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On October 15, 2020, the Federal Energy Regulatory Commission (“Commission”) issued an Order (“October 15 Order”) accepting in part, rejecting in part, and specifying modifications to tariff revisions proposed by the PJM Interconnection (“PJM”) to implement the Commission-directed expansion of the minimum offer price rule (“MOPR”) within the PJM footprint.

Prior to the Commission’s December 2019 Order to expand the MOPR to all state-subsidized capacity resources, the MOPR only applied to new natural gas-fired combustion turbine and combined cycle resources. The Commission’s October 15 Order accepts PJM’s MOPR compliance filings to apply the MOPR to any capacity resource that receives or is entitled to receive a state subsidy.

The Commission directs PJM to submit a further compliance filing by November 16, 2020 and revise the tariff on a number of issues, including among others, to:
  • incorporate tariff language providing for a competitive exemption to the extent a capacity market seller can demonstrate that the underlying resource that is subject of a bilateral transaction does not and will not be entitled to receive a state subsidy to support the construction, development, or operation of the resource; 
  • revise its proposal to make clear that where the default or resource-specific offer price floor for a particular resource is higher than the market seller offer cap for such a resource, the resource with a state subsidy should submit an offer using the resource-specific review process;
  • propose tariff revisions to account for a situation in which a self-supply entity could own a resource that may be sufficiently isolated from that self-supply entity’s rate-based cost recovery, such that the resource could be considered to not receive a state subsidy, regardless of whether it is owned or controlled by a self-supply entity;
  • revise its proposal regarding the gaming provisions that dictate the circumstances that a resource, which elects the competitive exemption and then accepts a state subsidy will forfeit its capacity revenue; and
  • propose tariff revisions to provide 30 days for sellers to notify PJM of a material change in subsidy status, and, five days if such material change occurs within 30 days of the auction.
Significantly, the Commission reversed its finding in the April 2020 Order on Rehearing that state default service auctions meet the definition of state subsidy. The Commission accepted PJM’s proposal to exclude independently evaluated, non-discriminatory, fuel-neutral, competitive state-directed default service auctions from the application of the expanded MOPR.

The Commission denied further rehearing requests challenging its expansion of the MOPR in the PJM.

In dissenting from the October 15 Order, Commissioner Glick asserted that the Commission’s MOPR decisions reflects overreach and stifles state efforts to promote clean energy.

The Commission’s October 15 Order can be found here.

For more information on the Commission’s MOPR decisions, and their potential applicability and impact, please contact Thomas Rudebusch, Bhaveeta Mody, Joshua Adrian, and Clarence Hawkes III.