Power Plants
FERC Cautioned on Price Rule Impact
The Federal Energy Regulatory Commission’s order intended to address potential buyer-side market power in the PJM Interconnection regional transmission organization will have serious unintended consequences, an NRECA official emphasized.
NRECA’s Dave Mohre cautioned federal regulators about the “serious unintended consequences” of a new rule. (File Photo By: Luis Gomez)
The issuance, FERC’s recent “minimum offer price rule” order, mandated major changes in the PJM centralized annual auction process. This process is the means through which load-serving entities must demonstrate that they have sufficient generating capacity to reliably meet consumers’ needs.
The FERC-approved changes will “inhibit needed resource development and arbitrarily raise costs to consumers,” cautioned Dave Mohre, executive director of NRECA’s energy and power division.
While it is unusual for the association to comment on a specific case, Mohre told a FERC technical conference, it is doing so here because the order “sets such a bad precedent and would cause so much harm.”
According to NRECA, FERC’s changes would greatly impact the ability of load-serving entities, including electric co-ops, to meet their capacity needs with their own resources.
This self-supply option is threatened by PJM’s rules that require load-serving entities to place their new resources into the auction at a higher price, which might be too high to be accepted.
If that happens, an entity would have to not only pay for its own “brick and mortar,” Mohre noted, but also buy duplicate capacity from the PJM market. That could make it too risky for co-ops and other load-serving entities to build their own generation or to buy the capacity to meet their needs outside the PJM auction.
Accordingly, Mohre underscored, the order [Dockets EL11-20 and ER11-2875] is anticompetitive in nature and would “fundamentally change the nature of the industry.”
FERC’s rule is said to focus only on gas-fired generators, the NRECA representative said. However, he added, because of the Environmental Protection Agency’s new and pending rules for coal-based capacity, new natural gas generation will be “the only game in town” for the next decade.
FERC Commissioner Philip Moeller commended Mohre for bringing up this issue. “The EPA regulations will be a real-world factor that will weigh on us,” the regulator commented.
To think otherwise, he added, “would be fantasyland.”