Dive Brief:

• PJM Interconnection's Independent Market Monitor, Monitoring Analytics, estimates capacity market costs will increase $8.4 billion annually based on the grid operator's current proposal to retain all units at risk of retirement in the market with subsidies, according to a memo released Monday.
• The plan, currently before federal regulators, is opposed by Monitoring Analytics and a variety of other stakeholders. The market monitor says its Sustainable Market Rule (SMR) proposal would lead to very minimal cost increases.
• "There's been a renewed interest in people talking to us about our SMR," Joseph Bowring, president of Monitoring Analytics, told Utility Dive. "One of the results of all of this hyperbole about the large impacts is that people are paying more attention to what might be sensible approaches."

Dive Insight:

The docket on PJM's capacity market reform is one of the most anticipated Federal Energy Regulatory Commission (FERC) decisions in September, as it will have a significant impact on subsidized energy resources in 13 states and Washington DC.

Last year, PJM submitted Resource Carve-Out plans closely tracking FERC recommendations and blocking low bids in its capacity market from resources that receive subsidies, as states attempt to create market signals for zero emissions energy generation. Under this Minimum Offer Price Rule (MOPR), subsidized resources blocked from PJM's capacity auction could obtain a capacity commitment by entering the Resource Carve-Out, as PJM seeks to limit market influences of state subsidies.

PJM's market monitor had opposed this plan, adding that it would nearly double capacity market payments if all units at risk of retirement were subsidized to remain in the market. Subsidizing half of the units at risk of retirement would increase capacity payments by 17.4% or $1.6 billion, according to the market monitor's report.

Monitoring Analytics is uniquely positioned to sound off on the costs of capacity market reform proposals.

"Nobody, aside from the grid operator and its market monitor, has access to the confidential market offers needed to calculate the precise cost," Devin Hartman, president and CEO of the Electricity Consumers Resource Council, wrote in a recent Utility Dive op-ed.

PJM's market monitor released a memo regarding a current report from Grid Strategies, which found the cost for the grid operator's MOPR plan would fall within the market monitor's estimated range, at $5.7 billion per year.

"We were evaluating the effects of broad application of MOPR without exemptions which is one real possibility," Rob Gramlich, founder and president of Grid Strategies, told Utility Dive via email.

The Grid Strategies analysis was accused of "cherry-picking" figures by two groups that support PJM's efforts to limit the influence of state subsidies on the market. The Electric Power Supply Association and the PJM Power Providers Group questioned the integrity of the analysis in their recent op-ed with Utility Dive. Grid Strategies has since responded to the criticism.

Monitoring Analytics' analysis "agreed with Grid Strategies that [PJM's] specific proposals should be rejected," according to the memo, adding that the "report fails to identify a preferable path forward other than vague references to bilateral purchases."

The market monitor's own approach to subsidies in the capacity market is expected to have a "zero to insignificant" impact on the offers and the clearing of renewable resources by not requiring "new renewable resources to offer at artificially higher prices."

The Monitoring Analytics SMR "would be different, and much lower," Gramlich added.

Monitoring Analytics anticipates growing interest in its own capacity reform plan from other stakeholders in the PJM capacity market reform docket.

"The PJM market design has brought significant benefits to participants and the fundamental design of PJM markets is sustainable," Monitoring Analytics wrote in their memo. "There is no reason to overturn the key components of the PJM capacity and energy markets. There is no reason to create convoluted capacity market rules to exclude any competitive offer from any technology including renewable and nuclear technologies. There is no reason to artificially increase energy prices to benefit uneconomic nuclear and coal plants."

The case may continue undecided at FERC until Commissioner Rich Glick's recusal is waived or once it expires on November 29. The White House is also expected to soon nominate a commissioner to fill one of two vacancies at FERC, which would potentially restore quorum for the PJM docket.