Dive Brief:

• The PJM Interconnection asked the Federal Energy Regulatory Commission on Tuesday to allow it to delay its May 2019 capacity market auction if the commission cannot make a final decision on rules for the market by early January.
• PJM and its member states asked FERC last month​ for more time to respond to a June order invalidating the rules for PJM's capacity market. If FERC grants that deadline extension, PJM said it will need to delay the auction until August 14, 2019.
• A delay in the capacity market auction would be "unusual but is not unprecedented," PJM said in a blog post. The 2015 auction, which provided power for the 2017-2018 delivery year, was pushed to August from May to provide PJM time to implement its capacity performance rules for generators.

Dive Insight:

FERC's June 29 decision throwing out the rules for PJM's capacity market is the product of years of wrangling over the effect of state energy subsidies on market functions.

Gas and coal generators argue state policies that benefit other resources, like renewables or nuclear plants, suppress the market clearing price for the fossil generators, lowering their revenues.

In response to those concerns, PJM in March proposed two capacity reform options at FERC — a price floor and a two-part capacity auction that would separate out subsidized resources.

FERC's decision sided with the generators, finding the state policies improperly altered market prices. However, the commission also rejected both of PJM's proposed solutions, ordering it to design new market rules that would allow subsidized resources to opt out of the capacity market altogether.

That solution would have to come quickly to be in place in time for PJM's next capacity market auction in May, but FERC assured market participants it would render a final decision in early January to provide time to plan the auction.

To keep that schedule, FERC ordered PJM to file its revised plans by Aug. 28 in a special proceeding called a "paper hearing."

PJM's CEO initially told Utility Dive that the grid operator would respond to FERC's decision within that timeframe, but late last month PJM states asked FERC for a deadline extension, and the grid operator filed in support of the request two business days later.

If FERC grants that deadline extension, PJM said in its filing that it would need to also delay its auction to "allow stakeholders, PJM, and the Commission more time to develop and establish the replacement rules," and provide "the necessary timeframe to conduct the auction in an orderly manner once the replacement rules are known."

The grid operator pushed FERC to make a decision quickly, writing that "stakeholders have suggested to PJM, and PJM agrees, that if the BRA [Base Residual Auction] is to be delayed, auction participants should have notice of that delay at the earliest practicable date."

FERC's invalidation of PJM's market rules has stirred consternation in the mid-Atlantic electricity market, the nation's largest. State members filed last month for a rehearing of the decision at FERC, saying the federal regulators overstepped their jurisdiction and misjudged the cause of low wholesale market prices.