Modernizing Electricity Market Design; Notice Inviting Post-Technical Conference Comments, 18523-18525 [2021-07324]

Agencies

• DEPARTMENT OF ENERGY
• Federal Energy Regulatory Commission

[Federal Register Volume 86, Number 67 (Friday, April 9, 2021)]
[Notices]
[Pages 18523-18525]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07324]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. AD21-10-000]


Modernizing Electricity Market Design; Notice Inviting Post-
Technical Conference Comments

    On March 23, 2021, the Federal Energy Regulation Commission 
(Commission) convened a Commissioner-led technical conference to 
discuss the role of the capacity market constructs in PJM 
Interconnection, L.L.C. (PJM), ISO New England Inc., and New York 
Independent System Operator, Inc. in an environment where state 
policies increasingly affect resource entry and exit. The technical 
conference included the discussion on the implications of retaining the 
expanded minimum offer price rule (Expanded MOPR) in the PJM capacity 
market, as well as prospective alternative approaches that could 
replace PJM's Expanded MOPR.
    All interested persons are invited to file initial and reply post-
technical conference comments on the topics in Parts I and II below. 
Commenters may reference material previously filed in this docket, 
including the technical conference transcript, but are encouraged to 
avoid repetition or replication of previous material. Commenters need 
not answer all of the questions, but commenters are encouraged to 
organize responses using the numbering and order in the below 
questions. Commenters are encouraged to limit their responses to the 
questions identified below and not provide significant background or 
other material. Initial comments must be submitted on or before April 
26, 2021. Reply comments must be submitted on or before May 10, 2021. 
Initial comments should not exceed 25 pages and reply comments should 
not exceed 15 pages. PJM's initial and reply comments are not subject 
to these page limitations.

I. Comments on Supplemental Notice

    We are seeking comments on the topics discussed during the 
technical conference, including responses to the questions listed in 
the Supplemental Notice issued in this proceeding on

[[Page 18524]]

March 16, 2021, in accordance with the deadlines and other guidance 
above.

II. Comments on PJM's Capacity Market

    We are also interested in comments regarding PJM's capacity market, 
in accordance with the deadlines and other guidance above, as follows:

A. Existing PJM MOPR Implications

    (1) Have circumstances regarding the nature and scope of state 
actions to support specific resource types (e.g., new state 
legislation, new or revised state subsidies, new or revised standards 
such as increased renewable portfolio standards, etc.) changed in the 
PJM footprint since the establishment of the Reliability Pricing Model? 
If so, should the purpose and goals of the capacity market evolve in 
response to this change? Please explain.
    (2) Please explain how the expected quantity of state supported and 
non-state supported resources, by resource type, has changed since 
2018. Please provide the relevant dates of relevant legislation, 
executive actions, rulemakings, and/or other state actions. How is the 
Expanded MOPR likely to affect the entry of these resources? Will the 
expected impact of the Expanded MOPR change over time? Please explain.
    (3) Is there a particular type or quantity of state supported 
resources that are unlikely to clear PJM's capacity market as a result 
of PJM's Expanded MOPR, in the near term or in the future? If so, 
please provide examples.
    (4) Please explain whether and, if so, how PJM's Expanded MOPR will 
result in over-procurement of capacity, or ``surplus capacity'' (i.e., 
capacity in excess of the PJM Installed Reserve Margin), due to reasons 
other than the capacity market's sloped demand curve. To the extent the 
Expanded MOPR results in surplus capacity, including the delayed 
retirement of existing resources, what are the impacts on PJM's 
customers? What impact could such surplus capacity have on PJM's energy 
and ancillary services markets? How do any such impacts bear on the 
Commission's responsibility to ensure just and reasonable rates under 
the Federal Power Act?
    (5) Does PJM's Expanded MOPR affect states' willingness to remain 
in PJM's capacity market? Does the Expanded MOPR compel states to 
choose between relying on PJM's capacity market to meet their resource 
adequacy needs and achieving state policies? If so, how? Which states 
are relying on or are considering relying on PJM's Fixed Resource 
Requirement (FRR), rather than the PJM's capacity market, as a result 
of the Expanded MOPR and why?
    (6) Please explain whether the implementation of PJM's Expanded 
MOPR has led or may lead to unforeseen impacts, including those 
enumerated below:
    a. Several panelists at the conference noted the potential for 
greater use of the FRR construct as a result of the Expanded MOPR. 
Please explain any potential impacts or concerns from an increased 
reliance on PJM's FRR construct in this manner (e.g., adverse impacts 
on capacity prices in PJM in zones that remain in the market, the 
reduced ability to ensure resource adequacy, etc.).
    b. Does the Expanded MOPR create administrative burdens for PJM, 
capacity resource owners, or others? If so, please explain and include 
details regarding the difficulties encountered.
    c. Does the Expanded MOPR have any impact on the ability of 
resources to engage in private voluntary, bilateral transactions? \1\
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    \1\ Calpine Corporation v. PJM Interconnection, L.L.C., 169 FERC 
] 61,239, at P 70 (2019) (``As to whether private, voluntary 
bilateral transactions might raise inappropriate subsidy concerns, 
we find that the record in the instant proceeding does not 
demonstrate a need to subject voluntary, arm's length bilateral 
transactions to the MOPR at this time.'') (footnote omitted).
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    (7) What are the benefits of the Expanded MOPR? Please explain.
    (8) Is it appropriate for the Commission to apply a MOPR to address 
state actions intended to suppress capacity market prices? Please 
explain why or why not?

