PJM Changes Course on State-Subsidized Generation


The ongoing battle over state subsidies in competitive electric markets continues as PJM — the grid operator whose service area includes Ohio — recently backed off its years-in-the-making Minimum Offer Price Rule (MOPR) expansion. A response to a Federal Energy Regulatory Commission (FERC) order, PJM’s MOPR expansion spelled trouble for state-subsidized generation. The MOPR expansion was applied in the most recent PJM capacity auction, resulting in low capacity prices, increases in low-carbon generation, and healthy reserve margins. Under PJM’s new proposal, which must be approved by FERC, complaints would be submitted to FERC on a case-by-case basis if a generator uses “conditioned state support” or coordinated “buyer-side market power.” FERC would make the final call. State-subsidized generation would not be subject to the MOPR for a variety of reasons, such as if the subsidy is for “environmental attributes” or “economic development.” While more analysis is needed, PJM’s new proposal appears to loosen how states can subsidize their favored generators. 7/22/2021