FERC's effort to undermine state clean energy policies cannot stand
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As attorneys general, my colleagues and I are the chief legal officers of our states, which are leading the charge in adopting policies to combat the rising threat of climate change. Our states are committed to the use of clean energy and energy efficiency programs that will reduce our reliance on fossil-fuels, strengthen our grid, and eliminate pollution. These are all important goals that will benefit our residents and fall well within the powers of our state governments. On Dec. 19, 2019, however, the Federal Energy Regulatory Commission (FERC), issued an Order that fundamentally threatens our efforts. We write to expose what FERC is doing and to express our determination to fight its misguided ruling.

Our states lie, in whole or in part, within the region covered by the PJM Interconnection, a FERC-regulated operator of the electric grid that serves roughly 65 million customers across all or parts of 13 states and the District of Columbia. PJM ensures that generation is available to meet demand on an hourly and daily basis and also ensures that enough capacity is planned to meet future requirements. The latter of these goals is accomplished through the operation of a “capacity market.” The capacity market compensates generators for their availability at a time three years in the future. As such, it sends price signals to potential future generators about the need to construct or decommission facilities and provides another revenue stream for the producers of electricity.

In its Dec. 19 Order, FERC tipped the scales governing PJM’s capacity market to direct payments away from new clean energy resources and instead towards the owners of existing, primarily fossil fuel fired, power plants. It did so by requiring that all new resources receiving “state subsidies,” a term that is broadly defined and would encompass the vast majority of planned renewable and zero emission resources, to bid into the capacity market at an administratively established minimum offer price.

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This Minimum Offer Price Rule or “MOPR” will prevent new clean energy resources from entering the capacity market, even though they are required to be built under state law. This will be particularly harmful to states with renewable portfolio standards which require a set percentage of capacity to come from clean energy resources. As a matter of state law these resources will be constructed over the coming year. Yet because of the MOPR, PJM will be forced to operate as if that capacity does not exist. Our residents will end up paying twice, first for the renewable resources that they have supported through the ballot box and again for the capacity procured through PJM’s distorted market.

FERC has provided little reason to support such a byzantine approach. The Commission asserts that our states’ clean energy policies distort the capacity market and that their participation should be penalized. But this is wrong as a matter of both law and policy. Under the Federal Power Act, FERC must honor a state’s efforts to shape its energy portfolio, even if those choices incidentally affect the wholesale price of electricity. And rather than distorting the market, state clean energy programs help to level the playing field by accounting for the pollution, greenhouse gas and otherwise, from fossil fuel generators. On top of that, renewable energy resources contribute to a more diverse, robust and competitive capacity market which ultimately benefits consumers. Excluding new clean energy resources from the capacity market will lead to higher prices and prop up the existing, and often heavily polluting, resource mix. FERC cannot ignore this reality and put its thumb on the scale in favor of fossil fuels, particularly when it also turns a blind eye to long-standing tax advantages, federal subsidies, and other out of market factors that those resources have taken advantage of for decades.

By erecting barriers to the participation of state-supported clean-energy resources, FERC’s Order violates the law and discriminates against state preferred resources. It will cost our residents billions of dollars, and delay our progress towards a clean energy economy. As the chief legal officers of Maryland, Delaware, and New Jersey we are committed to fighting this reckless and heavy-handed approach.

Brian E. Frosh is the attorney general of Maryland. Kathleen Jennings is the attorney general of Delaware. Gurbir S. Grewal is the attorney general of New Jersey.