As part of NCSL Base Camp 2020, NCSL hosted a discussion on the state and federal role in shaping energy markets and the resource mix with experts Ari Peskoe, director of Harvard Law School’s Electricity Law Initiative, and Richard Doying, executive vice president of markets for the Midcontinent Independent System Operator.
Peskoe kicked things off with an overview of the U.S. energy regulatory and legal framework, highlighting the role of states in regulating energy generation and recent policy developments expanding federal jurisdiction.
In particular, he highlighted the Federal Energy Regulatory Commission (FERC)’s Minimum Offer Price Rule (MOPR), which requires PJM—the nation’s largest wholesale electricity markets covering 13 states and Washington, D.C.—to make significant changes to the design of its capacity market. The order will require any PJM member resources receiving state support—primarily wind, solar and nuclear—to enter the capacity market at a FERC-determined higher minimum price, effectively undermining the ability of those resources to compete for an important source of revenue. Such a rule runs counter to clean energy policies in many of PJM’s member states.
Doying offered the energy system operator’s perspective on state, utility and corporate clean energy objectives, highlighting the regional transmission operator’s role in responding to and accommodating clean energy policies across jurisdictions. In particular, Doying showed how these policies are able to shift a region’s energy mix over time.
A theme throughout the discussion was the role of the upcoming election in shaping a lot of the federal policies that have recently caused tension among states, market operators and federal regulators. Peskoe emphasized that the MOPR and similar policies are just that—FERC policy decisions rather than congressional mandates. He expects more policies like the MOPR under a continuation of President Donald Trump’s administration and predicted that a change in administration would lead to a reversal of the MOPR policy.
This also has implications for the states currently weighing whether to exit PJM and move to either join a neighboring regional market or leave the capacity market entirely. In response to FERC’s MOPR order, the New Jersey legislature introduced legislation to evaluate its options in exiting PJM. Peskoe noted that a move to switch markets or exit the capacity market each presents its own set of regulatory hurdles, saying that exiting the capacity market entirely is an unprecedented move that would be more burdensome.
The importance of coordination at a regional level was another session theme. Doying underscored the need for collaboration between RTOs and states to ensure that policy objectives aren’t frustrated by the market response. Peskoe discussed the benefits of enacting similar policy mechanisms at a regional level.
The panelists also addressed how energy markets can evolve to better accommodate various state energy policies and answered questions about how energy markets are being impacted by the ongoing COVID-19 pandemic and extreme weather events, such as hurricanes and wildfires.
For more insights from these experts, including a recording of the session, and other resources focused on balancing state policies, market design and the shifting federal regulatory landscape, please visit the NCSL Base Camp 2020 website.
Laura Shields is a policy associate in NCSL’s Energy Program.
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