Paragraph 7: "The decision by certain states to support less economic or uneconomic resources...cannot be permitted to prevent the new entry or continued operation of more economic generating capacity in the federally-regulated multi-state wholesale capacity market."
In other words, we can't let state clean energy programs block new natural gas plants that are "more economic" under a capacity construct designed to prefer new natural gas plants - see @jacob_mays nature.com/articles/s4156… Asymmetric risk and fuel neutrality in [] capacity markets
@jacob_mays P9: "We therefore find that any resource, new or existing, that receives, or is entitled to receive, a State Subsidy, and does not qualify for one of the exemptions described in the body of this order, should be subject to the MOPR."
@jacob_mays What does "entitled" mean? P75: "a seller shall be considered 'entitled to' a State Subsidy if the seller has a legal right or a legal claim to the subsidy, regardless of whether the seller has yet to actually receive the subsidy...."
@jacob_mays P75 (cont): "a capacity resource should be considered to be entitled to receive a State Subsidy if the resource previously received a State Subsidy, and has not cleared a capacity auction since that time."
@jacob_mays But - and I'm already getting too deep in the weeds here - "Resources that do not wish to be mitigated or believe they will not actually receive a State Subsidy to which they are entitled may certify to PJM that they will forego any State Subsidy under the Competitive Exemption."
@jacob_mays FERC describes 5 exemptions from the MOPR in PP 12-16:
1) existing self-supply
2) existing demand-side
3) existing RPS
4) "Competitive" (new or existing that commit to forgo state subsidies)
5) Unit Specific (reviewed by market monitor)
1) existing self-supply
2) existing demand-side
3) existing RPS
4) "Competitive" (new or existing that commit to forgo state subsidies)
5) Unit Specific (reviewed by market monitor)
@jacob_mays (Brutal mis-numbering mistake at P 37. All of my references after 37 are going to be off by 1 when FERC corrects this tomorrow.)
@jacob_mays P 39: FERC distorts its own orders. In response to claims that MOPR is about buyer-side mkt power, FERC responds that MOPR was always about price suppression. Quotes 2011 order - MOPR should apply to "sellers that 'may have incentives to depress market clearing prices.'"
@jacob_mays That's precisely buyer-side market power. Today, renewable energy developers don't have incentives to "depress market clearing prices." Like other sellers, they (in general) want high prices!
@jacob_mays P41:Responding to claims that MOPR will raise costs, FERC claims it has legal authority to expand the MOPR (kinda beside the point) and FERC must ensure just and reasonable rates that "send price signals on which investors and consumers can rely" to guide entry/exit. Consumers??
@jacob_mays P54: Energy Efficiency will be MOPR-ized. How will this affect EE? Were utility-sponsored projects (presumably a state subsidy) typically bid in to the capacity auction? @EnergyLawJeff
@jacob_mays @EnergyLawJeff Despite its broad definition of State Subsidy (see below), FERC says in P 68 that its concern is with subsidies "most nearly directed at or tethered to the new entry or continued operation of generating capacity." 
@jacob_mays @EnergyLawJeff FERC says revenues from ZECs and RECs are distinguishable from revenues from coal ash sales, steam heat sales, and voluntary RECs (h/t @PolicyIntegrity). How? Well, FERC claims it must prevent states from disrupting the auction. That response simply assumes the answer.
@jacob_mays @EnergyLawJeff @PolicyIntegrity P70: Do "private, voluntary bilateral transactions [] raise inappropriate subsidy concerns?" No support in the record at this time to MOPR bilateral, voluntary transactions. But FERC leaves the door open to MOPR-izing.
@jacob_mays @EnergyLawJeff @PolicyIntegrity P71: FERC rejects AEP/Duke’s request to exclude retail rate-riders. "it is reasonable to include non-bypassable revenue arrangements or rate riders as State Subsidies."
@jacob_mays @EnergyLawJeff @PolicyIntegrity P74: Resources chosen through a competitive process can use the Unit-Specific Exemption...It is not necessary to create another administrative process to determine which state procurements are competitive in advance–the burden of demonstrating competitiveness falls on the seller!
@jacob_mays @EnergyLawJeff @PolicyIntegrity P83: FERC excludes "generic industrial development and local siting support" bc it's "available to all businesses and is not nearly directed at or tethered to the new entry or continued operation" of capacity.
@jacob_mays @EnergyLawJeff @PolicyIntegrity P89: FERC won't MOPR-ize federal subsidies bc it may not "disregard or nullify the effect of federal legislation." FERC includes some legal citations that are...interesting. Law professors take note.
@jacob_mays @EnergyLawJeff @PolicyIntegrity P 138 to 156 discuss offer floors. These are critically important because they affect how the auction actually functions. I'm not going into it here...
@jacob_mays @EnergyLawJeff @PolicyIntegrity P175: "because State Subsidies from state RPS programs are projected to grow significantly, we find that it is just and reasonable to mitigate resources receiving support through state-mandated and state-sponsored RPS programs, on [a] prospective basis."
