New York — Merchant power generator Vistra Energy on Monday said it was pleased with the US Federal Energy Regulatory Commission's recent ruling on PJM Interconnection capacity market rule changes, saying it restores market certainty. Other market participants, however, have expressed concerns.
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"We are pleased FERC has resolved the regulatory uncertainty hanging over the PJM markets," Curt Morgan, Vistra's president and CEO said in a statement.
Morgan said Vistra recognizes that some "will initially react negatively to the FERC order," but as they consider their options, Vistra hopes they take into account the "tremendous savings their constituents have realized over the years from the competitive PJM markets."
"Vistra supports states developing energy policies, but the company does not support exercising those policy decisions in a way that distorts competitive pricing," Morgan added.
FERC issued its long-awaited order December 19, revamping PJM's capacity market rules to combat the potential price-suppressing effects of state subsidy programs.
The order (EL16-49, EL18-178) gives PJM 90 days to submit a compliance filing. The regulator has also asked the grid operator to provide a timetable for when it proposes to hold its next capacity auction and an explanation of how implementation of the new market rules will affect that auction.
FERC established a replacement rate under which PJM will be expected to hold its delayed capacity auction for the 2022-23 delivery year and significantly expanded application of the minimum offer price rule that sets a default floor price for generation resources to clear the capacity market.
STATE CLIMATE GOALS
The rationale for the capacity market rule changes, and much of the broader debate on the issue, stems from the increasing volume of subsidized resources competing in the capacity market in recent years.
This is largely due to a growing number of states promoting renewable energy and other low emissions resources like nuclear power as part of their effort to reduce greenhouse gas emissions to combat climate change.
The Maryland Public Service Commission said it was disappointed with FERC's decision because the PSC expects it will slow Maryland's efforts to "enact its ambitious clean energy goals," it said.
The PSC said it believes states have a right to determine their own resource mix, a right recognized under the Federal Power Act.
"FERC's decision targets, and effectively nullifies, that prerogative and only confirms our misgivings regarding the future of PJM's capacity market," Jason Stanek, chairman of the Maryland PSC, said.
"Maryland is committed to a clean and renewable energy future, and we are considering legal options to protect the public interest of Marylanders," Stanek said.
If certain resources receiving subsidies are unable to clear PJM's capacity market and thus fail to receive capacity payments, the economics of those projects including offshore wind installations could be impacted.
The PSC said the FERC decision could not only be detrimental to new renewable energy resources, such as Maryland's offshore wind projects, but could also "stifle innovation" when it comes to new energy conservation and efficiency products, by "effectively pricing them out of the market and making them prohibitively expensive to ratepayers."
However, Vistra argued that potential state decisions to leave the PJM markets could be more costly than complying with the recently enacted rule changes.
States should "carefully consider the full implications" of any decision to exit the PJM market, since such a response "will result in considerable costs" and the "potential loss of a state's proportional share of an estimated $3 (billion)-$4 billion per year of cost savings for consumers created by the PJM wholesale markets."
-- Jared Anderson, firstname.lastname@example.org
-- Edited by Keiron Greenhalgh, email@example.com