Dive Brief:

• Federal Energy Regulatory Commissioner Neil Chatterjee told House lawmakers this week he does not support a provision in a recent FERC order establishing Minimum Offer Pricing Rules (MOPRs) as the “standard solution” to deal with state power subsidies.
• Chatterjee said he voted for the order including the provision because it was “necessary” to ensure approval of a two-part capacity market auction proposed by ISO-New England. Commissioners Cheryl LaFleur and Richard Glick issued statements opposing the provision, which Chatterjee now says he should have done.
• The announcement means a majority of FERC commissioners do not support the provision — paragraph 22 of the capacity market order. Chairman Kevin McIntyre appears to have pushed for the provision’s inclusion, but neither he nor Commissioner Robert Powelson responded to requests for comment.

Dive Insight:

FERC’s view of paragraph 22 is likely to affect how it views pending market reforms from other grid operators — not least the PJM Interconnection, which has both a MOPR proposal and two-part capacity market plan currently pending before the commission.

The paragraph would establish MOPRs as the “standard solution” in the absence of other reforms to adapt electricity markets to state energy policies like renewable portfolio standards and nuclear subsidies. MOPR rules set a minimum price under which resources may not bid into the market, limiting the price effect of subsidies.

The paragraph was controversial from the release of FERC’s decision approving ISO-NE’s Competitive Auctions with Subsidized Power Resources (CASPR) proposal.

The plan was approved 3-2, with Chatterjee, McIntyre and LaFleur supporting it. But LaFleur and Glick opposed paragraph 22 in separate statements, saying it would go too far to counteract state policies.

Chatterjee’s silence on the matter had led some market observers to assume he did not oppose the paragraph. That’s a sentiment he hoped to correct in his appearance before the House Energy and Commerce Committee this week.

“Quite frankly it was after we issued CASPR when I realized that because I hadn’t issued a concurrence people were assuming that I then supported the MOPR concept laid out in paragraph 22,” Chatterjee told Utility Dive the day after the hearing. “Now, looking back on it, I should have seen that they would assume that I therefore supported that language as it was written. I should have done a concurrence.”

Chatterjee said that while he never supported paragraph 22, he concluded approving CASPR was more important and the provision was necessary to secure its passage.

“The three of us who were going to support [CASPR] had to work together to have it pass, and at the end of the day, to me, it was more important that it get out the door than I get caught up on the specifics of language,” he said. “So while I would have preferred paragraph 22 to be edited out or edited in some degree, in the end, it was necessary to secure the three votes to pass.”

LaFleur expressed a similar opinion in her concurrence, writing that her opposition to paragraph 22 was a separate issue from the two-part capacity auction proposal. She reiterated that sentiment to Utility Dive on Wednesday.

“In my concurrence I said paragraph 22 wasn’t pertinent to whether we said yes or no to ISO-NE,” LaFleur said. “It was very important to me to give ISO-NE an answer on their proposal and I thought on balance it was just and reasonable.”

Chatterjee and LaFleur’s opposition to paragraph 22 suggests it is Chairman McIntyre who pushed for its inclusion, as he is the sole member of the CASPR vote majority who has not publicly opposed the paragraph.

Chatterjee and LaFleur would not comment on specific negotiations, but Chatterjee noted that the chairman had leverage over other members of the majority, as they viewed CASPR approval as more important than eliminating the paragraph.

“When you need all three votes for it to pass, if somebody is insisting on paragraph 22 staying in and I threaten to remove my vote unless paragraph 22 comes out, then we’re at a standstill and somebody has got to give there,” Chatterjee said. “I wanted CASPR to pass. I had to compromise to get it passed.”

Interpretation of the CASPR order is likely to have a direct effect on FERC’s evaluation of PJM’s dual capacity market reform proposal. This month, the grid operator filed both a two-part capacity auction and an expanded MOPR rule at FERC, asking regulators to choose between them.

Other provisions of the CASPR order are likely applicable to that evaluation, such as paragraph 21, which lays out general guidelines for capacity market functions. Regulators declined to comment on that part of the order, as there are pending rehearing requests at FERC, but Chatterjee said attention to the CASPR decision from other grid operators was a key reason to announce his opposition to paragraph 22.

“People are reading tea leaves into what we do and there were a lot of people including probably PJM who tried to read into CASPR and submit a filing based on what they thought they learned from CASPR,” he said. “The reading that people were having of my position was not accurate and I wanted to correct that because I’m cognizant people are paying attention to these things."