[USA] PJM to request a mid-auction capacity market rule change

During a presentation on the status of PJM’s 2024/2025 Base Residual Auction on December 21, 2022, Stu Bresler, Sr. Vice President of Market Services, stated that the grid operator plans to ask the Federal Energy Regulatory Commission (FERC) to approve a rule that would allow it to change a capacity auction parameter that led to anomalous results in its auction.[1] In the case of a small locational deliverability area (LDA) like Delmarva Power South, additions of large and/or intermittent units can lead to an increase in the area’s reliability requirement because capacity transfers are needed to account for times when the resources are not available. According to Bresler, when PJM determined how much capacity it would need, it assumed a mix of generators would offer about 1,000 MW in the Delmarva Power South area[2] because they had signed interconnection agreements. However, those generators didn’t bid into the auction, resulting in the LDA being short and the market clearing at an unjustly high price because of the increased reliability requirement.

Through a Section 205 filing[3], PJM plans to ask FERC to approve a rule change that would allow it to lower an area’s reliability requirement during the auction process if generators don’t bid into the auction as expected. PJM intends to ask FERC to make a decision on the proposal within 60 days. The grid operator expects to issue two sets of auction results on January 3, 2022. One set will show the results under existing rules, while the other will show results under the proposed rule. PJM will wait for FERC approval before clearing the auction. Joseph Bowring, President of Monitoring Analytics, PJM’s Independent Market Monitor, expressed his support for PJM’s actions.

[1] https://insidelines.pjm.com/pjm-updates-members-on-2024-2025-capacity-auction-results/

[2] Delmarva Power South covers part of Delaware, Maryland, and Virginia.

[3] In a Section 205 filing, the gird operator submits a new document containing or affecting a rate, term or condition of a FERC-jurisdictional service or charge with FERC for approval.

[USA] FERC approves ISO-NE plan to end MOPR

On May 27, 2022, in a 4-1[1] vote, the Federal Energy Regulatory Commission approved ISO New England’s (ISO-NE) plan to phase out its minimum offer price rule (MOPR) over two years.[2] A MOPR sets a floor price for bids in a capacity market to prevent resources from bidding artificially low prices. ISO-NE, which oversees grid operations in Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont, submitted the proposal to end its MOPR on March 31, 2022. ISO-NE proposed ending the MOPR in 2025. The transition will exempt up to 700 MW of qualified state-supported capacity (about 2,000 MW of nameplate capacity) from the MOPR over the next two capacity auctions. According to ISO-NE, adopting a two-year transition will help maintain reliability. The grid operator said that an immediate elimination of the MOPR could cause the retirement of existing capacity resources before state-sponsored resources are commercially available and able to replace the retiring resources.

FERC said the proposal “strikes a reasonable balance among the different considerations raised here, including efforts to ensure resource adequacy, minimize potential adverse effects on reliability that could result from an immediate change to the market rules, promote market certainty, and limit the costs associated with over-mitigation.” In his concurring statement, FERC Chairman Richard Glick said he wished the grid operator had proposed ending the MOPR immediately but stated that he understood that the New England states did not oppose ISO-NE’s proposal. He also urged ISO-NE to quickly develop “a capacity accreditation proposal to ensure that the [forward capacity market] is accurately valuing the capacity contribution of all resources.”

[1] Chairman Richard Glick (D), Commissioner Allison Clements (D), Commissioner Willie Phillips (D), and Commissioner Mark Christie (R) voted for the proposal. Commissioner James Danly (R) dissented.

[2] https://elibrary.ferc.gov/eLibrary/filedownload?fileid=8af6af9e-2c5f-c7bf-92cd-81084af00000

[USA] PJM MOPR could cost market consumers up to $2.6B annually according to new report

According to a May 2020 report released by consulting firm Grid Strategies, the Federal Energy Regulatory Commission’s (FERC) 2019 Minimum Offer Price Rule (MOPR) decision could cost customers in the PJM Interconnection from $1 billion to $2.6 billion annually.[1] The new estimate updates a previous cost analysis done by the group in August 2019 which found the MOPR could cost up to $5.7 billion per year.[2] The newest analysis finds the rule could cost consumers nearly $24 billion over the next nine years if FERC adopts minimum bid levels closer to PJM’s initial proposal rather then its most recent finding. Under that scenario, it is likely that subsidized nuclear units in Illinois, New Jersey, and Ohio will not be able to clear the capacity market. Under another scenario that assumes FERC adopts more recent PJM minimum bid levels, Grid Strategies still estimates that the rule will cost customers $10 billion over the same period. In this scenario, it is still possible that some units would not clear under PJM’s newest bid numbers.

Grid Strategies’ analysis comes in the midst of efforts by PJM to negotiate with stakeholders concerned by the MOPR’s potential impacts on state resource goals. Maryland and New Jersey have stated that they are looking at pursuing a Fixed Resource Requirement alternative which would allow parts or all of their state to secure capacity outside the wholesale market.[3]

[1] https://gridprogress.files.wordpress.com/2020/05/a-moving-target-paper.pdf

[2] https://gridprogress.files.wordpress.com/2019/08/consumer-impacts-of-ferc-interference-with-state-policies-an-analysis-of-the-pjm-region.pdf

[3] https://www.bpu.state.nj.us/bpu/pdf/boardorders/2020/20200325/3-27-20-2H.pdf