On May 21, 2020, FERC denied two 2017 complaints alleging that PJM Interconnection, L.L.C.’s (“PJM’s”) capacity procurement rules are unjust and unreasonable as applied to seasonal resources. FERC concluded complainants failed to show that PJM’s single annual capacity product is unjust and unreasonable, and rejected arguments that the rules discriminate against seasonal resources. Commissioner Richard Glick filed a separate concurring statement.
PJM’s annual capacity market uses a single capacity product, referred to as Capacity Performance, under which participating generation resources must deliver a committed level of electricity at any time for the entire year. When it accepted the Capacity Performance product in 2015, FERC held that using the same capacity requirement for winter and summer would increase reliability; and that applying an annual capacity product to all generating resources, including seasonal resources, was appropriate because it created the same expectations for all capacity resources without regard to technology type. PJM later amended its capacity market rules to provide an aggregation mechanism whereby seasonal resources pair up in order to provide what is effectively an annual product.
Old Dominion Electric Cooperative and the Advanced Energy Management Alliance filed complaints against PJM in January 2017 alleging that the Capacity Performance construct is unjust and unreasonable because it prevents participation of seasonal resources in the capacity markets. The complainants pointed to the fact that PJM is a summer-peaking system, and provided planning studies and other data they argued showed that capacity needs in PJM vary between seasons. Complainants therefore argued that PJM could procure capacity in a manner that better recognizes those seasonal needs and satisfies its resource adequacy targets more cost-effectively. FERC agreed that the evidence justified additional investigation, and convened a technical conference, which was held in 2018 (see March 6, 2018 edition of the WER).
FERC’s May 21 order denied the complaints, finding that the data provided by the complainants and at the 2018 technical conference was insufficient to justify a finding that the Capacity Performance model is unjust and unreasonable. FERC also rejected arguments that the Capacity Performance model unfairly discriminates against seasonal resources, and, pointing to PJM’s amendments to permit aggregation of seasonal resources, observed that PJM had already acted to improve the ability of its capacity market to integrate seasonal resources. FERC concluded that it was not convinced that PJM should abandon the Capacity Performance model, and that PJM deserved the opportunity to gain more experience with the model to determine whether it provides performance and reliability during all seasons of the year.
In a separate concurring statement, Commissioner Glick agreed that the record did not demonstrate that the Capacity Performance model is unjust and unreasonable. However, Commissioner Glick added that a seasonal capacity construct appears to be a more just and reasonable approach that could allow more resources to provide capacity, thereby increasing competition and promoting more efficient pricing.
FERC’s May 21 Order is available here.