Market Policy

Subscribe to Market Policy via RSS

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

On July 9, 2021, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) denied in part and granted in part a petition for review of FERC’s orders accepting revisions to PJM Interconnection, L.L.C.’s (“PJM”) Forward Capacity Market (“FCM”). The Petition was filed by the Delaware Division of the Public Advocate, Maryland Office of the People’s Counsel, and the Office of the People’s Counsel for the District of Columbia (“Petitioners”). The Court upheld FERC’s use of a Combustion Turbine (“CT”) plant as the Reference Resource in approving the net Cost of New Entry (“net CONE”) calculation, and found that FERC’s approval of a 10 percent adder on Reference Resource’s assumed energy market offer was arbitrary and capricious. The Court remanded the case for proceedings consistent with its decision on the 10 percent adder.
Continue Reading D.C. Circuit Upholds Use of Combustion Turbine as Reference Resource in PJM Capacity Market, Finds 10% Net CONE Adder Arbitrary and Capricious

On June 23, 2021, FERC accepted in part and rejected in part the New York Independent System Operator’s (“NYISO”) February 2021 proposal to revise its process for procuring operating reserves throughout the New York Control Area (“NYCA”). FERC accepted NYISO’s proposed revisions to its Operating Reserves Demand Curve (“ORDC”), including revisions to certain shortage pricing values, subject to a compliance filing providing at least two weeks’ notice of the actual effective date of the revisions. NYISO subsequently submitted that compliance filing on June 29, 2021 noting an effective date of July 13, 2021. The June 23 order also rejected NYISO’s proposal to establish a process for procuring reserves in excess of quantities required by minimum reliability standards, without prejudice to NYISO submitting a more specific proposal in the future.
Continue Reading FERC Accepts NYISO Operating Reserve Pricing Proposal, Rejects Proposal for Procuring Supplemental Reserves