Chairman Richard Glick Statement
March 9, 2021
Docket No. EL19-58-005
I concur in today’s order. Although PJM’s approach to the forward-looking E&AS offset “is by no means perfect,” it enables PJM to move forward with its long-delayed, much-needed capacity auction for the 2022-2023 delivery year.[1] Commissioner Clements’s partial dissent makes a number of good points about the harm caused by an inflated Net Cost of New Entry (Net CONE) value.[2] I share her general concerns about PJM’s approach to Net CONE, although I believe that the real problem lies with PJM’s misguided choice of the reference resource to calculate Net CONE, rather than in how it implemented the forward-looking E&AS Offset in this proceeding.[3] In any case, PJM would be well-served to seriously consider Commissioner Clements’s arguments when it goes back to the drawing board for its quadrennial review of the Variable Resource Requirement Curve this spring.[4]
Unlike that review, however, today’s order does not write on a blank slate. For three years now, the Commission has meddled with one aspect of PJM’s capacity market after another. I have dissented at nearly every turn, arguing that the Commission’s actions represent “truly bad public policy” and will produce rates that are patently unjust and unreasonable.[5] Making matters worse, those efforts have fundamentally undermined the capacity market’s ability to promote certainty and produce the reliable price signals guiding resource entry and exit that are supposed to be its principal purpose. Consider where we find ourselves: This May, PJM is slated to conduct what is nominally a three-year forward auction for a delivery period that begins less than a year from the date of the auction.[6]
With that in mind, now is not the time to once again pull the rug out from underneath the auction for the 2022-2023 delivery year.[7] That is especially so as the arguments on rehearing, including the arguments regarding PJM’s use of a 10% adder and the reliance on historical reserve prices to forecast future expected reserve revenues, were all previously raised, considered, and rejected.[8] Furthermore, I see nothing in the record that identifies a superior alternative to PJM’s proposal to use historical reserve prices as the basis for projecting future reserve revenues.[9] Were such an alternative available, I agree that it would merit a hard look. But as it is not, we must provide PJM with the certainty it needs to finally run the upcoming auction and then, with that behind us, turn to remedying the more fundamental problems that the Commission has created over the course of the last three years.
For these reasons, I respectfully concur.
[1] PJM Interconnection, L.L.C., 173 FERC ¶ 61,134 (2020) (Compliance Order) (Glick, Comm’r, dissenting in part at P 4).
[2] PJM Interconnection, L.L.C., 174 FERC ¶ 61,180 (2021) (Order) (Clements, Comm’r, dissenting in part). I also share her skepticism about the unjustified use of percentage adders and the effect of those adders on customers’ rates. See, e.g., Cal. Indep. Sys. Operator Corp., 171 FERC ¶ 61,172 (2020) (Glick, Comm’r, dissenting).
[3] PJM Interconnection, L.L.C., 167 FERC ¶ 61,029 (2019) (Glick, Comm’r, dissenting), order on reh’g, 171 FERC ¶ 61,040 (2020) (VRR Curve Rehearing) (Glick, Comm’r, dissenting at PP 2, 5) (“For many years now, the PJM capacity market has procured too much capacity at too high a price. The root of that problem is PJM’s excessively high Net Cost of New Entry (Net CONE) parameter. . . . The main problem with PJM’s proposed Net CONE value—and, thus, with its entire filing to establish the [Variable Resource Requirement Curve] Curve—is its choice of Reference Resource.”).
[4] Compliance Order, 173 FERC ¶ 61,134 (Glick, Comm’r, dissenting in part at P 4) (noting PJM’s pledge to revisit its new forward-looking E&AS Offset methodology and parameters in its next quadrennial review).
[5] Calpine Corp. v. PJM Interconnection, L.L.C., 171 FERC ¶ 61,035 (2020) (Glick, Comm’r, dissenting at P 1); see Calpine Corp. v. PJM Interconnection, L.L.C., 169 FERC ¶ 61,239 (2019) (Glick, Comm’r, dissenting); Calpine Corp. v. PJM Interconnection, L.L.C., 163 FERC ¶ 61,236 (2018), order on reh’g, 171 FERC ¶ 61,035 (Glick, Comm’r, dissenting); Calpine Corp. v. PJM Interconnection, L.L.C., 163 FERC ¶ 61,236 (Glick, Comm’r, dissenting); PJM Interconnection, L.L.C., 167 FERC ¶ 61,029 (Glick, Comm’r, dissenting), order on reh’g, VRR Curve Rehearing, 171 FERC ¶ 61,040 (Glick, Comm’r, dissenting); see also Old Dominion Elec. Coop. v. PJM Interconnection, L.L.C., 171 FERC ¶ 61,149 (2020) (Glick, Comm’r, concurring at P 5) (expressing doubt that the approach of “procuring more and more year-round blocks of undifferentiated capacity” is a “sustainable or efficient approach” to ensuring reliability).
[6] The auction for the 2022-2023 delivery year should have been run in May 2019. It is now scheduled to run in May 2021, with results posted in June 2021. The delivery year commences June 1, 2022.
[7] See Order, 174 FERC ¶ 61,180 (Christie, Comm’r, concurring at P 1). Relevant parameters for the May auction have been calculated by PJM and its Market Monitor and made available to market participants on its website. See Capacity Market (RPM), 2022-2023 (2021), https://www.pjm.com/markets-and-operations/rpm.aspx.
[8] Order, 174 FERC ¶ 61,180 at PP 13-15 (discussing 10% adder), PP 33-34 (discussing use of historical reserve prices to forecast future reserve revenues); see Compliance Order, 173 FERC ¶ 61,134 at PP 162-171 (historical reserve prices), PP 172-181 (10% adder).
[9] Compliance Order, 173 FERC ¶ 61,134 at P 168 (rejecting request to require PJM to adopt an alternative method to estimating future reserve revenues, because the record lacked a proposal superior to PJM’s proposal).