COMPETE Comments to FERC To Implement Changes to PJM Interconnection’s Minimum Offer Price Rule

Dear Secretary Bose:
 
Please accept the following comments on behalf of the COMPETE Coalition in Docket Nos. EL11‐20‐000 and ER11‐2875‐000. These dockets involve proposed revisions to the Minimum Price Offer Rule (“MOPR”) in PJM Interconnection’s open access tariff. We ask that FERC take immediate action to prevent consumers in PJM states from paying for unnecessary power plants and protect well‐functioning competitive wholesale markets. Without changes to the MOPR, PJM’s competitive wholesale market, which has fostered the type of innovation and clean energy solutions that FERC has strongly encouraged, will be at risk with consumers suffering the consequences.
 
COMPETE is composed of 543 electricity stakeholders from around the nation, many of whom are customers and demand response providers with significant operations in the PJM territory who rely on market price signals to make business and operational decisions.
 
Bill S‐2381, passed by the New Jersey legislature and recently signed into law by the Governor, seeks to subsidize a select few uncompetitive power plants under the mistaken notion that this will create jobs and tax revenues in the state, while lowering prices for consumers. The legislation would impose a new energy charge paid for by all New Jersey residents and businesses that will undermine competitive electricity markets in PJM, increase prices for consumers and handicap the ability to grow energy efficiency and demand response programs throughout PJM.
 
COMPETE recognizes that states may desire to pursue policy goals, but such initiatives must be structured in a way that avoids harming competitive wholesale markets. Subsidizing certain participants in competitive electricity markets skews the supply and demand balance that sets the true market price.
 
If FERC allows those subsidies to be reflected in the PJM capacity price, it mutes the market signal that generators, demand response providers, and consumers rely on to determine whether to invest in new resources in the future. Allowing such subsidized resources to underbid the market can lead to a fundamental market failure and jeopardize reliability. Ultimately, more subsidies will be requested and the market will be replaced by regulatory decisions, and costs for consumers will go up.
 
PJM’s current MOPR language is not sufficient to eliminate the harmful effects of the New Jersey legislation or others like it. As in effect now, the MOPR will allow subsidized generation to participate in the PJM capacity auctions without any mitigation.

We support the P3 filing, and request FERC to make, at a minimum, the following three changes to the PJM MOPR to ensure that all resources compete fairly.
 
The conduct screen should be structured so that all bids are set at a competitive level. If states elect to subsidize a new entrant, PJM should be required to reset their auction bid to 100 percent of the generation’s costs. Anything less would enable and encourage uneconomic generation to be built in the PJM region and harm all customers. Anything less than full mitigation fails to send a clear message to other states that the exercise of local authority to impact multi‐state regional wholesale market prices is unacceptable. This is particularly important to our members because they do business in a number of states in the PJM territory.

Second, PJM should not be handicapped by current provisions in the MOPR that provide a window of opportunity for some out of market bids to avoid mitigation. Any subsidized bid will threaten the integrity of the auction. The impact screen provision in the current PJM MOPR allows for manipulation of the true capacity price. In a competitive business like our members are engaged in, “a little” anticompetitive action by their competitors is unacceptable and it should be the same for competitive generation resources in PJM. The impact screen in the current PJM MOPR is anti‐competitive and therefore it should be eliminated.

And finally, these rules should have the persistence needed so that subsidized resources cannot simply re‐bid in subsequent years and suppress prices. Mitigation of these resources should continue until market conditions neutralize the potential for the resource to exert improper influence on clearing prices.

If FERC does not take action to implement these changes to the PJM MOPR, state‐approved subsidies will manipulate the market, which will seriously erode business opportunities for our members and other consumers to participate in demand response and energy efficiency programs. The consequence will be less competitively built new generating capacity, less innovative solutions like consumer demand response, and ultimately, higher prices for all consumers in PJM. This will leave other states with no choice but to look for alternatives for competitive electricity wholesale markets, which is an unacceptable outcome for COMPETE Coalition members. We strongly believe in competitive markets for all commodities because they are the proven, most effective way to produce the most reasonable long‐term prices and to encourage efficiency and innovation.
 
Our members rely on their cost competitiveness, innovation, and operational excellence to succeed. For this reason, we request FERC to take action on this matter and correct PJM’s MOPR so that it eliminates the impact of these subsides and discourages other states in PJM from pursing similar anti‐competitive policies.

Sincerely,

Joel Malina
Executive Director