the tables to reject a proposal by the Maryland PSC and the Maryland Office of People’s Counsel. It won only 35% support. (Package B in the MOPR Unit Specific Review Matrix.)
It won unanimous support from the EUC sector but less than 40% from the ED and OS sectors and virtually no support from Generation and Transmission Owners.
Dan Griffiths, executive director of the Consumer Advocates of PJM States (CAPS) said the Maryland proposal would retain much of the current rules. “We are open to … establishing a neutral process” for better defining some parameters in the review, he said.
PSEG’s John Citrolo said the proposal would allow the exercise of buyer-side market power, which the MOPR is designed to prevent.
“Long-term contracting can lower costs and shouldn’t be considered a subsidy,” Hall responded.
With no proposals receiving two-thirds support, the issue will be returned to the CSTF. “Send it back to the committee and see if they can wrestle a consensus,” said PJM Executive Vice President for Operations Mike Kormos, the MRC chair.
