The Federal Energy Regulatory Commission’s December order designed to accommodate state-subsidized generation into the PJM capacity market has provoked opposition from non-utility generators in the region, industrial customers seeking competitive prices for power, renewable energy advocates who feel disadvantaged by a rule favoring nuclear and coal plants, and PJM itself.
A flurry of rehearing requests raised serious issues about the FERC order. The order established a revised “minimum price offer rule” or MOPR, specifying that some bidders into the market can’t use government-ordered subsidies to undercut unsubsidized generation, but blessing state-ordered subsidies such as those in place in Ohio, New York, and elsewhere, that do just that..
The objections should not come as a surprise, as FERC Commissioner Rich Glick, the dissenter in the 2-1 MOPT decision, opposing the two Republicans commissioners, Chairman Neil Chatterjee and Commissioner Bernard McNamee, wrote. In dissent, Glick said, “From the beginning, this proceeding has been about two things: Dramatically increasing the price of capacity in PJM and slowing the region’s transition to a clean energy future. Today’s order will do just that.”
Glick added, “The order amounts to a multi-billion-dollar-per-year rate hike for PJM customers, which will grow with each passing year. It will increase both the capacity price in the Base Residual Auction as well as the already extensive quantity of redundant capacity in PJM. It is a bailout, plain and simple.”
In comments to FERC last week, PJM said the FERC order “may have paradoxically unintended consequences over time and may result in less economic efficiency.” It isn’t clear that those consequences were unintended, as Glick implied.
PJM chief lobbyist Craig Glazer, a former Ohio state utility regulatory, told a Resources for the Future meeting, “We viewed the [original] MOPR as providing guardrails when government action really causes the car to drive off the road.” But the final FERC action, he said, “might have made that process more administrative, more uncertain than it needs to be.”
But Glazer, as reported in Utility Dive, said the FERC order won’t be the “death knell for renewables or nuclear.”
The Washington Examiner reported, “A coalition of clean energy groups called on the Federal Energy Regulatory Commission Wednesday to revisit its controversial December order to raise payments to fossil fuel plants in the PJM power market to combat state policies that subsidize renewables and nuclear. The American Council on Renewable Energy (ACORE), American Wind Energy Association, Solar Energy Industries Association, and Advanced Energy Economy filed a joint request for rehearing and suggested they would sue if FERC does not change course.”
A large group of non-utility generators, including Calpine, Dynegy, and Panda Energy also filed a rehearing request this month, supporting PJM’s rehearing request. In their petition, they said, “The December 19 Order is in marked contrast from the Commission’s past rationale used for the MOPR. When the MOPR was originally designed as part of the original 2006 RPM settlement, MOPR effectively applied only to certain offers for new entry by gas-fired resources, recognizing that the marginal, price-setting offer was likely to come from such resources. Given that distinction, MOPR did not apply to other resource offers that did not raise certain specific concerns relating to the interference of efficient price formation.”
But the December FERC order, the group said, rejects “any accommodation to state resource policy interests,” and “falls short of reasoned decision-making and goes too far in eliminating sufficient accommodations for integrated utility self-supply resource choices and state resource policies.”
Industrial customers were also upset by the FERC MOPR. The Hershey Company, the Pennsylvania chocolatier producer of the iconic Hershey Kisses, as Gavin Bade of Politico reported, “Hershey (yes, the candy co.) filed for rehearing, saying that FERC’s decision ‘effectively stalled’ a clean energy PPA it is trying to finalize. Asks FERC to quickly clarify that voluntary renewable energy won’t be subject to MOPR.”
— Kennedy Maize