PJM Continues Stakeholder Sessions on Capacity Market Order

Member feedback important as PJM offers additional work sessions

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PJM and stakeholders will discuss FERC’s capacity market order and issues that PJM will address in an upcoming compliance filing.

PJM held a second special session for members to discuss the Federal Energy Regulatory Commission’s recent order on PJM’s capacity market. PJM staff and stakeholders discussed proposed implementation processes and reviewed schedules to prepare a timeline for the next capacity auction, as well as future auctions.

The Jan. 28 special session of the Market Implementation Committee was the second of eight PJM stakeholder meetings now scheduled in advance of PJM’s 90-day compliance filing, due March 18. The sessions will address the FERC order, proposed implementation and the impact on generators and resources in the capacity market. The Feb. 5 Market Implementation Committee is the next session.

The focus of the special MIC, and of PJM’s efforts in general, is preparing PJM’s compliance filing in response to FERC’s Dec. 19 order, so that capacity auctions can be conducted as soon as possible after FERC rules. Long-term issues PJM raised in a request for re-hearing can be addressed with stakeholders separately, PJM has stated.

Outside of these formal PJM meetings, stakeholders are also engaging with questions and answers via the regularly-updated Minimum Offer Price Rule (MOPR) Order FAQs.

New Federal Policy Expands Scope of Minimum Offer Price Rule

In its Dec. 19 order, FERC required PJM to make a number of rule changes to its capacity market in an attempt to preserve market integrity in the face the increasing number of state-subsidized generation resources. The order expanded PJM’s Minimum Offer Price Rule (MOPR) – which requires capacity auction bids to reflect their actual, unsubsidized costs – to include some existing subsidized generation resources and all new resources that are subsidized, including renewables and those used by self-supply entities such as state-regulated utilities.

PJM filed a Request for Rehearing/Clarification with FERC on Jan. 21, seeking clarity on certain matters so that PJM can proceed with the capacity auction for the 2022/2023 Delivery Year.

While seeking clarification in specific instances, including the treatment of self-supply and energy efficiency resources, PJM is also asking the Commission to provide greater flexibility for PJM to work with stakeholders on solutions to accommodate state energy policies and decisions by integrated utilities.

The FERC order did not adopt PJM-proposed exemptions to accommodate state policy initiatives aimed at individual state energy and environmental objectives. PJM believes that a sustainable balance between accommodating state interests and preserving the integrity of the market is achievable.

Rehearing/Clarification Request Discussed

On January 28, members and stakeholders reviewed the items included in PJM’s request for rehearing and discussed the development of the March 18 compliance filing specific to generators.

“Many of the members would like to understand the thinking behind the rehearing request,” PJM Counsel Chen Lu said.

Lu said PJM is asking FERC to reconsider the denial of exemptions for self-supply entities (such as vertically-integrated, state-regulated utilities) and energy efficiency resources, in addition to resources whose primary purpose is not electric generation. These exemptions would potentially include, for example, a resource that uses waste or byproducts to fuel a generator.

PJM also seeks clarification on, among other items, whether the FERC order applies to resources participating in the Regional Greenhouse Gas Initiative, a market-based effort among 10 states to cap and reduce carbon dioxide emissions from the power sector. For resources that receive both federal and state subsidies, PJM seeks clarity as to whether those units can retain the benefit of federal support during unit-specific reviews to determine their minimum offer price.

To assist stakeholders and members seeking understanding of the MOPR unit-specific review process, PJM Senior Engineer for Capacity Market Operations Patrick Bruno guided a flow chart discussion of steps by generator type.

PJM’s capacity market secures enough power for three years ahead, spurring investment required to meet peak demand and provide reliability critical to the bulk power system. Capacity represents a commitment of resources to deliver power as needed, particularly in case of a grid emergency. Also called the Reliability Pricing Model, the capacity market represents about 20 percent of the wholesale cost of electricity. Through broad participation and competition, the capacity market has historically achieved billions of dollars in savings and investment in new, more efficient and cleaner power resources to achieve remarkable emissions reductions while keeping consumer costs low.