A federal court today unanimously upheld regulators’ approval of a new electricity market structure in the eastern half of the country.
The three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit rejected environmentalists’ arguments that the framework discriminates against intermittent sources of energy such as wind and solar.
The Federal Energy Regulatory Commission made a “policy judgment” about the performance the market requires, “not an undue privileging of one resource’s costs over another’s,” the court found.
Senior Judges David Sentelle and A. Raymond Randolph and Judge Janice Rogers Brown – all Republican appointees – issued the ruling.
At issue was the 2015 FERC decision to approve PJM Interconnection’s new performance requirements for suppliers that want to participate in annual electric capacity auctions.
PJM is an electric transmission service in 13 Mid-Atlantic and Midwestern states and Washington, D.C. It operates an energy capacity market to ensure grid reliability.
Every year, PJM conducts an auction to provide capacity three years in advance. In a typical auction, producers offer a specific amount of capacity at a specific price. Those with the lowest prices clear auction first, and PJM continues the process until its forecast demand is met.
After the polar vortex – the particularly cold spell along the East Coast in the winter of 2014 – PJM eyed reforms to improve reliability, as well as a broader overhaul of its capacity market.
Under the rule changes, producers that fail to provide continuous capacity must pay penalties. PJM began phasing in the changes after it received FERC’s conditional approval.
But national environmental groups argued that the rules were unfair to seasonal renewable energy resources that didn’t maintain constant output.
And although PJM allowed seasonal resources to aggregate, they argued that the constraints PJM placed on such aggregation “effectively eliminate the usefulness of this provision.”
A trade group that represents demand-response providers, the New Jersey Board of Public Utilities, and various power associations also filed petitions seeking court review of FERC’s decision (Greenwire, Feb. 14).
In the unanimous decision today, the D.C. Circuit rejected all the claims, finding that the commission adequately explained why it approved the structure and that it acted in a just and reasonable way.
“None of these challenges overcome the deferential standard of review afforded the commission’s determinations,” the court found.
The Natural Resources Defense Council, which was among the environmental groups that argued the rules were unfair, expressed disappointment in the decision, calling it a “real setback for cleaner air and lower customer bills.”
“These rules restrict market competition largely to fossil and nuclear power plants,” NRDC attorney Jennifer Chen said, “and inhibit the electric grid from becoming more flexible, economical, and reliable through integrating more pollution-free wind and solar power and also demand response, which compensates volunteers to cut electricity use when the grid is stressed.”
Click here to read the ruling.
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