The PJM Interconnection should postpone its upcoming capacity auction until early next year, an Exelon Corp. executive said May 23, holding to an argument that the grid operator has already rejected.
The auction at issue faces significant market uncertainty given that the Federal Energy Regulatory Commission in June 2018 determined that PJM 's capacity market rules are unjust and the agency has yet to rule on the grid operator's proposed fixes (FERC docket EL18-178). Several PJM states and member companies, including Exelon, had urged the grid operator to further delay the upcoming auction, already pushed back from May until mid-April 2020.
“The problem here is that FERC has said the way PJM is running the auction is illegal, but we don’t have a solution for that illegality,” William Von Hoene, senior executive vice president and chief strategy officer for Exelon, said during the U.S. Energy Association's May 23 annual policy forum in Washington.
If PJM runs the auction for the 2022-23 delivery year in August as planned, Von Hoene added, “It would be within FERC ’s purview to say these results were misguided … so we have to rerun the auction.”
While “there would be winners and losers in that, … it’s hard to say” who would fall into which category as “it would depend on the auction results,” Von Hoene said.
What is clear is that such a scenario “would create tremendous uncertainty [and] … disrupt capital programs and commitments,” he continued. “It would be a situation that I think no one would want to have happen.”
PJM, however, has said that it will hold the August capacity auction under existing market rules, absent guidance from FERC to the contrary.
To ease concerns that conducting the auction under rules deemed unjust and unreasonable would subject the auction results to potential refund, PJM in April asked (FERC docket EL16-49) FERC to confirm that the agency would not apply any replacement rate prospectively, invalidate the August 2019 auction results, or require the auction to be rerun.
An increasing volume of generation backed by out-of-market state revenues seeking to participate in its competitive wholesale markets prompted PJM to pitch two capacity market redesign plans to FERC aimed at combatting the potential price-suppressing effects of existing and proposed state subsidy programs. FERC rejected both proposals and said PJM 's capacity pricing model had become "untenably threatened" by states' out-of-market payments.
FERC has yet to establish a replacement rate under which PJM would hold the 2022-23 auction nor has it ruled on the capacity repricing proposal PJM filed in October to address state-subsidized resources or the April motion for guidance on next steps.
Chairman Neil Chatterjee told reporters on the sidelines of the USEA meeting that he and his colleagues fully understood the complexity of the issue and “the urgency in which to provide the clarity that market participants are looking for.”
“We are working on this every minute, every hour, every day, and are going to continue to do so,” he said but declined to comment on whether commissioners were close to issuing an order.
The commission generally does not comment on internal deliberations involving pending, contested matters. Thus, whether particular sticking points are holding up action in the proceeding or a potential 2-2 deadlock among commissioners hindering the issuance of an order is unclear.
Jasmin Melvin and Wiliam Freebairn are reporters for S&P Global Platts, which, like S&P Global Market Intelligence, is owned by S&P Global Inc.