FERC turns down provisions in PJM's minimum offer price rule after court remand

Dive Brief:

The Federal Energy Regulatory Commission last week rejected changes to PJM Interconnection's minimum price offer rules (MOPR), reversing its 2013 decision after the D.C. Circuit Court of Appeals remanded the case back to the agency.
The court sided with generators in July, after they requested a review of the agency's decision. The D.C. Circuit determined FERC's conditions on its initial approval went beyond the "passive and reactive role" prescribed under the Federal Power Act (FPA).
In FERC's Dec. 8 decision, the agency said it would allow PJM to revise its minimum offer rules "if it determines doing so will cure the deficiencies with the December 2012 filing."

Dive Insight:

PJM's 2012 proposal to alter its MOPR was the result of a compromise between generators and load-serving entities, but FERC conditioned the proposal on the grid operator's retention of the unit-specific exemption. The Circuit Court concluded that condition resulted in an "entirely different rate design," sending it back to FERC, which has now rejected PJM's proposal.

"PJM’s perceived deficiencies of the unit-specific review process do not justify the implementation of the categorical exemptions when the exemptions alone could result in the application of the default offer floor to a resource that can establish its costs are lower than the default offer floor," FERC wrote in its order last week.

And the commission added that, "even if, as PJM alleges, conducting unit-specific reviews are somewhat more administratively complicated than implementing the two categorical exemptions, such difficulties are not sufficient to justify mitigating a resource with competitive costs."

The minimum offer rule was developed to keep state subsidies from artificially depressing prices, an issue which market operators and FERC are still dealing with today. In May, the agency held a technical conference on wholesale power markets, as stakeholders searched for ways to integrate state policies into organized markets.

FERC has directed PJM to submit a compliance filing within 30 days of its order, and also said its decision was "without prejudice to PJM submitting a new, revised FPA section 205 filing if it determines doing so will cure the deficiencies with the December 2012 filing."