The Federal Energy Regulatory Commission on Thursday voted 3-1 to vacate an "infamous" footnote added to a rehearing order on the PJM Interconnection's broader minimum offer price rule (MOPR) proceeding.
FERC's order eliminates confusion over the footnote, which had suggested that New Jersey's default service auction could be considered a state subsidy under the expanded MOPR. "I believe this, finally, is the end of the commission's PJM MOPR proceeding," said Chairman Richard Glick. "Although I disagreed with our various MOPR orders, I do believe it is time for PJM to move ahead with the capacity auction, which has unfortunately been delayed for several years."
Commissioner James Danly, the sole dissenting vote, said he was "disappointed" to see the footnote gone. "To have anything but a bright line against the participation of subsidized resources is simply an error and a dereliction of the duty to keep our markets properly insulated," he said. FERC also announced on Thursday it would be hosting a series of technical conferences on "modernizing" market design, with the first focused on PJM's capacity construct.
FERC's PJM MOPR order effectively raised the bidding price for state-subsidized resources bidding into the wholesale capacity market. The commission issued a clarifying order in October, that said "certain state default service auctions … do not meet the definition of state subsidies" and therefore would not be subject to the MOPR, but a footnote sowed confusion. It suggested that New Jersey's default auction could be considered a state subsidy because under state law, a certain portion of utility procurements need to come from renewable energy.
Default service auctions are offered by restructured states as an alternative to retail suppliers, and Glick at the time raised concerns that interfering in these proceedings would be an overstep on the commission's part.
Then-Chairman Neil Chatterjee dismissed those concerns, but changed his tune during FERC's January meeting, chaired by Danly, voting against keeping the footnote in, and ultimately siding with Glick Thursday.
"Today's action clarifies once and for all that revenue from a state's non discriminatory and competitive default service auction does not qualify as a state subsidy that triggers the MOPR," said Chatterjee during the meeting. "The footnote that we vacate today was mere dicta, in my view, and it muddied the path forward. I'm pleased we could clean up that confusion, and was happy to work closely with the chairman on this issue."
Wrapping up the PJM MOPR proceeding means the grid operator can move forward with its 2022/2023 capacity auction, which has been delayed since July 2019. It will also allow stakeholders to assess the full impacts of the MOPR on the market and its resources, something Chatterjee has been advocating for since the order was first passed at the end of 2019.
Commissioner Allison Clements emphasized on Thursday that although she was opposed to the MOPR's "broad application" across eastern grid operator regions, such as in PJM, the New York ISO and the New England ISO. She added that the technical conferences were an "appropriate" way to proceed with examining broader market issues.
"I'm optimistic that stakeholders can come together to formulate their own effective solutions, but the commission must be prepared to act if they do not," she said. As to PJM specifically, thus far, it seems the grid operator "has appropriately focused on developing a near term solution to bring their capacity markets into congruence with state policies."
Tensions between state and federal regulators, as well as with PJM broadly, have become more pronounced in recent years, particularly under the MOPR.
"The biggest threat ... to PJM and to the competitive marketplace is the RTO and/or the transmission owners messing with sovereign states' rights," Maryland Public Service Commissioner Anthony O'Donnell said earlier this year, blaming the grid operator for various delays impeding the state's ability to advance its clean energy policies.