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E&E News: FERC Throws Support to Fossil Fuels in Largest Power Market

Posted by Rod Kuckro and Jeremy Dillon on Dec 20, 2019

E&E News covered FERCs recent demand to PJM requiring them to restrict state-backed renewables within its capacity market and included quotes by AEE's Jeff Dennis. Read excerpts below and the entire E&E News piece here (sub. req.)

Federal regulators approved rules yesterday for the nation's largest electricity market that effectively prop up fossil fuel power plants and discourage new investments in renewable power, demand response and energy storage projects. The much-awaited changes in PJM Interconnection's rules governing its capacity market were issued by the Federal Energy Regulatory Commission 508 days after the agency issued a decision calling the current market rules unjust and unreasonable and directing PJM to devise a fix.

The decision is among the most consequential by the commission since it created regional power markets 20 years ago this week. It's certain to be challenged. Commissioner Richard Glick slammed the decision as "a bailout, plain and simple." It creates "regulatory uncertainty" and would "stunt the transition to clean energy resources" by states that have adopted favorable policies such as renewable portfolio standards to reduce greenhouse gas emissions, the Democrat said. PJM oversees the transmission grid and power market that deliver electricity to 65 million customers in 13 states in the Mid-Atlantic and parts of the Midwest.

The new rules — approved by a 2-1 party-line vote — give an advantage to existing coal- and natural gas-fired power plants in PJM, which is plagued by excess generation capacity and where cheaper renewables and nuclear plants have been crushing conventional fossil fuel resources on price. The agency gave PJM 90 days to file a response on how it will comply. Reaction was quick and critical from clean energy advocacy groups. Jeff Dennis, general counsel at Advanced Energy Economy and former senior official at FERC, called it "unfortunate" and "a price support scheme for existing coal and natural gas power plants." FERC Chairman Neil Chatterjee told reporters, "I don't buy it at all" that the agency's action favors coal and natural gas over renewables.

Capacity markets are used in PJM and other markets to ensure that enough electricity is available at all times. Owners of power plants bid into auctions to offer their capacity — usually three years out — and, if they clear, are provided capacity payments. FERC's decision changes bidding rules to protect coal and natural gas plants from new renewables by making those resources bid in at a higher price than existing renewables, which are grandfathered in the agency's order. Confusion over the design of PJM's capacity market led FERC in July to order a delay in its next planned capacity auction. Chatterjee was joined in the decision by the other Republican commissioner, Bernard McNamee, as they argued that state subsidies for nuclear and renewables artificially give those resources a leg up...

Read the entire E&E piece here (sub. req.)

Topics: AEE In The News