The giant PJM Interconnection today, after intense and contentious internal discussions, filed a “you pick ‘em” proposal at the Federal Energy Regulatory Commission to deal with state-mandated programs to subsidize uncompetitive nuclear, coal and renewable capacity. The 477-page PJM filing offers two different proposals to FERC, suggesting that the feds adopt the one that pleases them most.
In a press release, the Middle Atlantic regional transmission operator said, “PJM’s filing presents both a proposal to accommodate state policies while maintaining competitive capacity market prices and one to mitigate offer prices for subsidized resources.” According to several accounts, neither of PJM’s proposals won support from the RTO’s stakeholders. PJM has been struggling with how to respond to actions by states pushing nukes, coal, and renewables into the competitive wholesale market for well over a year.
“Left unaddressed,” said PJM CEO Andy Ott, “the subsidies will crowd out efficient, competitive resources and shift to consumers the investment and operational risks of generation. We seek the appropriate balance that respects state policy while avoiding policy impacts of a state’s subsidies on the market as a whole and on other states.”
PJM’s preferred plan, “capacity repricing,” creates a two-stage auction, where a generating resource that is getting state financial support that clears the first state of the auction would then be repriced in a second stage “to remove the effects of the subsidy – resulting in a competitive price for all resources.”
The second proposal (MOPR-Ex), not PJM’s preference, would extend the existing “minimum offer price rule” (MOPR) to require subsidized generation to remove the effect of the subsidy in its bid into the PJM capacity market. This, says PJM, “could result in subsidized units failing to receive a capacity commitment.”
The exceedingly complex PJM filing will take time for FERC and the various interested parties to digest, analyze and respond. Among the first out of starting line was the Natural Defense Resources Council, which has long held an interest in the interplay between competitive and subsidized generation.
NRDC’s Jennifer Chen with the Sustainable FERC Project commented, “Either of PJM’s two competing price proposals will drive up the utility bills of 65 million electricity customers in 13 Mid-Atlantic and Midwestern states. That’s a high price to pay for a problem that doesn’t even exist right now.” She noted, “PJM stakeholders had overwhelmingly rejected PJM’s proposal, which would funnel more money from consumers for no additional benefit.. The competing proposal, which stakeholders did not have time to fully negotiate before PJM terminated the stakeholder process, would discriminate against offshore wind and force consumers’ utilities to over-procure generation.”
Ari Peskoe, who directs the Electricity Law Initiative at the Harvard Law School Environmental and Energy Law Program, observed in a Tweet, “Rehearing requests filed today about the ISO-NE capacity market order will likely reveal the types of arguments that opponents will make against PJM’s filing.”
In the meantime, the Department of Energy is considering a plea from Akron-based FirstEnergy to use its emergency 202(c) authority in the Federal Power Act to keep its nuclear and coal-fired capacity running, despite the inability to compete in the PJM market. Earlier, FERC rejected a DOE plan to push the plants into the competitive markets.
Speaking at a Bloomberg New Energy Finance meeting in New York this morning, Perry said, “The 202(c) may not be the way we decide is most appropriate — the most efficient way to address this. It is not the only play.”
— Kennedy Maize