FERC directs revisions to market power mitigation in PJM capacity market

by Paul Ciampoli
APPA News Director
March 22, 2021

The Federal Energy Regulatory Commission on March 18 told the PJM Interconnection, its market monitor and market participants in the region that the existing default market seller offer cap fails to allow for adequate review of potential market power concerns in the capacity market, because it  is based on an unreasonable expectation of the number of performance assessment intervals PJM will experience in a given delivery year. 

The Commission directed parties to propose alternative methods for market power review and mitigation in the capacity market.

FERC’s order stems from two complaints filed in 2019 by the market monitor and consumer advocate groups in the region, alleging that PJM’s calculation of the default market seller offer cap in the capacity market is unjust and unreasonable.

The complaints were supported by the American Public Power Association.

The default market seller offer cap originally was established as part of PJM’s 2015 capacity performance construct, in response to the 2014 polar vortex.

FERC found PJM’s existing rate unjust and unreasonable, but said it needs additional evidence to set the appropriate replacement rate and therefore ordered additional briefing.

FERC’s action on the complaints will not interfere with PJM’s upcoming May 2021 capacity auction for delivery year 2022-2023, FERC said. The auction should take place as scheduled under current rules. 

FERC noted that it will continue to exercise its oversight of the upcoming auction and any anticompetitive conduct observed may be referred to the Office of Enforcement.

The order is available here.