On December 19, 2019, the Federal Energy Regulatory Commission (FERC) issued an order directing PJM Interconnection, LLC (PJM) to expand its current Minimum Offer Price Rule (MOPR) in a manner that will disadvantage new renewable resources participating in the PJM capacity market.
The PJM competitive capacity market compensates energy suppliers who maintain available capacity to meet peak demands ‑‑ typically during the depths of winter cold snaps or summer heat waves. Energy suppliers compete for payments in this market through a sophisticated auction process.
Some suppliers complained that renewable and, in some states, nuclear energy sources had an unfair advantage because they received some form of subsidy or reserve under state-mandated programs. The complaint alleged that a renewable resource receiving a state subsidy could “unfairly” submit a lower bid in the capacity auction.
The impacted states and renewable sources argued that the subsidies or reserves were designed to accomplish specific state policy goals, particularly greenhouse gas reduction. They argued that any change to offset those subsidies would frustrate these goals.
This order achieves the following:
Renewable resources that are already constructed will not have to meet the requirements of PJM’s new MOPR rule. However, the order is likely to have a significant impact on financial projections for any renewable resource that has not yet been built. It may also affect any existing resources that receive subsidies under new state programs. When released, the PJM compliance plan should be reviewed to determine the exact scope of the impact.
The order is expected to also influence plans in some states regarding subsidies for nuclear power plants. Nuclear plants receiving subsidies under any new state programs will also likely be required to comply with the MOPR rules.
Michael C. Powell
(410) 576-4175 • email@example.com
Margaret M. Witherup
(410) 576-4145 • firstname.lastname@example.org