Forging Consensus for the Future of Resource Adequacy

PJM Capacity Market Workshop Concludes, Weighing MOPR Reform Processes

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At the final Capacity Market Workshop session on March 26, stakeholders and PJM recapped work on capacity market design, discussed priorities and reviewed expedited stakeholder processes toward fast action ahead on necessary reform to the Minimum Offer Price Rule.

Begun in February, the Capacity Market Workshop has elicited key principles from both stakeholders and PJM for sound and durable capacity market design. The workshop also explored scoping, timing and sequencing of potential capacity market reform.

During the workshops, PJM and its stakeholders reached general consensus that reform of the Minimum Offer Price Rule (MOPR) is the most immediate priority, so that PJM’s capacity market can better accommodate state policy choices while maintaining essential resource adequacy goals. PJM conveyed this to the Federal Energy Regulatory Commission at FERC’s March 23 technical conference on resource adequacy.

Inclusive Processes Inform Principled Action Steps

Stakeholders and PJM agree that any proposed reforms must enhance the underlying purpose of the capacity market – to ensure that there exists a portfolio of resources that can serve the region’s electricity needs reliably, not only under normal conditions, but also under extreme conditions.

PJM’s goal is for stakeholders to achieve general consensus on a MOPR reform package in an expedited fashion, representing coordinated industry response to FERC’s call to action, along with exploring a number of other potential enhancements to the capacity market in what PJM is calling “Phase 2.” As a result of study, extensive dialogue and workshop debate thus far in 2021, core principles have emerged. Based upon feedback from stakeholders, including the Organization of PJM States, Inc. (OPSI), PJM has advanced a series of principles that should serve as a guide for any prospective changes to the existing market. According to those principles, the capacity market should:

  • Function to help support reliability
  • Respect and accommodate state resource preferences and facilitate competitive, least-cost procurement of these policy choices
  • Be flexible in design, thus ensuring the long-term viability of the market
  • Embrace competitive principles and send appropriate price signals for efficient entry and exit of resources
  • Ensure appropriate mitigation of market power

Proposed Paths Forward

To maintain the schedule for the 2023/2024 capacity auction, any proposed change to the MOPR needs to be submitted to FERC by mid-to-late July, Adam Keech, Vice President – Market Services, said. This deadline complies with technical and regulatory requirements associated with the upcoming 2023/2024 Service Year Base Residual Auction, scheduled for this December.

Within that time frame, both of the expedited stakeholder processes discussed – the Enhanced Liaison Committee and the Critical Issue Fast Path – include coordination with PJM’s Board of Managers. Both provide for expedited action while preserving necessary stakeholder discussion and debate.

Addressing Resource Adequacy for the Grid of the Future

Other pressing capacity market topics indicated by a significant number of stakeholders will be discussed in “Phase 2” in the near future via routine stakeholder processes. These concepts align with principles discussed above and include:

  • Capacity resource qualifications
  • Performance assessments
  • Procurement of additional reliability-based services
  • Competitive procurement of public policy resources
  • Other stakeholder-proposed items as identified through scoping discussions

As feedback is gathered in the near term, PJM anticipates more discussion for determining stakeholder processes. It is anticipated that a first meeting will be held on April 7.