With a new Federal Energy Regulatory Commission on the horizon, states that opposed the agency’s minimum offer price rule expansion within the PJM Interconnection are grappling with how or whether to continue fighting the rule. 

Former FERC Chairman Neil Chatterjee and others who supported the order are urging states to wait out the impact before making any consequential decisions — such as exiting the capacity market altogether. But some of the MOPR’s strongest state opponents fear there is no time to wait. And though a new FERC is coming, it may be too little, too late.

"We wish that a new FERC could just simply wave its wand and get rid of the MOPR," said David Kolata, executive director of the Citizens Utility Board of Illinois. But "we can't wait for a new FERC to solve the mess that the previous FERC created, because that can't happen right away," he added.

Illinois, New Jersey and Maryland were the MOPR’s most vocal PJM state critics, due to the coastal states’ offshore wind targets and all three state’s ambitious clean energy goals. Maryland and Illinois are contemplating legislative resistance, while New Jersey is mulling various regulatory avenues. 

While stakeholders are split on whether to move and quickly or whether to wait out new leadership, those in the former camp say it isn’t just MOPR they’re targeting.

"MOPR was kind of the most outrageous offensive violation of our ability to set policy," said Maryland Delegate Lorig Charkoudian, D, but it also highlighted a broader potential weakness in state legislatures’ power to control resource decisions more generally.

"If we're not kind of sufficiently organized and coordinated, then all those efforts can be undermined by PJM and by FERC," she said.

To exit, or not to exit, that is the question

Within days of FERC’s decision to uphold its minimum offer price rule expansion in the PJM Interconnection, three states filed lawsuits challenging regulators’ authority to implement such an order. In the months preceding and following the lawsuits, those same states were pursuing a number of strategies to mitigate the rule’s impact, or exit the PJM capacity market altogether. The strength of their opposition began to frighten away stakeholders who had initially supported the policy, including competitive generators. 

What many stakeholders now agree on is that the MOPR expansion is not the best long-term solution. The key disagreement surrounds states’ most direct proposed solution: exiting the capacity markets altogether through a fixed resource requirement (FRR). Though it has the support of some key stakeholders including state investor-owned utilities, it faces opposition from competitive suppliers and other market advocates.

Advantages of leaving include an immediate elimination of the MOPR, as well as broader relief from capacity market constraints. There also appear to be fewer good options for states, argue some stakeholders. 

But opponents of the FRR note the high price tags cited by the PJM Independent Market Monitor, and fear it could inhibit market competition in those regions. And, they argue, market-based mechanisms such as carbon pricing present a safer alternative.

Maryland

For Maryland, "everything is still on the table," including an FRR option, Maryland Public Service Commissioner Odogwu Obi Linton said during the Mid-Atlantic Renewable Energy virtual summit on Wednesday. PJM’s independent market monitor has estimated an FRR approach could set ratepayers back up to $206 million in the next capacity auction, something regulators and lawmakers are keeping in mind, said Obi Linton.

"There's been a lot of concern that there could be an increase in prices to consumers. And I know that [the PJM IMM] suggested it financially would be challenging for us to proceed that way," he said. "But the reality is that …  consumers want renewable energy here in Maryland. We know that they want it, we know that they are willing to support it, and our general assembly knows that as well. So there's a lot of eagerness to find a solution."

The state’s legislature began working on mitigating the MOPR earlier this year, but a shortened legislative session due to the COVID-19 pandemic limited those efforts. Ahead of the 2021 legislative session, there are still a lot of questions, said Charkoudian, who led the legislature’s efforts earlier this year. There is a question of how long the MOPR will be in place to begin with, as well as uncertainties around PJM’s compliance with the order, including whether default service auctions are considered a subsidy. And if the legislature does decide to pursue an FRR, there’s a question of what that mechanism would actually look like, she said, and ensuring it protects ratepayers. With all that to consider, "at some point, we need to decide are we moving forward? How are we moving forward? And that decision has to get made in the next couple months," she said. 

If the state ultimately doesn’t pursue an FRR, there are still issues it wants to resolve with PJM over its capacity market, which Charkoudian said is currently oversupplied, and oversupplied with fossil fuels.

"Even if we don't end up having to go forward with an FRR, potentially these conversations we're having will help inform that bigger conversation of how we can structure capacity markets … to really reinforce the values we have of ratepayer protection and, and climate protection," she said.

New Jersey

In New Jersey, the FRR has also been floated as an option, but fears over costs and uncertainty are muddying the picture.

"We have to come up with a solution that is palatable to the ratepayers of New Jersey, taking into consideration the cost and affordability issues, as well as the long term," said BPU Commissioner Upendra Chivukula during the Wednesday summit, adding the MOPR "is not sustainable in the long run."

New Jersey regulators in March launched an investigation into alternative resource adequacy mechanisms it could pursue to stay on track to reach its 100% clean energy goals. Exelon and the Public Service Enterprise Group urged the Board of Public Utilities to pursue an FRR approach that would commit the state to at least five years under that approach, but estimates from the grid operator’s independent market monitor found the state could lose up to $386 million during the 2021/2022 capacity auction under that approach. And though offshore wind was a major driver for the state’s desire to get rid of the MOPR, permitting delays may prolong those project timelines anyway.

With mounting uncertainty around costs, some in the state are urging regulators to wait and see what happens with FERC under Biden. 

"PSEG and Exelon continue to insist the Board must act quickly. However, given the significant level of uncertainty regarding almost every aspect of the PSEG-Exelon FRR proposal, the Board should decline the invitation to act in haste," wrote the New Jersey Division of Rate Counsel in November comments filed with the BPU. "In addition, the recent national elections have added another level of uncertainty. A change in presidential administrations will likely result in a change in federal policy toward clean energy resources."

BPU’s investigation is ongoing, spokesperson Peter Peretzman said in an email. "The Board continues to monitor changes at the Federal level and we look forward to working with the incoming administration on these critical energy policies," he added.

Illinois

If an FRR develops in Illinois, it will be through the state’s Clean Energy Jobs Act (CEJA), a comprehensive clean energy bill that would put the state on a path to 100% renewable energy by mid-century. The bill also includes a provision that would give Illinois regulators the option to opt out of PJM’s capacity market through an FRR. A coalition of clean energy, environmental, business and consumer groups support the provision, considering it the state’s best chance to reach 100% renewable energy, and do so affordably.

"From our perspective, we haven't seen an approach that works as well as a well-designed FRR. But that doesn't mean it doesn't exist," said Kolata, who is part of the coalition.

But that mechanism incited backlash earlier this year from competitive suppliers, the Illinois Chamber of Commerce and the governor, among others, following recent bribery charges leveled against Exelon subsidiary Commonwealth Edison. Gov. J.B. Pritzker in his clean energy roadmap called out the provision specifically, arguing it could increase the subsidies paid to Exelon nuclear plants, and ultimately raise costs for customers. 

"Although nuclear plants are integral to achieving our clean energy goals and integral economic drivers in the communities where the plants are located, taxpayer and ratepayer financial support for these plants cannot be a blank check," the policy statement reads. Instead, the governor’s office proposed the state pursue a carbon price.

The governor’s office did not respond to request for comment on whether including the FRR provision would ultimately be a deal breaker for the bill.