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Key Takeaways | Developments in the PJM Market

On June 18, 2020, McDermott partners Neil Levy and David Tewksbury were joined by Paul M. Sotkiewicz, PhD, of E-Cubed Policy Associates, LLC, to discuss recent developments in the markets operated by PJM Interconnection (PJM). Below are key takeaways from this week’s webinar. In December 2019, the US Federal Energy Regulatory Commission (FERC) issued an order requiring PJM to expand its Minimum Offer Price Rule (MOPR). Under the expanded MOPR, a capacity resource that receives a state subsidy will be subject to a minimum offer floor price in PJM’s capacity auctions, unless it is entitled to one of the exemptions set forth by FERC. The expanded MOPR is not expected to have significant impacts on the results of PJM’s capacity auctions, particularly in the near term. There are at least three reasons for this: First, there are various exemptions to the expanded MOPR, including, but not limited to, exemptions for existing renewable resources, as well as for...

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Following Recent Maryland Ruling, Federal Court Declares New Jersey Scheme to Promote Investment in In-State Generation Unconstitutional

by Ari Peskoe A Federal District Court Judge for New Jersey struck down the state’s incentive program to encourage construction of in-state generation capacity.  New Jersey’s scheme was similar to Maryland’s scheme that was the subject of a District Court ruling last month.  The Judges in both cases found that the state intruded on Federal ratemaking authority in violation of the Supremacy Clause of the Constitution. New Jersey regulators concluded that insufficient transmission and increasing demand could lead to reliability problems in the state.  Working with state legislators, the Board of Public Utilities (BPU) developed the Long-Term Capacity Agreement Pilot Program (LCAPP), an incentive scheme designed to encourage gas-fired generation in or near New Jersey.  Like the Maryland incentive, New Jersey’s program guaranteed developers of new generation payments from the state’s incumbent utilities if PJM’s capacity auction resulted in a price lower than a...

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Federal Court Rules Maryland Scheme to Promote Investment in In-State Generation Unconstitutional

by Ari Peskoe On September 30, a Federal District Court Judge for Maryland declared that the state’s incentive scheme to encourage the construction of new gas-fired generation capacity violates the Supremacy Clause of the Constitution.  By requiring incumbent utilities to supplement PJM’s market-clearing prices with payments to the developer of a new gas-fired generator, the Judge determined that Maryland’s incentive scheme impermissibly sets a wholesale rate.  The Judge’s ruling may complicate states’ efforts to ensure that FERC-jurisdictional electricity markets meet the goals of individual states. In 1999, Maryland restructured its electricity industry, requiring its investor-owned utilities to divest their generation assets and purchase electricity in federally regulated, regional wholesale markets. In 2007, at the direction of the Maryland General Assembly, the state’s Public Service Commission (PSC)...

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