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E&E News: States Seeking Exit from FERC Rule Face Steep Off-Ramp

Posted by Arianna Skibell on Jun 8, 2020

E&E News covered the challenges for states considering leaving PJM, quoting AEE's Jeff Dennis. Read excerpts below and the entire E&E News piece here (sub. req.). 

States looking to escape a regional power market before federal rule changes take effect have only one way out. The exit ramp is complex and untested. Even its name is forbidding: the fixed resource requirement, or FRR. Exiting the PJM Interconnection capacity market, the nation's largest, won't be easy, but analysts say it could give states the flexibility they need to duck the rule they say would prevent them from hitting their ambitious clean energy targets. So the FRR is suddenly a hot ticket.

"It lived in a quiet little corner of the PJM rules," said Casey Roberts, a senior attorney with the Sierra Club Environmental Law Program. "But now that sleepy corner is waking up." At issue is a Federal Energy Regulatory Commission rule change that could make it difficult for renewable and nuclear resources to compete with fossil fuel power plants in PJM's wholesale market, which sprawls across 13 Midwest and Mid-Atlantic states and the District of Columbia. Capacity markets offer a way for the grid operator to ensure there will be enough power generation to meet demand into the future, typically three years out. Generation resources like a coal plant or wind farm bid into PJM's periodic auctions to qualify to provide electricity in later years.

Officials in states that have adopted bold clean energy targets — Illinois, New Jersey and Maryland, for example — worry the new rule will make it hard for some renewable resources to complete. Generators often rely on the revenue generated from the market to stay afloat. These states are now eyeing an exit to ensure the development of projects they see as crucial for spurring economic recovery from the coronavirus pandemic and combating climate change. The fixed resource requirement forces states to essentially design a new market mechanism to procure capacity...

Jeff Dennis, managing director and general counsel for Advanced Energy Economy, said the FRR may kick up more questions than it answers, in part because it was designed to be an on-ramp, not an off-ramp. "It was a tool that was created for a large vertically integrated utility," Dennis said. Vertically integrated utilities own all levels of the supply chain, including generation, transmission and distribution. When PJM launched the latest version of its capacity market in 2007 as a way to procure enough power generation to meet demand well into the future, the American Electric Power Co. said the market would discriminate against large vertically integrated utilities that didn't fit neatly into the new design...

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

Topics: AEE In The News