PJM Proposes Options to Tackle Price Distortions From Subsidized Resources

PJM Proposes Options to Tackle Price Distortions From Subsidized Resources

 

PJM Interconnection LLC on Oct. 2 unveiled a proposal addressing a June 29 directive from the Federal Energy Regulatory Commission to revamp the capacity market rules to address price distortion as the participation of sources receiving out-of-market state revenues continues to grow. The plan proposes an expanded minimum offer price rule or MOPR that would apply to existing and new resources regardless of fuel and technology types, along with a unit-specific carve-out option for resources that do not want to be restricted by the MOPR. The “Resource Carve-Out” mechanism would offer an alternative to MOPR allowing subsidized resources to obtain a capacity commitment without having to clear the capacity market. Recognizing that the mechanism would not completely protect market clearing prices from the “trade-off” resulting from uneconomic resources, the grid operator’s plan includes an “Extended Resource Carve-Out” that adds a price adjustment method to restore clearing prices closer to the competitive outcome. PJM said that the proposal would maintain the integrity of the wholesale markets while respecting state policy priorities. In August, the commission granted PJM’s request to delay the next capacity market auction for the 2022-23 delivery year from May to Aug. 14-28, 2019, to allow more time to implement market reforms.

 

 

Monty Bannerman

ArcStar Energy

+1-646-402-5076

www.arcstarenergy.com