Commissioner Mark C. Christie Statement
April 30, 2021
Docket Nos. ER21-278-001, ER20-584-000, EL19-100-000 (consolidated)
I agree that what is termed the ELCC “transition mechanism” is unjust, unreasonable and unduly discriminatory or preferential. While today’s order makes clear that the Commission rejects the entirety of PJM’s ELCC proposal, it also suggests that the rest of PJM’s proposal “appears” to be a just and reasonable approach to determining the accredited capacity value.[1] While the current ELCC proposal without the “transition mechanism” may have met the standard for approval under FPA section 205,[2] since the Commission rejects the entire proposal here any future decision will be made when and if a revised ELCC proposal is again before the Commission. Given that there will now be an opportunity for further comment and possible refinement of the ELCC construct, I offer the following.
It is absolutely essential that RTO/ISO capacity markets value and compensate capacity resources as accurately as practicable, for two primary reasons: First, reliability depends on it, and second, consumers should only pay for capacity that actually performs when needed. That was an oft-heard theme of the Commission’s recent technical conference on resource adequacy in RTOs/ISOs with capacity markets.[3]
Further, this issue is closely related to the current discussion over the Minimum Offer Price Rule (MOPR) in capacity markets; for another common theme at the aforementioned Technical Conference was that, whatever your opinion on MOPR, the rationale for the MOPR construct may be significantly diminished if — a big “if” — capacity resources are accurately valued and compensated in capacity markets based on their actual performance.[4]
With that in mind, I believe that PJM’s current ELCC proposal, while an improvement over the status quo, can and will be improved. I hope that parties will use the opportunities provided by today’s order to offer additional comment on how the ELCC construct can be made more accurate, including particularly addressing any necessary post hoc reporting requirements that detail actual performance versus the ex ante ELCC values, how such data can and will be used to adjust values, and the
functioning of performance penalties to ensure consumers are not forced to pay for capacity that turned out to be over-valued by the ELCC formula in actual performance.[5]
PJM also now has the opportunity to address these issues in any future ELCC proposal.
For these reasons, I respectfully concur.
[1] PJM Interconnection, L.L.C., 175 FERC ¶ 61,084, at P 17 (2021).
[2] PJM Interconnection, L.L.C., 171 FERC ¶ 61,210, at n.77 (2020) (“To be just and reasonable, proposed revisions do not have to be the most just and reasonable among all possible alternatives.”) (citations omitted); see also Louisville Gas & Elec. Co., 174 FERC ¶ 61,188, at P 48 (2021) (“In submitting an FPA section 205 filing, the public utility need only demonstrate that its proposal is just and reasonable . . . not that its proposal is the most just and reasonable among all possible alternatives.”).
[3] See, e.g., Technical Conference regarding Resource Adequacy in the Evolving Electricity Sector, Docket No. AD21-10-000 (Mar. 23, 2021) (Technical Conference), Tr. 263:15-19 (“Keep the lights on, while at the same time not undermining individual state preferences. The key to it is appropriately evaluating resources based on their capacity contributions and capabilities.”) (Conway); Tr. 108:25-109:1 (“Efficient capacity accreditation is something that would really facilitate the policy objectives.”) (LeeVanSchaick); ISO-New England Mar. 19, 2021 Pre-Technical Conference Statement at 3 (“The next step in the evolution includes a project to revise the capacity accreditation of various resource types, which may require modifications to capacity clearing and qualification procedures to ensure we are not crediting resources for more than their actual reliability benefit to consumers.”) (emphasis added); Tr. 242:1-7 (“The type of generation or resource technology that a state wants to deploy or retain demonstrates its ability to meet demand consistently and when most needed. And that type of resource should be able to participate and compete for capacity revenue in the PJM capacity market, but only to the extent that it actually provides capacity performance and no more.”) (emphasis added) (Conway).
[4] See, e.g., Technical Conference Tr. 146:21-147:10 (“it’s not as simple as eliminating the MOPR or keeping the MOPR. . . . [F]irst off you need to define what your requirements [for] reliability are, and you need to revisit that on a regular basis. . . . [A]nd then it’s putting the right value on those different elements to make sure that the consumers are protected, and those resources are compensated appropriately.”) (Dewey); Tr. 264:21-265:1 (“I don’t think that removing the current expanded MOPR in PJM and replacing it with a targeted MOPR like the prior MOPR, would result in improper cost shifting as long as the state policy preferred resources are appropriately valued, based on their capacity contributions and capabilities.”) (Conway) (emphasis added).
[5] Moreover, I hope the parties continue to address the distinctions between a marginal versus average ELCC value. The Independent Market Monitor has expressed his view that the marginal approach is superior to the average approach and, indeed, has expressed concerns that use of average values will cause increased inefficiencies. Independent Market Monitor for PJM Nov. 23, 2020 Comments at 19 (“The use of average rather than marginal ELCC values will cause PJM’s capacity market results to be incorrect and inefficient, at the expense of the PJM customers and non-ELCC resources competing with ELCC resources.”); see also, id. at 19-20 (“Using the marginal rather than average ELCC value in market clearing results in every resource receiving the same price per MW of provided equivalent load carrying capacity, the correct assignment of capacity obligations per MW of cleared of a ELCC adjusted resource and the correct allocation of any penalties for non performance.”).