FERC Accepts PJM Energy Offer Cap Proposal

On December 11, the Federal Energy Regulatory Commission (FERC) accepted a proposal by PJM Interconnection (Docket No. ER16-76-000) to modify provisions related to the energy offer cap on offers in advance of the winter of 2015-2016.

The proposal raises PJM’s $1,000/megawatt-hour (MWh) energy offer cap, which was first put in place 18 years ago. PJM filed revisions to its Tariff and Operating Agreement with the commission on October 14; the changes went into effect on December 14.

Under the terms of the approved proposal, cost-based offers may be submitted at any level; however, the revisions limit the ability of the cost-based offers to set the locational marginal price up to a cap of $2,000/megawatt hour (MWh). Any costs in excess of $2,000/MWh may be recovered through make-whole payments and are subject to an after-the-fact review by PJM and the independent market monitor.

PJM further clarified that offers above $2,000 still would be dispatched in merit order.

In its recent Notice of Proposed Rulemaking on price formation, the FERC indicated that it is going to act on this issue for a long-term solution.

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