March 30, 2020
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On March 18, PJM Interconnection, L.L.C (PJM) filed with the Federal Energy Regulatory Commission (FERC) proposed changes to its Tariff in compliance with FERC’s order of December 19, 2019, which required PJM to expand, with certain exemptions and exceptions, its current Minimum Offer Price Rule (MOPR) to address state-subsidized electric generation resources and their impact on PJM’s capacity market, the Reliability Pricing Model (RPM).
PJM also proposed that the new date for the Base Residual Auction (BRA) for the 2022/23 delivery year be tied to the date of FERC’s order on the Compliance Filing. However, the Public Utilities Commission of Ohio (the PUCO) has requested an extension of time to file comments or a protest in response to PJM’s Compliance Filing due to its limited resources during the COVID-19 emergency.
The reactions of certain U.S. renewable energy groups to PJM’s Compliance Filing indicate that some of the exemptions and exceptions from the MOPR included in the proposed Tariff revisions may have assuaged some concerns about the ability of renewable energy projects to compete in PJM’s capacity market under the MOPR.
PJM revised the MOPR provisions in its Tariff to apply to a Capacity Resource that receives or is entitled to receive State Subsidies (Capacity Resources with State Subsidy), as well as to new natural gas-fired combustion turbine and combined cycle resources, unless the resource qualifies for one of the exemptions or exceptions set out in the December 19 Order. Under PJM’s proposal, a Capacity Market Seller is “entitled” to a State Subsidy if it has a legal right or legal claim to the subsidy, regardless of whether the Capacity Market Seller actually has received the subsidy.
PJM’s proposed Tariff revisions also include four categorical exemptions from the MOPR for (1) resources that are owned or bilaterally contracted by Self-Supply Entities, (2) certain Intermittent Resources that qualify for a state-mandated or state-sponsored Renewable Portfolio Standards (RPS) program, (3) certain Demand Resources and Energy Efficiency Resources that receive or may be entitled to receive a State Subsidy, and (4) Capacity Storage Resources, each of which is subject to satisfying specified conditions.
PJM’s revised Tariff provisions also include a competitive exemption from the MOPR for Capacity Market Sellers that certify that they will elect to forgo for the relevant Delivery Year accepting any State Subsidy for the relevant Capacity Resource. Capacity Market Sellers of State Subsidized Resources electing the competitive exemption will be allowed to offer below the default MOPR floor price. Capacity Market Sellers of Capacity Resources that generate Renewable Energy Credits (RECs) or equivalent credits may elect the competitive exemption if they certify that the credits will be used and retired only for voluntary obligations, as opposed to state-mandated RPS.
PJM generally proposes to retain the existing unit-specific exception—renamed the “resource-specific exception.” Under this process, any resource subject to the MOPR can demonstrate that its actual costs are lower than the applicable default MOPR Floor Offer Price and, if so, such resource is permitted to offer at that lower price. PJM also proposes to allow the Capacity Market Seller to choose to offer at either the default or resource-specific price level regardless of the applicable offer cap.
PJM further proposes safeguard provisions to address the consequences for Capacity Market Sellers if PJM reasonably believes that a previous determination of whether a resource is a Capacity Resource with State Subsidy was based on fraudulent or material misrepresentations or omissions, and absent such misrepresentation or omission, the resource’s Capacity Resource with State Subsidy status would be different.
PJM explained that it is not modifying the basic structure of the MOPR, but has updated its MOPR provisions to specify that default MOPR Floor Offer Prices to New Entry—Capacity Resources are based on the costs of constructing a new facility—CONE, and, as such, values are based on the “net” CONE for each resource type.
With respect to the timing of the BRA for the 2022/23 Delivery Year—which had been scheduled to occur in May 2019—PJM proposes to complete all pre-auction activities and open the BRA for the 2022/23 Delivery Year within six and a-half months after the date of FERC’s order accepting the Compliance Filing. According to PJM, under this approach, if FERC issued an order on the Compliance Filing by mid-May, PJM would conduct the delayed 2019 BRA no later than December 2020. However, PJM also provides for a “limited, conditional extension” to no later than March 31, 2021, if legislation directly applicable to new elections of the existing Fixed Resource Requirement (FRR) alternative in PJM’s Tariff is passed by a state legislature and signed by the authorized state executive before June 1, 2020, and upon the request of a state public utility commission acting in its official capacity.
