On April 9, 2018, PJM Interconnection, L.L.C. (“PJM”) filed two alternative proposals to address supply-side state subsidies that, as PJM argues, could otherwise depress prices in PJM’s capacity market, the Reliability Pricing Model (“RPM”).  As presented by PJM, its “Capacity Repricing” proposal would establish a two-stage capacity market to accommodate subsidized resources, while the other proposal, the “MOPR-Ex proposal,” would expand PJM’s use of the Minimum Offer Price Rule (“MOPR”) to address subsidized resource entry.  With PJM’s filing, the issue of how to address out-of-market capacity market subsidies returns again to FERC exactly one month after a divided Commission approved a similar filing from the ISO New England Inc. (“ISO-NE”) (see March 20, 2018 edition of the WER). Continue Reading PJM Files Two Alternate Proposals to Address State-Subsidized Resources in Capacity Markets

On March 30, 2018, FERC rejected PJM Interconnection, L.L.C.’s (“PJM”) October 17, 2017 proposed tariff revisions to improve the performance of the PJM frequency regulation (“Regulation”) market (the “Regulation Proposal”).  According to PJM, the revisions were needed in light of a number of ongoing operational and market issues that had developed in the Regulation market.  FERC rejected the Regulation Proposal because it did not comply with the requirements of Order No. 755 and FERC’s regulations to compensate all Regulation resources based on the actual quantity of Regulation service provided. Continue Reading FERC Rejects PJM’s Regulation Market Tariff Revision

On March 30, 2018, FERC issued an order establishing a technical conference and partially granting one of two complaints against various changes to the PJM Interconnection, L.L.C. (“PJM”) frequency regulation market.  In partially granting one complaint, FERC found that PJM’s tariff is unjust and unreasonable in so far as it omits the methodology for calculating certain regulation-related cost curves, as well as the parameters governing certain regulation market signals.  In the forthcoming technical conference, FERC intends to consider both: (1) whether PJM’s recent frequency regulation market changes hamper the full participation of storage resources, for example, to provide regulation services, and (2) whether PJM’s regulation market design as a whole is consistent with prior FERC precedent. Continue Reading FERC Establishes Technical Conference Regarding PJM Frequency Regulation Complaints

On March 28, 2018, FERC partially accepted the Midcontinent Independent System Operator, Inc.’s (“MISO”) Order No. 831 compliance filing (“March 28 Order”).  In Order Nos. 831 and 831-A, FERC required Regional Transmission Organizations (“RTOs”) and Independent System Operators (“ISOs”) to amend their respective tariff provisions governing existing offer caps on incremental energy offers, which FERC determined was necessary to: (1) avoid suppressing Locational Marginal Prices (“LMPs”) below the marginal cost of production; and (2) fully compensate generation resources for the costs incurred to serve load (see November 21, 2016 edition of the WER).  Continue Reading FERC Partially Accepts MISO Order No. 831 Compliance Filing, Orders Further Modifications to MISO Tariff

On March 29, 2018, FERC issued an order accepting proposed modifications to the methodology used to evaluate the availability of resource adequacy (“RA”) resources and resulting charges and payments under the Resource Adequacy Availability Incentive Mechanism (“RAAIM”) administered by the California Independent Operator Corporation (“CAISO”).  In the order, FERC agreed that CAISO’s proposal addressed identified problems such as overweighting certain types of resource adequacy capacity and discouraging parties from providing other types of capacity. Continue Reading FERC Accepts Modifications to CAISO’s RAAIM Charges and Payment Methodology

 On March 29, 2018, FERC issued an order granting a limited tariff waiver request by the California Independent System Operator Corporation (“CAISO”) relating to participation requirements for certain demand response resources in the California Public Utilities Commission’s (“CPUC”) Demand Response Auction Mechanism (“DRAM”) with delivery obligations between April-October in 2018 and 2019.  The waiver, which was necessitated by recent changes in CAISO’s resource adequacy program, will allow CPUC-identified DRAM resources to meet their contractual and regulatory obligations.  In granting the waiver, however, FERC stated that DRAM contracts executed after the date of the order and that do not conform with current CAISO requirements should not be eligible for the waiver. Continue Reading FERC Grants CAISO Waiver Request for DRAM Resources Impacted by Availability Hours Change

On March 19, 2018, FERC issued an order terminating its proceeding under section 206 of the Federal Power Act (“FPA”), accepting Idaho Power Company’s (“Idaho Power”) updated market power analysis, and concluding that Idaho Power successfully rebutted the presumption of market power.  In doing so, FERC concluded that Idaho Power satisfied the Commission’s standards for market-based rate authority in its own Balancing Authority Area (“BAA”).  In finding that Idaho Power had rebutted the presumption of market power, FERC relied on Idaho Power’s delivered price test (“DPT”) analysis and various sensitivity analyses using transaction data from both the Idaho Power BAA and an adjacent trading hub. Continue Reading FERC Finds Idaho Power Lacks Market Power in Its Own BAA and Terminates FPA Section 206 Proceeding

On March 9, 2018, a divided FERC approved the Competitive Auctions with Sponsored Policy Resources (“CASPR”) proposal submitted by the ISO New England Inc. (“ISO-NE”). Developed through an extensive stakeholder process that began in 2016, CASPR was promoted by ISO-NE as a mechanism to integrate out-of-market state resource policies that might otherwise suppress capacity market prices in ISO-NE’s capacity market. A divided FERC approved the proposal as a just and reasonable accommodation of state policies, with Commissioner Powelson dissenting, arguing that the proposal dilutes market signals and “threatens the viability” of ISO-NE’s capacity market. Commissioners LaFleur and Glick concurred with the outcome, but criticized the order’s guidance on adapting markets to state energy policies, and reliance on minimum offer pricing rules (“MOPRs”) as the “standard solution” to achieve that end. Continue Reading A Divided FERC Approves ISO-NE’s Capacity Market Changes to Accommodate State Subsidized Resources

On March 13 and March 15, 2018, FERC took actions to address tax law changes resulting from the Tax Cuts and Jobs Act of 2017 for electricity, natural gas, and oil companies.  In addition, on March 15, 2018, in response to a federal court remand, FERC stated that master limited partnership (“MLP”) interstate natural gas and oil pipelines will no longer be allowed to receive an income tax allowance in cost of service rates. Continue Reading FERC Addresses Impact of Tax Cuts on Rates for Energy Companies and Eliminates Income Tax Allowance for Master Limited Partnerships

On February 23, 2018, FERC approved PJM Interconnection, L.L.C.’s (“PJM”) changes to its tariff and Reliability Assurance Agreement (“RAA”) to revise Reliability Pricing Model (“RPM”) capacity market rules in order to accommodate greater participation from seasonal resources.  Specifically, FERC approved changes related to: (1) resource aggregation for submitting combined capacity market sell offers; (2) granting winter-period interconnection rights; and (3) demand response resource measurement and verification for seasonal resources.  However, FERC separately responded to complaints that the RPM does not adequately accommodate seasonal resources by directing FERC staff to establish a technical conference to explore whether further changes are needed to permit seasonal resource participation. Continue Reading FERC Orders Technical Conference on Seasonal Resources Participating in PJM’s RPM Capacity Market