POWER March 2022 - 22

POWER MARKETS
Market Transitions: The MOPR
Merry-Go-Round
The PJM Interconnection's Minimum Offer Price Rule (MOPR) was introduced in
2006 as a floor to bar new generators from artificially depressing capacity
auction clearing prices through below-cost bids. In December, the Federal
Energy Regulatory Commission directed PJM to expand MOPR to nearly all
state-subsidized capacity resources.
Kennedy Maize
"
The transformation of the power
sector is changing the landscape of
energy supply ... Generally, electricity
systems and markets are complex
and not always easy to understand. " That
statement from a 2019 paper by The Oxford
Institute for Energy Studies sums
up more than a decade of turmoil and
tension in U.S. wholesale competitive
power markets.
Trying to adapt these markets, now
serving more than half the country, to
new, non-dispatchable and zero-carbon
sources such as wind, solar, and nuclear
involves disputes among state governments,
market operators, conventional
merchant generators, renewables advocates,
legacy generators, and Republican
and Democratic regulators at the Federal
Energy Regulatory Commission (FERC).
FERC oversees competitive power markets,
but only to a limited degree over
state utility regulators.
Renewables Grow, Policies Change
The march of wind and solar across the
land is likely to continue. The Energy
Information Administration on Jan. 18
said U.S. power generation from renewables-mostly
solar and wind, and not
including hydropower-likely will grow to
17% of the nation's total electricity output
in 2023, up from 13% in 2021.
Last December, FERC on a 3-2 vote
(all three Democratic commissioners
in favor; the two Republicans against)
approved a mechanism to allow statesubsidized
power to bid into the PJM
Interconnection (Figure 1) capacity market,
proposed by PJM. Two years before,
FERC on a 3-2 vote (the Republican
majority voting in favor against the two
Democrats) voted to bar subsidized power
bids into the auction.
The parties are wrangling over statemandated
subsidies such as renewable
portfolio standards and zero-emissions
22
1. PJM Interconnection coordinates the movement of electricity through all or parts of
Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio,
Pennsylvania, Tennessee, Virginia, West Virginia, and the District of Columbia. Courtesy: PJM
Interconnection
credits, and how those impact markets.
Later, some states began subsidizing
their uneconomic nuclear plants
to keep them operating. Involved are a
plethora of esoteric economic concepts
(see sidebar) including buyer-side market
power and reverse Dutch auctions.
An Evolving Market
Nowhere has this tension between buyers
and sellers played out with more
twists and turns than at the PJM Interconnection,
the power market for buyers
and sellers in 13 populous states and the
District of Columbia. Located in historic
Valley Forge, Pennsylvania, PJM began
life in 1956 as the Pennsylvania-New
Jersey-Maryland power pool, aimed at
dispatching electric generating plants on
a lowest-cost basis.
A series of FERC orders, beginning in
1996 with Order 888, based on a 1992
law, transformed PJM into a competitive
wholesale energy market. The FERC
order, shepherded by then-Chair Betsy
www.powermag.com
Moler, ordered public utilities to provide
open access transmission service on a
comparable basis to the transmission
service they provide themselves.
The way to do that was to establish
new open access institutions called
independent system operators (ISOs)
or
regional transmission organizations
(RTOs), basically interchangeable terms.
Generators would bid their supplies into
auctions run by the ISOs, which would
in turn dispatch the power at the lowest
prices. The result was the great restructuring
of U.S. electric markets from the
1990s to today. PJM is the exemplar.
Capacity Payments
In addition to operating as a place for
buyers and sellers to transact daily business
on an arms-length basis, PJM also
operates a capacity market aimed to assure
that there is always a reliable supply
of power available ahead of almost any
circumstances. Stu Bressler, PJM senior
vice president-markets, told POWER,
POWER | March 2022

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POWER March 2022

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