B. Potential Alternatives to Expanded MOPR in PJM

    (9) Should the Expanded MOPR be revised or eliminated? If so, what, 
if any, are any other changes to the PJM Tariff would be necessary or 
appropriate? Please explain fully.
    (10) If any changes are made to the MOPR rules, is it necessary or 
appropriate to combine those changes with reforms to ensure that 
capacity resources are properly accredited for their reliability value?
    (11) Please explain the timeframe in which a proposed replacement 
rate could be implemented to avoid delaying the December 2021 Base 
Residual Auction.
    (12) Should a MOPR designed to address only buyer-side market power 
(i.e., a Targeted MOPR) replace the Expanded MOPR? How should the 
Commission determine what constitutes a potential exercise of buyer-
side market power? \2\
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    \2\ For example, a buyer could contract with a seller outside of 
the PJM capacity market and direct the seller to submit an offer 
below the supplier's cost (e.g., at zero) in the PJM capacity 
auction to lower the market clearing price. Such a strategy would 
lower the buyer's total capacity procurement costs if the savings 
the buyer achieves from the lower market clearing price paid for the 
total quantity of capacity the buyer purchased in the PJM capacity 
market exceeds the losses (excess costs in this example) the buyer 
incurred from the out-of-market contract with the seller.
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    (13) Please explain to which resources a Targeted MOPR should apply 
(e.g., only to natural gas-fired resources or to all resource types; 
only to new resources or to all new and existing resources).
    (14) Under a Targeted MOPR construct, what exemptions, if any, 
should be considered (e.g., self-supply, competitive entry exemptions)? 
Please explain.
    (15) For states that choose to achieve resource adequacy outside of 
the PJM capacity market, please describe any options (e.g., FRR, self-
supply, etc.) that should be considered for availability to the states.
    a. Should FRR or other self-supply options be modified in any way 
to make them more useful to states that wish to reclaim authority for 
resource adequacy in order to meet state policies?
    (16) Should load serving entities be able to procure capacity 
outside of PJM's capacity market such that PJM would only administer a 
residual capacity auction (i.e., an auction that removes demand 
procured outside the capacity market from the demand curve and supply 
curve would not include capacity procured outside of the capacity 
market) to procure the remaining capacity requirements? What rules 
should govern such a residual auction? Would a residual auction provide 
sufficient incentives for capacity to enter the PJM market when needed 
to ensure resource adequacy? Please explain.
    (17) Several panelists at the conference stated that removing the 
Expanded MOPR in PJM would not have any adverse impacts on resource 
adequacy and in turn reliability. Please explain whether you agree or 
disagree with this statement and why.
    (18) Are there differences among the expected short-term, 
intermediate term, and long-term effects of removing the Expanded MOPR 
on resource adequacy and in turn reliability? Please explain why or why 
not.
    (19) Is there a concern that merchant resources may fail to receive 
financing due to state supported resource entry in PJM? Please explain 
and provide supporting evidence if possible. Please also explain how 
this consideration bears on the Commission's responsibilities under the 
Federal Power Act.

[[Page 18525]]

    a. Should PJM's capacity market address this concern, and if so, 
how? Is there an option to address potential financing challenges by 
adjusting the parameters that establish the capacity market demand 
curve, such as changes to the net cost of new entry (Net CONE) 
estimate? For example, Net CONE estimates could be adjusted by reducing 
the expected economic life of the reference unit used to establish Net 
CONE, increasing the reference unit's cost of capital to reflect higher 
risks, or through changes to the shape of the demand curve.
    b. Many state polices related to electric generation (e.g., 
renewable portfolio standards) are specified in statute and include 
timelines (often decades into the future) that investors can use to 
estimate the timing, type, and quantity of state supported resources 
entering PJM's markets and potential market impacts. To what extent 
does the transparency of such state polices mitigate or reduce these 
risks to merchant resources?
    c. Would a capacity market with a Targeted MOPR provide a 
sufficient incentive for capacity to enter the PJM market when needed 
to ensure resource adequacy?
    (20) What changes are needed to ensure PJM's energy and ancillary 
services markets send appropriate price signals and ensure sufficient 
incentives for investment?
    (21) What is FERC's responsibility toward states in the PJM region 
that have chosen a state policy of not subsidizing their preferred 
resources in light of the competitive capacity market?
    (22) How urgent is the need to reconcile PJM's capacity market 
rules and state policies? Could PJM or the Commission adopt a phased 
approach with short-term and long-term solutions? For example, could 
short-term actions include eliminating the Expanded MOPR and replacing 
it with a Targeted MOPR? What long-term solutions are needed, if any?
    For further information, please contact individuals identified for 
each topic:

Technical Information, David Rosner, Office of Energy Policy and 
Innovation, Federal Energy Regulatory Commission, 888 First Street NE, 
Washington, DC 20426, (202) 502-8479, [email protected].
Legal Information, Rebecca J. Michael, Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street NE, Washington, 
DC 20426, (202) 502-8776, [email protected].

    Dated: April 5, 2021.
Kimberly D. Bose,
Secretary.
[FR Doc. 2021-07324 Filed 4-8-21; 8:45 am]
BILLING CODE 6717-01-P