Hurricane Relief Effort

FERC Approves PJM’s Extensive “Capacity Performance” Capacity Market Reforms

PJM Interconnection, L.L.C.’s (PJM) forward capacity auctions secure three-year commitments from generators to meet the region’s peak electricity needs, but PJM found the market rules were not incenting committed generators to deliver the desired performance during capacity emergencies—evidenced by record generator outages during peak demand of 2014’s “Polar Vortex.” Grounded in the details and inner workings of the Federal Energy Regulatory Commission (FERC), we worked closely with PJM to develop, file at FERC and successfully prosecute the most extensive reforms to PJM’s capacity market rules since the 2006 settlement that established that market. Such reforms included redefining the capacity product, eliminating excuses and significantly increasing penalties for generator non-performance, and a corresponding increase in generators’ maximum offer price. Naturally, the rule changes received opposition from dozens of parties, including generators objecting to the higher penalties and limited performance excuses, and load interests objecting to the higher maximum offer prices and possibly increased consumer costs. FERC approved the rule changes largely as proposed by PJM. Intimately involved with all aspects of this contentious and high-profile case, Wright & Talisman has been drafting detailed complex tariff provisions to extensive advocacy before FERC to defend the rule changes as necessary to maintenance of long-term reliability.

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