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PJM committee forms task force to examine out-of-market subsidies

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PJM committee forms task force to examine out-of-market subsidies

A PJM Interconnection committee created a task force to identify state initiatives that could be out of alignment with PJM's market construct.

The grid operator's Markets and Reliability Committee on Jan. 26 approved the creation of a Capacity Construct/Public Policy Senior Task Force that would examine current and potential state initiatives such as "resource adequacy, fuel diversity, public, and environmental policies," according to a Jan. 27 post on PJM's "Inside Lines" blog. The task force would examine policies and subsidies that states issue that may run counter to PJM's Reliability Pricing Model, or RPM, which uses a forward auction to secure capacity three years in advance for the 13-state region.

The task force expects to complete its review by the fourth quarter of 2017, according to an issue charge approved by the committee. The group does not require further approval from PJM's board, a PJM spokesman said by email.

The task force's work comes "as some states and load-serving entities try to comply with their states' policies and attempt to take a more active role in guiding the resource mix," according to the problem or opportunity statement that PJM approved for the task force.

The task force comes as the RPM has been "challenged" by out-of-market subsidies from certain states, members said during the meeting. Some examples include power purchase agreements in Ohio and zero emission credits in Illinois that are intended to support the continued operation of specific generating units, according to the task force's problem or opportunity statement.

In the past few years, utilities such as American Electric Power Co. Inc. affiliate Ohio Power Co. and FirstEnergy Corp. have sought expanded power purchase agreements and riders to provide long-term payments to coal and nuclear plants challenged by market conditions. A FERC decision last year took the PPA proposal off the table. Illinois, in 2016, adopted a zero emission standard that allows two existing nuclear plants to receive payments for producing zero-emission energy over 10-year contracts.

Five members — American Municipal Power Inc., Old Dominion Electric Cooperative, the PJM Public Power Coalition, Delaware Municipal Electric Corp. Inc. and the Public Power Association of New Jersey — sponsored the creation of the group. Ed Tatum, American Municipal Power's vice president of transmission, presented the updated issue charge and problem or opportunity statement after releasing drafts before the committee during an Aug. 25, 2016, meeting.

Members who spoke during the Jan. 26 meeting discussed the scope of the task force's review and which "out-of-the-market" issues would come under the task force's scrutiny.