The Maryland Public Service Commission is actively exploring the possibility of exiting the PJM Interconnection's capacity market in response to an expanded price floor aimed at countering state subsidies for clean energy resources. But any move to pull the state's utilities out of that market will likely have to wait until after PJM's next capacity auction, PSC Chairman Jason Stanek said April 24.
The Federal Energy Regulatory Commission the week before largely upheld a December 2019 order directing PJM to expand its minimum offer price rule, or MOPR, by setting an administratively determined price floor for all new and some existing resources that receive a material state subsidy.
The MOPR could have a significant long-term impact on states with renewable portfolio standards such as Maryland by forcing consumers to pay twice for capacity: once through state-sponsored clean energy procurement and then again through a capacity market with rules that prevent subsidized resources from winning supply obligations.
Maryland, for example, has an RPS that requires utilities to get half of their power from renewable sources by 2030, a standard that includes an in-state solar carve-out and a directive for the installation of 1,200 MW of offshore wind capacity by 2030.
On the same day that FERC affirmed its MOPR order, PJM's independent market monitor released a report analyzing the potential market impacts of Maryland exercising an off-ramp called a fixed resource requirement, or FRR.
The IMM noted that under the FRR option, utilities would need to meet their Maryland capacity obligations through either their own generation, if any, and/or bilateral contracts with other capacity owners. The utilities impacted include Exelon Corp. subsidiaries Baltimore Gas and Electric Co., Delmarva Power & Light Co. and Potomac Electric Power Co. as well as FirstEnergy Corp. subsidiary Potomac Edison Co.
The IMM's analysis specifically found that different iterations of an FRR would actually increase capacity prices in Maryland in five out of six different scenarios, with price increases in certain load zones ranging from 6.1% to 42.5% compared to the results of PJM's last capacity auction. The only scenario where the IMM found a price decrease, 5.4%, assumed the exercise of an FRR option for the PEPCO load zone.
'It could take quite a while'
"We're currently reviewing the study along with the FERC decisions to see what the effects on Maryland ratepayers would be," Stanek said in an interview.
Due to COVID-19-related budget constraints, Stanek said the commission probably cannot afford to pay a third-party to conduct another analysis at this time. "We do have experts on staff that can give us some estimation of costs, but obviously we don't have all the tools of an expert third-party witness," the chairman said.
The state convened a working group to examine the possibility of leaving the PJM capacity market shortly after FERC issued its December 2019 order, but those efforts have been hobbled due to the coronavirus public health crisis. The state General Assembly is adjourned for the rest of the year.
"Any move by a state to establish their own FRR is going to take time, effort and resources to construct infrastructure that is not currently there, and it could take quite a while," Stanek said. "Do I foresee us participating in the next [PJM capacity auction]? Yes, I do. Beyond that, I can't commit."
Echoing a critique made by FERC Commissioner Richard Glick in dissenting from the MOPR order, the Maryland PSC chairman noted that FERC did not perform its own analysis of market impacts that could flow from that order.
Following FERC's December 2019 directive, the Organization of PJM States argued in a rehearing request that the commission had not met its burden that existing capacity market rates were unjust and unreasonable.
"I think the states will continue to maintain that argument as we decide what to do, either individually or collectively, with the orders that are now before us," Stanek said.
Petitions for review of the MOPR order have started to accumulate at the U.S. Court of Appeals for the District of Columbia Circuit, but a court decision is not expected until after PJM holds its the next two capacity auctions, at the earliest.
Comments on an initial PJM compliance filing responding to FERC's December 2019 order are due May 15, and another compliance filing required by the latest FERC order is due June 1.