FERC Orders PJM To Change Reserve Market Rules, Delay Capacity Auctions | Capacity News
Published December 23, 2021 | News
Ethan Howland reports in Utility Dive that the Federal Energy Regulatory Commission on Wednesday ordered the PJM Interconnection to revise its reserve market rules, which will delay the grid operator’s upcoming capacity auction. This was a reverse of an earlier decision. In a 3-1 vote, FERC reaffirmed its previous decision to direct PJM to consolidate tier one and tier two reserve products, but said it had erred by approving changes to the grid operator’s operating reserve demand curves (ORDC), which help set the price for reserves.
Our Scott Niemann, Director and Principal of ESAI Power said, “This rule change seems like a small detail, but the ripple impacts may be more significant and touch a lot of aspects of the PJM market.”
In the latest decision, FERC said PJM failed to show its “reserve penalty factors” and two-step ORDCs that had been in place before the commission approved changes last year were unjust and unreasonable. FERC Commissioner James Danly voted against the decision in a dissent to be published later.
FERC also reversed itself and said PJM must use a backward-looking, instead of forward-looking, energy and ancillary services offset (E&AS), which is designed to reduce capacity market revenue to match any gains generators receive through the reserve markets.
Scott went on to say, “Delaying the auction potentially allows time for rule changes from pending legal challenges to the MOPR and MSOC rules, should they be successful, to be addressed.”