Maryland Regulator Appeals FERC Capacity Market Order Citing Potential to Frustrate State Clean Energy Efforts

The Maryland Public Service Commission requested rehearing of the Federal Energy Regulatory Commission’s order issued last December to revamp PJM Interconnection LLC’s capacity market rules, according to a Jan. 21 news release. The ruling would expand the minimum offer price rule, or MOPR, to new or existing resources entitled to state subsidies, with certain exemptions. The state agency argued that the order interferes unlawfully with the states’ exclusive jurisdiction over generation and resource portfolio decisions. The practical effect of the order will be to frustrate state policies to support cleaner generating resources, in violation of state authority under federal law, the agency said.

The decision could jeopardize Maryland’s new renewable energy resources, such as offshore wind projects, and stifle innovation of new energy efficiency products, by pricing them out of the market, according to the state regulator. The MOPR sets a default floor price for generation to clear the capacity market in PJM, the regional grid operator for 13 states including Maryland and the District of Columbia.

The ruling applies exemptions to existing resources participating in state renewable portfolio standard programs, existing demand response, energy efficiency and storage resources, and existing self-supply resources. Further, federal subsidies will not be subject to the MOPR. Previously, the MOPR required that new, non-exempt natural gas-fired generators offer at or above the offer price floor set by the grid operator.

Commissioner Richard Glick, the FERC panel’s lone Democrat, issued a vehement dissent calling the order “illegal, illogical, and truly bad public policy.” The sweeping definition of subsidy will potentially subject much of the capacity market to MOPR, and the number of exemptions will entrench the current resource mix by excluding several existing classes from mitigation. The order permits the commission to zero out any state effort to address the externalities associated with electricity sales, including the Regional Greenhouse Gas Initiative and target any future carbon tax, cap-and-trade program, or clean energy standard, all of which would inevitably affect the wholesale market clearing price, according to Glick.