@jacob_mays @EnergyLawJeff @PolicyIntegrity P176: Confusing statement on voluntary RECs - "we agree with intervenors that it is not possible, at this time, to distinguish resources receiving privately funded voluntary RECs from state-funded or state-mandated RECs." So seems like all RECs are considered subsidies?
@jacob_mays @EnergyLawJeff @PolicyIntegrity P203: New self-supply will be MOPR-ized.
I agree with this in P 204:
"in a regional market dominated by states with retail competition, it is not clear why utilities in states that prefer the vertical integration model should be afforded a competitive advantage."
I agree with this in P 204:
"in a regional market dominated by states with retail competition, it is not clear why utilities in states that prefer the vertical integration model should be afforded a competitive advantage."
@jacob_mays @EnergyLawJeff @PolicyIntegrity Nice work by FERC here on this point. Public power, co-ops, and Dominion will respond with force.
Worth reiterating that all MOPR-ized resources (renewables, self-supply, etc) can seek a unit-specific exemption.
Worth reiterating that all MOPR-ized resources (renewables, self-supply, etc) can seek a unit-specific exemption.
@jacob_mays @EnergyLawJeff @PolicyIntegrity Glick's "strong" dissent: "From the beginning, this proceeding has been about two things: Dramatically increasing the price of capacity in PJM and slowing the region’s transition to a clean energy future."
@jacob_mays @EnergyLawJeff @PolicyIntegrity Glick: "sweeping" subsidy definition and abandonment of resource carve-out will "likely culminate in a system of administrative pricing that bears all the inefficiencies of cost-of-service regulation, without any of the benefits."
@jacob_mays @EnergyLawJeff @PolicyIntegrity Glick: FERC "compounds its intrusion on state authority by substituting its own policy preferences—a peculiar mix of reverence for 'competition' and reliance on administrative pricing—to entrench the existing resource mix and trample states’ concerns about enviro. externalities"
@jacob_mays @EnergyLawJeff @PolicyIntegrity Glick: "the Commission adds yet another new twist: That state subsidies 'reject the premise the capacity markets.' (citing to P17) But, as with investor confidence and market integrity, it is hard to know exactly what that premise is."
@jacob_mays @EnergyLawJeff @PolicyIntegrity Glick: "Saying that the MOPR has always been about price suppression is the equivalent of saying that speed limits have always been about keeping people from getting to their destination too quickly. There is a sense in which that is true, but it kind of misses the real goal."
@jacob_mays @EnergyLawJeff @PolicyIntegrity Glick: "A theory of jurisdiction that allows the Commission to block any state effort to economically regulate the externalities associated with electricity generation is not a reasonable interpretation of the FPA’s balance between federal and state jurisdiction."
@jacob_mays @EnergyLawJeff @PolicyIntegrity Glick: "At every meaningful decision point in today’s order, the Commission has elected the path that will make it more difficult for states to shape the future resource mix."
@jacob_mays @EnergyLawJeff @PolicyIntegrity Glick: "the Commission appears dead set on refashioning the PJM capacity market from a construct based primarily on bids determined by the resources themselves to a construct that will inevitably rely on a pervasive program of administrative pricing."
@jacob_mays @EnergyLawJeff @PolicyIntegrity In addition to his numerous policy arguments, Glick outlines a few legal vulnerabilities. Well worth reading. Hard to get a court to overturn FERC's just and reasonable rate determination, despite good arguments.
@jacob_mays @EnergyLawJeff @PolicyIntegrity I'll add one more legal vulnerability. Under the Admin Procedure Act, regulators can change positions as long as they provide an explanation. Here, FERC does not acknowledge that it's divorcing the auction from resource adequacy.
@jacob_mays @EnergyLawJeff @PolicyIntegrity FERC's initial approval of the capacity auction in 2006 repeatedly ties the auction to PJM’s responsibility “for ensuring that its system has sufficient generating capacity to meet its reliability obligations.”
@jacob_mays @EnergyLawJeff @PolicyIntegrity Under today's order, "sufficient generating capacity" is a purely economic term, completely unrelated to PJM's "reliability obligations." This is a major shift. The auction will be a financing mechanism designed to exclude decades-old generation development models.
@jacob_mays @EnergyLawJeff @PolicyIntegrity FERC effectively claims for itself supreme authority to finance new capacity. Sure, states can develop capacity too, but FERC will effectively make it more expensive by forcing utilities to buy unneeded FERC-approved capacity from PJM.
@jacob_mays @EnergyLawJeff @PolicyIntegrity FERC's order on the PJM capacity auction transforms a market-based mechanism for achieving resource adequacy into a walled garden for private equity investors who demand higher returns.
From our May 2018 filing: eelp.law.harvard.edu/wp-content/upl…
From our May 2018 filing: eelp.law.harvard.edu/wp-content/upl…
@jacob_mays @EnergyLawJeff @PolicyIntegrity For the background explainer on what the MOPR is and what FERC's key decision points were in this proceeding, see
