Part 1: MOPR and Capacity Markets – The Current Situation in the PJM Capacity Market2 min read
At Constellation we strive for transparency—and to ensure customers are as knowledgeable as possible to make informed energy purchasing decisions—here is a brief clarifying overview. In this blog we discuss the Minimum Offer Price Rule, better known as MOPR, and why you should be familiar with it.
What Is MOPR?
In December 2019, FERC expanded the Minimum Offer Price Rule (MOPR) in PJM, concluding that state support for clean generation is growing and presents an immediate threat to the federally regulated multi-state capacity market. FERC defined state support broadly and included not just state environmental programs but state rate base recovery as well, extending MOPR to resources owned or purchased by vertically integrated utilities, municipalities, and cooperatives. FERC directed PJM to apply the MOPR to all new and existing, internal and external, State-Subsidized Resources that participate in the capacity market, regardless of resource type, with certain exemptions. FERC exempted most existing resources as well as any resources that certify that they will forego state subsidies, although traditional MOPR application to new natural gas units continues. The MOPR requires state-supported capacity resources to offer into the PJM capacity market as if they are not receiving revenues under the state environmental program or within the rate base. Holding all else constant, over time this rule is designed to cause an increase to the total cost of capacity PJM procures, by neutralizing the effect of state support programs.
Prior to December 19, most resources were not subject to the MOPR which meant their offers were not subject to a floor. However, in October 2020, FERC approved default MOPR Floor levels for new and existing resources and a process for obtaining resource-specific offer floors. It is difficult to predict how soon the full impact of the new rules will be felt in capacity prices as it depends on several factors, including the overall mix of existing and new supply.
What Happens Going Forward?
The Base Residual Auction (BRA) for the 2022/2023 DY originally scheduled for May 2019 has been set to run between May 19 and May 25, 2021 with auction results available on June 2, 2021.
Understanding Your Options
When evaluating your energy supply options, it is important to understand how your demand-based components—like capacity—will be treated. In our next blog we’ll discuss the capacity market and how customers can educate themselves about the impact MOPR and capacity can have when comparing prices from suppliers.
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