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FERC Goes Déjà Vu All Over Again

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Almost exactly two months ago, FERC imposed a Minimum Offer Price Rule (MOPR) on virtually all state-subsidized generation in the PJM energy market, most notably clean and renewable resources.  PJM’s 13 states screamed bloody murder, decrying a federal grab of “states’ rights” that threatened to undo years of preferential treatment for, and integration of, utility-scale renewables, especially when fears of climate change has pushed renewables toward the mainstream of power supply.

Well this week FERC did much the same—though up north a bit—making it difficult and perhaps impossible for most clean energy resources to clear the NY Independent System Operator’s (NYISO) Capacity Market.  And just as they did on December 20 in PJM, many stakeholders reacted unhappily that these buyer-side mitigation rules (BSM) will effectively put the kibosh on new green projects by simply making them uneconomic.

Among other rulings, FERC rejected New York’s petition to exempt 1000 megawatts of projects proposed by the NY Public Service Commission (PSC) and the State’s energy R&D promotional agency, NYSERDA. In fact, these agencies sought total relief for all new energy storage resources. NYISO’s anodyne response was that the grid operator is “reviewing the order” and will consider “appropriate next steps” including a rehearing.  

FERC’s Chairman Neil Chaterjee tried to draw a distinction between these New York-specific orders and the ones imposed recently in PJM. But it seemed to many that it was a distinction without a difference. Chaterjee said “Today’s orders protect the competitiveness of NYISO’s capacity market by addressing the price-distorting action that could have unintended impacts on the future supply of electricity consumers.” But just last December, he very similarly argued that state subsidies distorted PJM's organized energy market and created an unlevel playing field, and that the order was designed to protect the capacity market, which many generators had argued was under siege from state subsidies. Critics say there’s little difference between these BSM rulings and the one that imposed the MOPR.

And once again Commissioner Richard Glick was the dissenter, just as he suggested that the PJM ruling had injected an unprecedented level of administrative interference into the market such that bidding decisions for market suppliers would be made in "Valley Forge" (location of PJM headquarters).

To be sure, some very visible leaders including Senator Chuck Schumer levied the charge of politics into the decision, in particular that FERC is little more than an arm of the GOP and aiming to prop up fossil-fuel despoilers of the environment.

There seems to be a cognitive dissonance here. The relatively new President and CEO of NYISO Rich Dewey commented that "The wholesale markets must now accommodate state policies; not conflict with them.” But that’s rather precisely what the two-person majority in FERC seems to be saying is the problem: state policies as written are in fact unfairly distorting the organized power markets to the detriment of ratepayers, and unfair to competitive generators.

No doubt this won’t be viewed with smiles “on the second floor” in Albany. Governor Cuomo has made a transition to clean energy a cornerstone of his climate plan, calling for 100% renewable generation by 2040 including aggressive, and some say, unrealistic offshore wind and energy storage targets.

Legal challenges are sure to follow; however, dissenting stakeholders must first exhaust all administrative remedies including a FERC rehearing before filing lawsuits.

It's clear that states aren’t giving up their efforts to build clean energy resources and ensure they get a reasonable accommodation to join the bulk power markets in an economically viable way. And it’s equally clear that environmentally-focused stakeholders will vocally support that policy in every avenue available to them, including regulators, the courts, media, and even grassroots campaigns.

But it’s also clear that, despite NYISO’s Dewey’s goal of “harmonizing” FERC's obligations while respecting states’ rights to determine the mix of generation within their borders, there’ll be little or no “harmony” in what will follow in the power markets.


David Gaier's picture

Thank David for the Post!

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Bob Meinetz's picture
Bob Meinetz on Feb 24, 2020 1:09 am GMT

David, though FERC makes for a convenient punching bag, lay the blame where it belongs: renewables. For generating a steady supply of clean electricity (to put it bluntly), they suck.

The only people screaming bloody murder in PJM's thirteen states are 1) renewables advocates, who apparently don't have the slightest clue what maintaining a reliable supply of electricity requires, or 2) renewables developers, who saw a market for soaking renewables advocates (and the people who listen to them) for all they're worth, and 3) natural gas developers (like Competitive Ventures, LLC, building two new gas plants to replace Indian Point) who want "in" on that market too.

If I didn't give a crap about climate change, I'd be investing in wind, solar, and gas too. There's a sucker born every minute.

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