Electricity Markets
Press Release

APPA, AMP, and PPANJ Request Rehearing of FERC Minimum Offer Price Rule Order

Washington D.C., January 21, 2020—The American Public Power Association, American Municipal Power, Inc. (AMP), and the Public Power Association of New Jersey (PPANJ) have requested rehearing of the Federal Energy Regulatory Commission’s December 19, 2019 order which implemented a sweeping expansion of the Minimum Offer Price Rule (MOPR) used in PJM’s capacity construct, the Reliability Pricing Model (RPM).

The December 2019 order directs PJM to apply the MOPR to any new or existing resource that receives, or is entitled to receive, a broadly defined “state subsidy,” unless that resource is specifically exempted.

For public power, this means that every new resource built in the future—whether it is a renewable, storage, or energy efficiency resource—will run the risk of not clearing the capacity auction (even after they have initially cleared an auction), causing public power utilities and their customers to face the risk of paying twice for that resource every year and directly interfering with public power’s fundamental business model. 

Similarly, state-sponsored resources will be subject to the MOPR, raising the same risks for the states and impeding the states’ rights to make their own resource choices. 

“This order is detrimental to public power’s principle of local decision-making in providing reliable, affordable, and environmentally responsible power” said American Public Power Association President and CEO Joy Ditto. “It’s essential that our members have the ability to supply their own power without being pulled into a broken market construct that threatens to make them double-pay for their own resources.”

“We urge the Commission to reconsider the extensive record before it and reverse its determination that the public power business model is a subsidy and a threat to competitive markets. The public power business model existed long before PJM’s RPM, has co-existed without negatively impacting pricing outcomes, and our approach to new resources is closer to a true market than RPM has ever been,” stated Marc Gerken, PE, AMP President and CEO. “The Commission should allow public power to supply power to their customer-owners without the risk of paying twice for capacity based on an administrative construct with prices set in Valley Forge, PA with no enduring features of a competitive market.”

“The public power business model is a long standing, well-recognized model that rests upon a compact between a community and its citizens to provide electricity at the lowest reasonable cost. Such a compact is not easily established except through years of proven service to its citizens, in some instances for over one hundred years,” said PPANJ Executive Director Brian Vayda. “The recent decision on PJM’s capacity construct is an anathema to the American principle of self-help governance in which citizens band together locally to solve their problems. The potential to pay twice for our own capacity resource—once through the development of the unit, and again through the RPM if the constructed unit does not clear the auction—will severely harm our citizens/customers. Our citizens/customers just can’t and in most cases won’t take the risk of stranding that resource.”

See the full pleading here.