In a move clearly intended to slide under the radar, the United States’ Federal Energy Regulatory Commission (FERC) announced a directive just a few days before Christmas which will require PJM Interconnection to raise prices of wind and solar power to be in line with the cost of fossil fuels — a move slammed by the Union of Concerned Scientists which believes it will increase the cost of electricity to consumers between $2 billion and $8 billion per year.
The new FERC directive is in response to a proposal submitted by PJM Interconnection — the regional transmission organization (RTO) which covers parts of the Mid-Atlantic and Midwest — which sought “to address the impact of state subsidies on the wholesale capacity market.” Filed in April of 2018, PJM’s proposal was essentially approved and turned into a directive by the Commission, now requiring PJM to comply within 90 days of the order.
The Federal Energy Regulatory Commission’s findings described the fossil fuel industry as the underdog across PJM Interconnection’s 14 states and districts. According to the Commission’s directive, “out-of-market payments provided, or required to be provided, by PJM states to support operation of certain generation resources threaten the competitiveness of PJM’s capacity market. That order ruled PJM’s open access transmission tariff is unjust and unreasonable because the MOPR failed to address the price-distorting impact of resources receiving out-of-market support.”
“FERC is affirming our obligation to safeguard the competitiveness of the PJM capacity market,” said FERC Chairman Neil Chatterjee. “I recognize, and wholeheartedly respect and support, states’ exclusive authority to make choices about the types of generation they support and that get built to serve their communities. They still can do so under this order.
“But the Commission has a statutory obligation, and exclusive jurisdiction, to ensure the competitiveness of the markets we oversee,” Chatterjee added. “An important aspect of competitive markets is that they provide a level playing field for all resources, and this order ensures just that within the PJM footprint.”
The new directive, which was announced on December 19 and timed perfectly to fall beneath the Christmas radar, effectively serves to bail out the fossil fuel industries in play across PJM’s market area for being unable to compete against the declining prices of renewable energy sources like wind and solar, while blaming state subsidies as the overriding issue.
Importantly, PJM’s original proposal targeted state subsidies for renewable energy generation sources, but ignored the existing subsidies propping up fossil fuel generation sources — describing one as “market interference” and casually sliding past the other.
Unsurprisingly, the Union of Concerned Scientists (UCS) slammed the decision, saying that it will increase electricity costs across the 13 states (and the District of Columbia) in PJM’s market area, sliding the cost onto consumers, who will have to pay an extra $2 billion to $8 billion per year in additional costs.
“Federal regulators today have sided with PJM to effectively nullify state laws by excluding power plants meeting state policies from federal markets,” said Mike Jacobs, senior energy analyst at the Union of Concerned Scientists. “By agreeing to this proposal, FERC is not indifferent to state policies that address carbon emissions—they are actively attacking them.”
“PJM is pretending there aren’t subsidies in the markets they run, but the irony is they’re everywhere,” said Jacobs, noting that fossil fuel generation sources that receive financial benefits from being in the capacity market are still allowed under the new rule to receive cost recovery support through state public utility commissions. “Now, FERC is rounding up the usual suspects—wind and solar power—but are ignoring the obvious ones under their nose.”
The UCS highlighted the impact this new directive by pointing to the deepening “tensions over whether the federal government or state governments have jurisdiction over certain power supply issues” in states like Virginia or Illinois. For example, electric customers in Illinois — wherein Northern Illinois relies on PJM to provide plant reserves — will have to pay an extra $864 million or more a year for their electricity.
“PJM and federal regulators seem poised to strip away Illinois’s autonomy to chart its own low-carbon future,” said Jessica Collinsworth, lead Midwest energy policy analyst at the UCS office in Chicago, which is served by the PJM grid. “Who will suffer the most from this decision are the thousands of Illinois residents who will now be forced to subsidize fossil fuel sources we neither want nor need.”