Chatterjee defends markets after FERC order backlash

Source: By Jeremy Dillon, E&E News reporter • Posted: Wednesday, February 12, 2020

Federal Energy Regulatory Commission Neil Chatterjee defended the efficacy of capacity markets yesterday and cautioned states against exiting over policy differences governing the market.

Chatterjee’s remarks came in response to questions about the potential cascading effects of a state-backed pullout of the PJM Interconnection capacity market following the recent changes instituted by FERC to balance alleged state interference into power generation decisions.

“I’ll simply say this: I for one am a big believer in markets and the value that particularly the capacity markets have provided to consumers, to the economy and to the environment,” Chatterjee told reporters during a news conference at the National Association of Regulatory Utility Commissioners’ winter policy conference in Washington.

“I think for all the people expressing concerns and the potential about leaving the capacity markets need to do the analysis and see how that shakes out,” he added. “That’s my advice: Let’s see how this all shakes out. Let’s see how the auctions go. Let’s see what the impacts on these generators are before anyone makes these kinds of decisions.”

States like Illinois and Connecticut, among others, have complained about how the changes to the grid operator overseeing them have affected their ability to institute state-level laws to boost clean energy sources to help reduce carbon emissions.

In one example affecting Illinois, FERC moved late last year to extend the “minimum offer price rule” — a type of bid floor for capacity bids in PJM’s auction — to cover any electricity resources that receive state subsidies, like many wind and solar projects and existing nuclear plants (Energywire, Dec. 23, 2019).

Clean energy advocates argue that the higher rates would effectively freeze new renewable resources and nuclear energy from competing in PJM’s capacity market — to the detriment of states seeking to reduce carbon emissions and combat climate change.

Chatterjee argued the move was needed to counter an influx of state subsidies that themselves risked collapsing the capacity market in the long term without a FERC action to counteract their influence.

“When folks do the analysis and see the benefits of participation in organized markets, I would think a state would have to think twice about losing the benefits that their consumers enjoy in participating in these organized markets,” Chatterjee said about a potential pullout.

Upcoming FERC action

Chatterjee also previewed the high-profile action items the commission is likely to tackle in the coming months, including a potential breakthrough in the stalled consideration of distributed energy resources.

Leading his list of items was FERC’s response to a host of rehearing requests in the PJM minimum offer price rule decisions.

A final rule on the agency’s implementation of proposed changes to the Public Utility Regulatory Policies Act is also on the agenda, he said. FERC issued a notice of proposed rulemaking on its changes in the fall of last year that split the commission along party lines.

But a breakthrough on commission consideration of an order to open wholesale markets to distributed energy resources could offer an opportunity for bipartisan cooperation. Chatterjee suggested the commission was seeking a path that could get a consensus on board.

“I think if we can successfully move forward there, that it could be similarly impactful as what we did in [Order 841] on energy storage,” Chatterjee said.

FERC’s resilience docket may offer a similar chance for consensus on the commission, although exact timing was not as clear.

Chatterjee reiterated yesterday that he had no plans to move forward on resilience without first establishing a definition that has consensus and how to address it.

“It’s still a priority, it’s still a focus, and I’m working to achieve that consensus with my colleagues,” Chatterjee said on the resilience issue.