The PJM Interconnection's proposal to relax its minimum offer price rule (MOPR) took effect Wednesday after the Federal Energy Regulatory Commission's four members deadlocked on the plan.
The "focused" MOPR will allow resources like wind farms and nuclear power plants with state subsidies to take part in PJM's next capacity auctions without the threat their bids will be increased by the grid operator's current market rules. The grid operator has asked FERC for permission to delay its upcoming auction from Dec. 1, 2021, to Jan. 25, 2022.
The Electric Power Supply Association (EPSA), a trade group for competitive power suppliers that opposes the focused MOPR, is considering asking FERC for a rehearing, a required step before petitioning the D.C. Circuit Court of Appeals to review the focused MOPR.
FERC's inability to reach a decision on PJM's proposed changes to its MOPR — a rule designed to prevent a market participant from offering artificially low bids to suppress capacity prices — is the latest twist in a controversial regulatory process.
In June 2018, FERC ordered PJM to expand its MOPR to prevent subsidized resources from distorting the grid operator's capacity market, which aims to make sure PJM has enough power supplies to meet its needs. FERC Chairman Richard Glick, then a commissioner, voted against the decision.
FERC in October 2020 largely approved PJM's plan to revamp its capacity market. Glick dissented, calling the MOPR proceeding " one of the commission's all-time worst, both in the baffling decisions it reached and the bumbling way in which it got there."
During the process, states like Maryland and New Jersey considered pulling out of the capacity market, saying the expanded MOPR was a barrier to their clean energy goals. Renewable energy advocates also opposed the expanded MOPR. PJM runs the grid and wholesale power markets in 13 Mid-Atlantic and Midwest states and in the District of Columbia.
Responding to state concerns, PJM in February started a fast-track stakeholder process to revise its MOPR. The process led to an overhaul proposal that was widely supported by the grid operator's members.
Under the new rules, renewable energy facilities and nuclear power plants will be exempt from the MOPR, as will demand-response and energy efficiency programs, along with new natural gas-fired power plants.
Parties will be able to file complaints at FERC if they believe a state-backed power facility should see its capacity bids increased via the MOPR.
Independent power plant owners, natural gas companies and Monitoring Analytics, PJM's market monitor, opposed the focused MOPR, in part because they said it would lead to unjust electric rates and it would be overly complex.
EPSA is considering its options, according to Todd Snitchler, EPSA president and CEO.
"We will continue to pursue what we think is the better path forward which would be to reject the as-filed MOPR and allow sufficient time to pursue a more holistic approach to respond to the concerns raised by FERC and the states," Snitchler said in a statement.
Renewable energy groups were pleased the focused MOPR will take effect.
"The narrowly-tailored MOPR that PJM filed corrects rampant legal and economic flaws in the pre-existing expanded MOPR, and reaffirms the importance of respecting and accommodating legitimate state energy policy objectives in the wholesale market," Advanced Energy Economy Managing Director Jeff Dennis said in a statement.
The narrowly-tailored MOPR returns the market rule to its original purpose of addressing the limited circumstances where capacity buyers have an incentive and ability to manipulate market prices, Dennis said.
PJM's revised MOPR reflects states' desires to determine their own generating resource mix, according to Paul Patterson, an equity analyst with Glenrock Associates.
"It's an acknowledgement of the reality on the ground and will make it easier to provide subsidies to the facilities states want," Patterson said.
Some states want a resource mix that isn't market driven, Patterson said.
The FERC commissioners will explain their views on PJM's proposal in comments to be filed in the proceeding.