Gavin Bade, Utility Dive
FERC’s June order finding PJM's market rules unjust and unreasonable is the product of years of debate among players in the mid-Atlantic electricity market over the impact of state energy policies.
Gas and coal generators argue policies like nuclear subsidies and renewable energy mandates allow those resources to bid into the capacity market at lower prices than they otherwise would, suppressing the clearing price for the whole market.
In response to those concerns, PJM in March proposed two options to reform its capacity market at FERC — a price floor and a two-part capacity auction that would separate out subsidized resources.
FERC's decision sided with the generators, finding the state policies improperly altered market prices. But it also rejected both of PJM's proposed solutions, directing it instead to devise a new market rule that would allow subsidized resources to opt out of the capacity market altogether.
PJM did not challenge FERC's rejection of its proposals in its rehearing request, but asked for more detail on whether elements of its two-part capacity repricing proposal could be included in its final market fix. FERC approved a similar proposal in May for ISO-NE.