On Monday, the Electricity Law Initiative filed comments at the Federal Energy Regulatory Commission (FERC) about proposed capacity market rule changes. The Electricity Law Initiative’s comments emphasize that procuring electric generation capacity is a program of cooperative federalism – states may choose among resources for their environmental or other benefits while FERC has authority over capacity prices in interstate markets.
PJM, the regional grid operator across thirteen mid-Atlantic and midwestern states, proposes to pay lower rates to generators that are compensated for their environmental benefits through state policies such as renewable energy mandates. The Electricity Law Initiative argues that FERC is not compelled to accept this proposal as “just and reasonable” and should reject PJM’s arbitrary distinctions among generators. By elevating PJM’s capacity procurement construct above long-standing state generation policies, FERC approval would increase the cost of state policies, favor PJM’s preferred resources over state environmental policies, and escalate tensions with states. FERC should reject the proposal because PJM provides insufficient justification for disrupting a program of cooperative federalism.