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On June 9, 2015, theFederal Energy Regulatory Commission (FERC) conditionally approved significant reforms to PJM’s capacity market, implementing the Capacity Performance Resource product, with PJM’s compliance filing due within 30 days. [1]   FERC found such reforms were necessary to address “the confluence of changes in the PJM markets, including both recent performance issues…impacted by inadequate incentives and penalties for resource performance under its current construct and ongoing changes in PJM’s resource mix that are projected to accelerate.” PJM’s resource performance fell well below expected levels during the extreme weather events of January 2014 (i.e., during the Polar Vortex) when PJM’s 22 percent forced outage rate far exceeded its 7 percent historical average.

FERC found that PJM’s Capacity Performance proposal is intended to ensure performance and the reliability of the PJM system during extreme weather events. As approved, capacity resources necessary to perform during these events can recover their costs of doing so while facing new and substantial penalties for non-performance. [2]   Specifically, FERC noted that PJM’s currently effective offer cap for existing generators does not allow sellers to include in their offers the costs attributable to natural gas firm transportation contracts.

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[1]PJM Interconnection, L.L.C., 151 FERC ¶ 61,224 (2015). up
[2]FERC noted that although its approval was not based solely on the recent degradation of resource performance in PJM in times of system stress, “this poor performance has led to significant and expensive price spikes.” up

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Photo of Francesca Ciliberti-Ayres‡ Francesca Ciliberti-Ayres‡

Francesca focuses her practice on energy regulatory and litigation matters before the Federal Energy Regulatory Commission (FERC), state public utility commissions, and the Court of Appeals. Her experience includes representing parties in major interstate natural gas and petroleum pipeline hearings involving complex multiparty…

Francesca focuses her practice on energy regulatory and litigation matters before the Federal Energy Regulatory Commission (FERC), state public utility commissions, and the Court of Appeals. Her experience includes representing parties in major interstate natural gas and petroleum pipeline hearings involving complex multiparty major rate cases, in certificate proceedings and confidential investigations before FERC involving natural gas, oil, and environmental matters, LNG licensing, tariff, and fuel proceedings. She also advises clients on ensuring compliance with regulatory requirements and environmental regulations.

Photo of Gregory K. Lawrence Gregory K. Lawrence

Gregory K. Lawrence focuses his practice on the electricity and natural gas industries. He is experienced appearing before the Federal Energy Regulatory Commission (FERC) and multiple state utility commissions regarding regulatory proceedings, compliance and enforcement, capacity and energy market structure, transactions and negotiations,

Gregory K. Lawrence focuses his practice on the electricity and natural gas industries. He is experienced appearing before the Federal Energy Regulatory Commission (FERC) and multiple state utility commissions regarding regulatory proceedings, compliance and enforcement, capacity and energy market structure, transactions and negotiations, asset transfers, and governmental affairs. Greg’s clients include funds and financial institutions, marketers, traders, renewable and other project developers, energy storage and demand response assets, municipal and investor-owned utilities, and large energy consumers.

Recognized as a leading energy and electricity lawyer by Chambers USA, Greg is a frequent speaker at energy industry conferences and a contributor to a wide range of publications, including The Electricity Journal, Electric Light & Power, Energy Risk, Bloomberg Law Reports, Project Finance International, Corporate Counsel, Windpower Engineering, and EnergyLaw 360. He also authored a quarterly column in Electric Energy T&D Magazine and “Rationalizing Supply with Demand: Electricity Demand Response in U.S. Wholesale Electricity Markets,” a book chapter in U.S. Law and Taxation.