HARRISBURG – The Senate Republican Caucus filed a brief in federal court recently to protect Pennsylvania’s energy competition and reliability from regulatory overreach, Sen. Gene Yaw (R-23) said.
“Energy policy decisions in New Jersey or Illinois or Virginia should not take precedence over Pennsylvania’ policies, or any other state in PJM,” Yaw said. “The minimum offer price rule ensured that no resource was favored over another based on a state subsidy and encouraged fair competition among resources in the interstate electricity market. The Federal Energy Regulatory Commission effectively eliminating this important protection undermines the federal government’s long-standing ‘fuel neutral’ approach to regulation and we cannot let it go unchecked.”
In the brief, the caucus argues that the federal court should vacate a regulation proposed by PJM – the agency that manages the power grid for 13 states, including Pennsylvania, and the District of Columbia – to allow subsidized electricity generators to skirt its minimum offer price rule (MOPR) when committing to supply energy in PJM’s forward-looking capacity market. This market ensures PJM will have enough energy to power the grid three years into the future and is a key measure of its reliability.
FERC’s administrative inaction on the rule allowed it to lapse into effect, without ever considering the merits of the rule itself.
At the heart of MOPR is the distinction between subsidized electricity generation and non-subsidized electricity generation.
Some states that supply electricity in PJM subsidize certain types of electricity generation with state tax revenues. These subsidies promote certain types of electric generation capacity to the exclusion of others. In short, the states pick winners and losers.
Pennsylvania supports markets based on competition – not subsidies. Here, the cost of electric generation is the cost of electric generation. It’s not artificially influenced by a state contribution and PJM producers are incentivized to produce power at the lowest possible price for consumers.
Under MOPR, the generator’s capacity market bid is based on the cost to provide that capacity before any state subsidy is applied. Thus, all states supplying electricity to the PJM grid are on the same footing.
PJM’s new regulation, which is before the federal courts, effectively ignores the market-distorting impacts of subsidies. This change is a wholesale shift in policy based on administrative procedure with no regard to fair and equitable treatment for resources that do not receive subsidies, Yaw said.
“This unprecedented change to the operation of our power grid’s wholesale market undermines decades of successful competition and increased reliability achieved in Pennsylvania as a result of our sensible energy policies,” Yaw said. “Our caucus cannot and will not allow federal negligence to supplant the progress we’ve made through lowered electricity rates and decreased emissions with conflicting policies adopted by other states in our grid.”
CONTACT: Nick Troutman, 717-787-3280