PJM mulls capacity repricing strategies to tackle subsidy programs

Dive Brief:

The PJM Interconnection is moving closer to implementing measures to counter the impact of state energy subsidies on capacity auction prices, RTO Insider reports.
Issues still being debated by PJM task force include whether or not repricing should be triggered only when a subsidy occurs in a capacity delivery year, if retriggering would apply to carbon dioxide pricing schemes, and whether or not repricing should only be triggered by state sponsored subsidies.
The Capacity Construct/Public Policy Senior Task Force (CCPPSTF) met for the sixth time in August and is planning at least two more meetings before voting on recommendations.

Dive Insight:

Monitoring Analytics, PJM’s market monitor, has said that state sponsored subsidies are a threat to the competitiveness of the regional transmission organization’s wholesale power market.

Of special concern are nuclear subsidies approved last year in New York and Illinois and under consideration in a handful of other states.

PJM fought off threats from programs in New Jersey and Maryland that would have provided subsidies for in-state generation. Those battles ended with the Supreme Court’s Hughes v Talen Energy Marketing decision that has been cited in cases challenging the recent nuclear subsidies.

The nuclear supports have fared better so far in court, surviving federal court challenges in both states.

PJM filed friend of the court briefs in both cases, but is also taking steps to defend what it sees as the integrity of its wholesale power market. The RTO in June published white papers outlining potential remedies, including a repricing scheme for its capacity market.

However, implementing those counter measures is proving not to be a simple matter. Among the issues that came up at the task force meeting were whether or not repricing should be triggered only by subsidies provided during a capacity delivery year.

Another hanging question is whether or not programs that incentivize carbon dioxide emission pricing should be exempted from repricing. That question could prove particularly fraught because utilities, such as Exelon, have argued that nuclear subsidies are warranted because they encourage zero emission generation. PJM itself has published a white paper looking at ways that CO2 pricing schemes could work in concert with regional wholesale power markets.

Stakeholders at the meeting also considered whether or how to include incentives that could be implemented in the future, such as incentives for demand-side resources. PJM staff are collecting stakeholder responses ahead of the next meeting, scheduled for Sept. 11.