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Commissioner Robert F. Powelson
June 29, 2018
Docket Nos. EL16-49-000, ER18-1314-000, ER18-1314-001, EL18-178-000
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Concurrence on PJM Interconnection Capacity Market Proposals

"I strongly support today’s order. I write separately to acknowledge the significance of the majority’s decision and its impact on the future of wholesale energy markets in the PJM region. The issue of out-of-market support for preferred resources is not a new one. In 2013, the Commission opened a proceeding to discuss the interplay between state public policy decisions and wholesale markets.1 In May 2017, the Commission continued that effort by holding a two-day technical conference to further explore the issues. After years of open dialogue unconstrained by ex-parte restrictions, the Commission failed to provide guidance on one of the most pressing issues facing wholesale electricity markets. PJM ultimately took the lead and proposed two options. However, the majority – as well as many stakeholders – could not find either to be just and reasonable solutions to the problem. Today, the Commission sets forth a third solution, and in doing so, provides much-needed guidance to PJM and its stakeholders.

"Let me be clear: there is a problem. The Federal Power Act compels this Commission to ensure just and reasonable rates. The record before us clearly indicates that unfettered access to wholesale energy markets by state-supported resources leads to unjust and unreasonable rates. If the Commission did not find today that the existing PJM tariff is unjust and unreasonable, it would be ignoring the duties prescribed to it under the Federal Power Act.

"I have come to realize that there is no one-size-fits-all solution to ensure state decisions to support certain resources do not impact the wholesale market. Under the Federal Power Act, the states are able to procure the resources they prefer. Notwithstanding the fact that I did not support ISO-New England’s Competitive Auctions with Subsidized Policy Resources (CASPR) mechanism, I acknowledge that it reflected a regionally-tailored approach to the problem.2 The fact that CASPR may work for ISO-NE does not mean it is an appropriate solution for PJM. The problem in New England was the accommodation of new state-supported resources as opposed to the problem in PJM, which is an accommodation existing state-supported resources.

"The resource-specific FRR Alternative provides a solution that is appropriate for the unique set of circumstances in the PJM region. The proposed resource-specific FRR Alternative is based, in principle, on the existing FRR construct that has existed in the PJM tariff for many years. It is not an entirely new concept to PJM and its stakeholders. Further, the idea of an expanded MOPR has a more-than-robust record from a diverse set of interested parties. I am aware that the order sets forth an aggressive timeline for this action. However, this is a problem that is long overdue for a solution, and I am confident that all stakeholders, including the states, will be ready and willing to roll up their sleeves and work to towards a solution that is consistent with the Commission’s guidance.

"Further, I do not believe that individual state decisions to re-regulate should be an overriding factor in our decision-making. The Commission’s responsibility is to protect the integrity of the wholesale markets and ensure just and reasonable rates. We cannot make decisions based on speculation about what states may or may not do. Moreover, the approach outlined in today’s order – the resource-specific FRR Alternative – allows states the flexibility to procure preferred resources, while also allowing them to remain in the wholesale energy and ancillary services markets. The tradeoff is that the states will bear the cost responsibility of their resource-specific decisions, which is consistent with the fundamental ratemaking principle of cost-causation. Simultaneously, through the expanded MOPR, the market will remain free from the effects of subsidized resources. If states find that the resources they select are cost-prohibitive, or undesirable for any other reason, they may either: 1) select more cost effective resources, or 2) rely on the capacity market to select resources to meet resource adequacy goals.

"I, too, believe that capacity markets can and do provide meaningful benefits to consumers. I have been a tireless advocate of competition and the principles that have been a cornerstone of FERC policy for many years. Failure to take decisive action would be a disservice to PJM, its stakeholders, and ultimately consumers.

"Accordingly, I respectfully concur.”






                                               

    1 Centralized Capacity Markets in Regional Transmission Organizations and Independent System Operators, Docket No. AD13-7-000 (June 17, 2013).
    2 ISO New England Inc., 162 FERC ¶ 61,205 (2018) (Powelson, Comm’r, dissenting).
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