Summary of FERC Order on Minimum Offer Price Rule in PJM Markets

On December 19, 2019, the Federal Energy Regulatory Commission (FERC) directed PJM to submit a replacement minimum offer price rule (MOPR) for forward capacity market auctions that extends the MOPR to include new and certain existing resources that receive or are entitled to receive certain out-of-market payments, specifically those referred to in the Order as “state subsidies”. These state subsidies include state renewable portfolio standard (RPS) programs, nuclear generation subsidies, and other potential state-specific generation subsidies (with some exceptions). However, the Order makes clear that existing renewable resources that participate in state RPS programs, as well as existing demand response, energy efficiency, storage resources, self-supply resources, and any resource that does not receive state subsidies are exempt from the MOPR.

Thus, FERC intends for PJM to raise the minimum price that resources can bid into future capacity market auctions, which will make it less likely that new state-subsidized resources will set the capacity market auction clearing price. Critics of the Order have cautioned that the Order may affect more resources than FERC discusses and will result in higher capacity clearing prices. 

The Order is in response to PJM's October 2018 response to FERC's previous June 2018 Federal Power Act section 206 filing that found that PJM's existing capacity market structure was "unjust and unreasonable, and unduly discriminatory or preferential" as a result of out-of-market state subsidies for existing and new resources.