On February 18, 2021, FERC took action in a multi-year dispute over the PJM Interconnection’s capacity market pricing rule known as the Minimum Offer Price Rule (or, “MOPR”) by vacating a single troublesome footnote from its last order, making way for PJM to move ahead with its annual capacity auction after years of delay. The U.S. Court of Appeals for the Seventh Circuit will soon take up a host of appeals of FERC’s decisions on the controversial MOPR.
In essence, the MOPR purports to create a capacity market offer floor for certain types of resources that PJM deems to be receiving “out of market subsidies.” In the multi-year proceeding concerning the expansion of the MOPR in PJM’s wholesale capacity markets, FERC effectively raised the bidding price for state-subsidized resources by directing PJM to apply the MOPR to capacity resources receiving state subsidies, which are often renewable resources, whereas prior to PJM’s delayed 2019 auction the MOPR only applied to natural gas-fired resources (see October 22, 2020 edition of the WER). Confusion arose, however, over FERC’s October 15, 2020 Order accepting changes to PJM’s tariff that describe the process and criteria necessary to determine whether certain state default service auctions met the definition of state subsidies, and specifically as to whether footnote 134 of that order suggested that New Jersey’s default service auction could be considered a state subsidy under the expanded MOPR because a certain portion of utility procurement must come from renewable energy.
Footnote 134 provided that FERC’s October 15 Order did not constitute a ruling that any particular state-directed default service auction actually meets PJM’s state subsidy exemption requirements, including, by way of example, New Jersey’s default service auction. The footnote goes on to explain, however, that FAQ guidance issued by New Jersey about the auction appeared to conflict with the notion that the auction met PJM’s exemption requirements.
FERC modified the October 15 Order to vacate footnote 134, deferring instead to PJM’s tariff language, which was accepted and is now the filed rate.
Commissioner James Danly dissented, explaining his view that the footnote was not inconsistent with the tariff, noting that it expressly stated that FERC did not make a ruling as to whether any particular state auction met PJM’s requirements. Danly stated it was well within FERC’s authority to explain any limitations on the scope of the earlier decision (permitting the exception from the definition of a state subsidy for state procurement auctions that meet certain defined characteristics) and that he believes the questions raised in the footnote were relevant to determining whether the auctions constitute a state subsidy under the tariff.
Significant uncertainty for the MOPR remains. Chairman Glick and Commissioner Allison Clements have been vocal critics of the role the MOPR plays in thwarting state renewable energy initiatives. In addition, FERC’s MOPR decisions are currently under appeal at the Seventh Circuit. FERC also announced on February 18, 2021, that PJM’s capacity construct would be the first in a series of technical workshops on resource adequacy.