The Federal Energy Regulatory Commission (FERC) directed PJM Interconnection LLC (PJM) to expand its current Minimum Offer Price Rule (MOPR) to address state-subsidized electric generation resources, with certain exemptions.
This reaffirms and builds on FERC’s June 29, 2018, order, which found that 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, according to FERC. 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,” FERC Chairman Neil Chatterjee said. “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.”
PJM now has 90 days to comply with the order, and at that time is to provide the commission with a new timeline for the next auction.
National Mining Association President and CEO Rich Nolan said, “Today’s decision by FERC correctly aims to quarantine the market-manipulating effects of growing state subsidies. Far too much of the nation’s essential coal fleet has been lost to market manipulation. The expanded MOPR aims to restore fairness to the marketplace and is a timely first step in addressing the loss of the nation’s baseload generating capacity. Fuel-secure, baseload coal plants remain essential to providing the balanced, dispatchable fuel mix needed to preserve grid reliability and resilience.”
PSE remains responsible for its presale 25% ownership share of all costs for remediation of existing environmental conditions and decommissioning regardless of when Colstrip Unit 4 retires.
The fixed operations and maintenance costs and property taxes for the additional 25% share of Colstrip Unit 4 are estimated to be approximately $15 million annually. The 5-year power purchase agreement with PSE will pay for about 50% of this amount and the other 50% will be offset by the reduction in purchases from the market.
If the sale is approved, NorthWestern Energy will own 55% of Colstrip Unit 4.
Acquiring a greater stake in Colstrip Unit 4 does not solve NorthWestern’s capacity shortage, Rowe explained, but it will meet about 25% of the overall capacity needed while Montana transitions to using more carbon-free energy sources in the future.
“Purchasing more of Colstrip Unit 4 for only $1 is by far the most affordable way to help close the gap in the capacity shortage.
“Building a natural gas plant that provides the equivalent capacity would cost approximately $240 million,” said John Hines, NorthWestern Energy Vice President Supply and Montana Government Affairs. . “A wind plus battery storage combination could cost several billion dollars and still not provide equivalent capacity. Solar by itself is not currently a viable option in Montana in the winter to address this type of sustained peak capacity need.
“If NorthWestern Energy would have had the additional 95 MW of power from Colstrip Unit 4 in its portfolio last winter, this would have saved our customers about $4 million over just 4 days during a particular cold blast Montana experienced last March and more than $8 million at the full 185 MW,” Hines said.
