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PJM Overhauls the Minimum Offer Price Rule Used to Prevent Buyer-Side Market Power in Forward Capacity Auctions

We represented PJM Interconnection, L.L.C. (PJM) in refocusing the Minimum Offer Price Rule (MOPR) to its original purpose: prohibiting and mitigating any potential exercise of buyer-side market power. Previously, the MOPR had become an expansive rule aimed at mitigating the impact of state subsidies on capacity market clearing prices. By returning the MOPR to its intended focus, we addressed the federal-state conflict between Federal Energy Regulatory Commission (FERC)-regulated wholesale electric capacity markets, which set prices for all resources needed for reliability based on the lowest-cost offer needed to clear the market, and state policies subsidizing renewable, nuclear, and other favored types of electric resources.

With our assistance, PJM proposed revisions to its capacity market’s buyer-side market power mitigation rules, ensuring that only resources with the ability and incentive to exercise buyer-side market power would be subject to the minimum offer price rule. We also represented PJM in briefing to the U.S. Court of Appeals for the Third Circuit, which affirmed FERC’s acceptance of the reformed MOPR, and we continue to represent PJM on this matter before the U.S. Supreme Court.