The reactions of the trade associations of the U.S. Wind energy and solar industries to PJM’s Compliance Filing indicates that some of the exemptions and exceptions from the MOPR included in PJM’s Compliance Filing, in particular, the resource-specific exception, may have assuaged concerns about the ability of renewable projects to compete in PJM’s capacity market under the MOPR. The American Wind Energy Association (AWEA) issued a statement that “PJM’s proposal provides the flexibility necessary for renewable resources to demonstrate that they are among the lowest cost and most reliable resources of capacity available today,” and “PJM’s compliance filing is an important step toward renewable resources participating in the PJM capacity market.” In a similar vein, the Solar Energy Industries Association (SEIA) stated that “[t]hough SEIA objects to the underlying policies presented in the current MOPR construct, PJM took a positive step in proposing how to comply with FERC’s December  order. PJM’s submission will allow renewable generators to properly identify a project-specific bid price for bidding into the capacity market auctions.”
FERC established a due date of April 22, 2020, for comments on PJM’s Compliance Filing. On March 25, the PUCO asked FERC to extend the time to file comments or a protest in response to PJM’s Compliance filing until the expiration of the COVID-19 emergency, or no earlier than June 1, 2020. In support of its request, the PUCO noted that a Stay at Home Order was issued for all Ohioans effective March 23, 2020 until April 6, 2020, to help prevent the further spread of COVID-19, and urged FERC to recognize that the PUCO is required to prioritize the allocation of its emergency-limited resources to attend to the health and safety needs of the citizens of Ohio by granting its motion for extension of time. This request is pending.
 See Compliance Filing Concerning the Minimum Offer Price Rule, Request for Waiver of RPM Auction Deadlines, and Request for an Extended Comment Period of at Least 35 Days, filed in Docket No. ER18-1314-003 (Mar. 18, 2020) (Compliance Filing).
 Calpine Corp. v. PJM Interconnection, L.L.C., 169 FERC ¶61,239 (2019), reh’g pending (December 19 Order). In 2018, FERC found that PJM’s existing MOPR rules were unjust and unreasonable as they result in inefficient market outcomes due to resources receiving out-of-market payments. Calpine Corp. v. PJM Interconnection, L.L.C., 163 FERC ¶ 61,236 (Jun. 29, 2018) (June 29 Order). Subsequently, FERC directed PJM to delay the 2019 Base Residual Auction (BRA) for the 2022/23 Delivery Year until FERC establishes a replacement rate. Calpine Corp. v. PJM Interconnection, L.L.C., Order on Motion for Supplemental Clarification, 168 FERC ¶ 61,051 (Jul. 25, 2019).
 PJM’s MOPR sets a minimum offer level to operate as a price floor in order to protect against the ability of certain resources to suppress market clearing prices by offering supply at less than a competitive level. June 29 Order at P 9.
 PJM included in its filing FERC’s definition of “State Subsidy,” which includes “direct or indirect payment, concession, rebate, subsidy, non-bypassable consumer charge, or other financial benefit that is  a result of any action, mandated process, or sponsored process of a state government, a political subdivision or agency of a state, or an electric cooperative formed pursuant to state law,” and (1) is derived from or connected to the procurement of (a) electricity or electric generation capacity sold at wholesale in interstate commerce or (b) an attribute of the generation process for electricity or electric generation capacity sold at wholesale in interstate commerce; or (2) will support the construction, development or operation of a new or existing capacity resource; or (3) could have the effect of allowing the unit to clear any PJM capacity auction. PJM also proposes to identify in its Tariff seven programs that categorically would not be considered a State Subsidy, including any contract, legally enforceable obligation, or any rate pursuant to the Public Utility Regulatory Policies Act of 1978 (PURPA). Compliance Filing at pp. 12–14.
 Compliance Filing at pp. 5–6.
 Compliance Filing at pp. 29–42.
 Compliance Filing at pp. 43–51.
 Compliance Filing at p. 73.
 Compliance Filing at p. 79.
 Compliance Filing at pp. 5–6.
 Compliance Filing at p. 52.
 Compliance Filing at p. 84.
 FERC has explained that, under PJM’s existing rules, the FRR option is available to a load-serving entity, at its election, to satisfy its obligation to provide unforced capacity outside of PJM’s capacity auction. June 29 Order at P 8, n. 10.
 Compliance Filing at pp. 85-86.
 American Wind Energy Association Statement on PJM’s Response to FERC Capacity Market Directive, March 18, 2020.
 SEIA Statement on PJM MOPR Compliance Filing, March 18, 2020.