PJM Won’t Impose Proposed Capacity Auction Deadlines, Engages Members on New Plan

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PJM indicated Thursday that it will suspend the collection of information that would be required under its proposed capacity market reforms as it awaits a decision on the proposal by the Federal Energy Regulatory Commission (FERC).

Stu Bresler, senior vice president – Operations and Markets, told the Markets & Reliability Committee at its March 21 meeting that PJM will proceed according to current capacity auction rules – which FERC has ordered PJM to change – while it engages members on next steps.

PJM previously had been following a “parallel path” approach, following both existing and proposed new deadlines to be prepared to conduct the capacity auction on schedule. The most significant deadlines in question concerned the Minimum Offer Price Rule (MOPR) provisions, which would be substantially revised under PJM’s proposal.

But staff revisited the decision following stakeholder feedback.

The auction has been delayed from May to Aug. 14 to give FERC time to weigh in on the proposed rule changes and PJM time to implement the Commission’s decision, which had been expected by March 15.

In a March 11 filing, PJM urged the Commission to act “with expediency,” outlining potential problems created by the absence of FERC direction.

On Thursday, some members noted that FERC’s inaction has defeated the purpose of the delay and debated whether the best course of action would be to request yet another extension. Such a move, which is unprecedented, would likely result in holding auctions for the 2022-2023 and 2023-2024 delivery years within weeks of each other next year.

FERC is not obligated to rule on PJM’s proposal by any deadline, and some cautioned that there’s no guarantee the issue will be decided in a timely manner – even with another rescheduling.

In addition, Bresler noted, there are a number of related filings on which FERC has yet to rule – including on the issues of offer caps and seasonal capacity – adding to the uncertainty.

Meanwhile, several states independently are considering policies that would subsidize certain generation resources that participate in the auction – an issue at the heart of the filing.

PJM’s proposed reforms are in response to FERC’s ruling of June 29, 2018, which agreed with PJM that state subsidies distort the capacity market as currently designed, but differed on the remedy and provided general instruction on a solution.

FERC found that PJM’s current rules are not just and reasonable. However, absent any order, Bresler said, PJM is obligated to follow the existing Tariff.

Doing so introduces a risk, though. If FERC orders new rules and makes them retroactive, it could require PJM to re-execute the capacity auction.

With that in mind, Bresler introduced another option: Members could agree to ask FERC to approve interim auction parameters, which would expire once FERC orders a new set of rules. That would eliminate the potential of being ordered to re-run the auction.

Such a filing, which would be made under Section 205, would carry a 60-day timeline for FERC to respond. Bresler encouraged members to provide feedback and said they could expect an update at the April 10 Market Implementation Committee meeting.