Electricity Markets
Press Release

FERC order to expand Minimum Offer Price Rule in PJM is disappointing

The American Public Power Association (Association) is disappointed in the Federal Energy Regulatory Commission’s December 19 order to greatly expand the Minimum Offer Price Rule in the PJM Interconnection’s capacity construct. The use of a MOPR greatly increases prices and harms all consumers, with the only beneficiaries being a small group of incumbent merchant generation owners.

Under this order, the MOPR price floor will now apply to all resource types, whether existing or new. The only exemptions are for currently existing resources and for any non-gas “merchant” resource built without any payments outside of the PJM-operated markets.

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 stands in sharp contrast to any definition of competitive markets, and represents the worst type of government interference in the markets — not to protect consumers but instead to support a selected group of sellers,” said American Public Power Association President and CEO Sue Kelly.

“It is the ultimate irony that the public power business model has been deemed a subsidy and a threat to competitive markets. Our approach to new resources is closer to a true market than PJM’s Reliability Pricing Model has ever been,” stated Marc Gerken, PE, AMP President and CEO. “This order leaves no question that RPM is nothing more than an administrative construct with prices set in Valley Forge, PA with no enduring features of a competitive market.”

The Association will be carefully reviewing the order and considering its options.