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On January 20, 2022, FERC issued an order on remand from the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) directing PJM Interconnection, L.L.C. (“PJM”) to remove provisions from its Tariff that applied a 10 percent adder to the energy and ancillary services (“E&AS”) offset in PJM’s net Cost of New Entry (“CONE”) calculation. FERC acknowledged that energy market rules permit generators to increase their offers into the energy market by 10 percent above estimated costs. That fact alone, FERC concluded, does not justify application of the 10 percent adder to the E&AS offset in the Net CONE calculation used to establish the Variable Resource Requirement Curve (“VRR Curve”). Moreover, FERC concluded, PJM failed to present sufficient evidence to support inclusion of the 10 percent adder. FERC directed PJM to remove the 10 percent adder from its VRR Curve determination for the 2023-2024 Base Residual Auction (“BRA”) and subsequent auctions. FERC previously directed PJM to delay the start of the 2023-2024 BRA (see January 18, 2022 edition of the WER). In the January 20 order, FERC stated its expectation that PJM propose an amended BRA schedule that would provide it adequate time to remove the 10 percent adder from its Tariff. Commissioner James Danly issued a separate dissenting statement.
Continue Reading On Remand, FERC Reverses Prior Approval of PJM 10% Net CONE Adder

On December 17, 2021, FERC affirmed a Public Utility Regulatory Policies Act of 1978 (“PURPA”) qualifying facility (“QF”) self-certification for the Shields Valley Solar Facility (“Shields Valley”), a hybrid solar and battery project relying on inverters to limit its net power production capacity.  In doing so, FERC reiterated its finding in its Broadview Solar rehearing order that a QF owner can use MW net output at the point of interconnection, taking into account inverter losses and other components to produce electricity, in determining whether a facility meets the 80 MW statutory maximum for QF status.  Commissioner James Danly wrote separately in dissent explaining his view that Shields Valley plainly exceeds the statutory capacity limit for a QF.
Continue Reading FERC Affirms QF Self-Certification for a Hybrid Solar and Battery Project, Prompting Dissent from Commissioner Danly

On December 22, 2021, FERC issued an order on voluntary remand from the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) directing changes to PJM Interconnection, L.L.C.’s (“PJM’s”) reserve market design. FERC’s December 22 order reverses certain changes it previously ordered in May 2020 (“May 2020 Order”). The December 22 order affirmed FERC’s decision in the May 2020 Order to accept PJM’s proposal to consolidate its Tier 1 and Tier 2 Synchronized Reserve Products. However, the December 22 order required PJM to revert back to its currently-effective Reserve Penalty Factors, two-step Operating Reserve Demand Curve (“ORDC”), and a backward-looking Energy and Ancillary Services (“E&AS”) Offset. FERC directed PJM to apply the backward-looking E&AS Offset to the 2023/24 Base Residual Auction (“BRA”), which was previously scheduled to run in January 2022, notwithstanding any resulting delay to the auction schedule. FERC required PJM to submit a revised BRA schedule on compliance. Commissioner Christie issued a concurring opinion, and Commissioner Danly dissented in part.
Continue Reading FERC Reverses Certain Changes to PJM Reserve Market in Voluntary Remand Proceeding

On November 30, 2021, FERC issued and order accepting a California Independent System Operator Corporation (“CAISO”) tariff filing designed to clarify its market rules for hybrid and co-located resources. CAISO proposed two areas of revisions: 1) enhancing market participation for hybrid and co-located resources; and 2) allowing for the use of multiple aggregate capability constraints by co-located resources at a single generating facility in CAISO. Commissioner James Danly wrote separately questioning whether hybrid resources should continue to be exempted from CAISO’s resource adequacy requirements, but agreed the revisions were just and reasonable.
Continue Reading FERC Accepts CAISO Tariff Changes for Co-located and Hybrid Resources

On November 18, 2021, FERC issued a Notice of Inquiry (“NOI”) inviting comments on reactive power capability compensation and market design.  The NOI highlights various issues with reactive power filings that have resulted from significant changes to electric markets and the generation resource mix, including the potential for overcompensation.  The NOI seeks comment on various aspects of reactive power compensation, as well as potential alternative approaches that could be used to develop reactive power capability revenue requirements.  
Continue Reading FERC Issues Notice of Inquiry on Reactive Power

On November 29, 2021, FERC issued a notice stating that the requests for rehearing on PJM Interconnection, L.L.C.’s Focused Minimum Offer Price Rule (“Focused MOPR”) policy, which went into effect by operation of law on September 29, 2021 (see October 29, 2021 edition of the WER) were deemed denied by operation of law. FERC’s notice triggers a 60-day clock under the Federal Power Act for parties to petition for appellate review. The November 29 notice followed rehearing requests filed by parties including the Pennsylvania Public Utility Commission, Public Utilities Commission of Ohio, Electric Power Supply Association, Old Dominion Electric Cooperative, Vistra Corporation, and the New Jersey Board of Public Utilities. In addition to the rehearing requests, the PJM Power Providers Group has already appealed the Focused MOPR to the United States Court of Appeals for the Third Circuit, and submitted comments responding to Chairman Glick’s and Commissioner Clements’ joint statement in support of the Focused MOPR.
Continue Reading Parties Request Rehearing of PJM’s Focused MOPR Policy

On October 26, 2021, FERC issued an order accepting a California Independent System Operator Corporation (“CAISO”) tariff filing designed to improve CAISO’s markets by optimizing the performance of storage and demand response resources. CAISO proposed three distinct tariff revisions: (1) creating biddable state of charge parameters for energy storage; (2) applying market power mitigation to energy storage; and (3) enabling demand response resources to specify maximum daily run times.
Continue Reading FERC Accepts CAISO Proposal Regarding Storage and Demand Response Resources

On September 29, 2021, FERC recognized that PJM’s Minimum Offer Price Rule (“MOPR”) replacement proposal, previously filed with FERC on July 30, 2021, went into effect by operation of law after the Commission failed to act on PJM’s filing within the 60-day statutory deadline. FERC’s notice stated that FERC did not act on PJM’s filing because the Commissioners are divided two-to-two as to the filing’s lawfulness. Consistent with the Federal Power Act (“FPA”), the Commissioners each issued a statement explaining his or her view on PJM’s MOPR replacement proposal. Going forward, PJM’s MOPR replacement proposal has already been appealed based on an emergency request for rehearing of FERC’s September 29 notice. Additional requests for rehearing continue to be filed prior to the October 29 deadline.
Continue Reading PJM MOPR Replacement Takes Effect by Operation of Law; Commissioners Issue Separate Statements

On September 2, 2021, FERC accepted a new Market Seller Offer Cap (“MSOC”) in the PJM Interconnection, L.L.C. (“PJM”) capacity market that will require all capacity market sellers that fail PJM’s market structure test and offer above $0/MW-day to, at their election, obtain approval for their offer from PJM’s Market Monitor or utilize a default MSOC equal to the resource’s applicable net Avoidable Cost Rate (“ACR”)—i.e., its annual operating costs—less the resource’s net energy and ancillary services (“E&AS”) revenues (“ACR Proposal”). Commissioner James Danly issued a separate dissenting statement in which he argued that the ACR Proposal will lead to over-mitigation, in part because it will require the Market Monitor to review a higher number of capacity offers than under PJM’s previously-effective MSOC. In a compliance filing on FERC’s September 2 order, PJM asked for a 55-day delay of its upcoming capacity auction (currently scheduled to begin December 1, 2021) in order to allow time for the Market Monitor to perform the required unit-specific review under the new MSOC. As of this writing, FERC has not yet acted on PJM’s request.
Continue Reading FERC Accepts Replacement Offer Cap for PJM Capacity Markets; PJM Requests Capacity Auction Delay to Implement New Offer Cap

On September 7, 2021, FERC staff issued a whitepaper to frame discussions ahead of two technical conferences planning to discuss potential ancillary services reforms.  The whitepaper summarizes approaches that RTOs/ISOs are currently evaluating to reform energy and ancillary services markets to address the need for greater operational flexibility, including increasing shortage prices, procuring higher quantities of existing “traditional” ancillary services products (like an operating reserve demand curve), and creating new ancillary services products.
Continue Reading FERC Staff Issues Whitepaper on Energy and Ancillary Services Market Reforms Ahead of Technical Conferences