EPSA Submits Capacity Market Workshop Comments to PJM With Guiding Principles on Capacity Markets

COMMENTS OF THE ELECTRIC POWER SUPPLY ASSOCIATION

PJM Capacity Market Workshop – Session 2

The Electric Power Supply Association (“EPSA”) appreciates the opportunity to provide comments following the PJM Interconnection, LLC (“PJM”) Capacity Market Workshop – Session 2, which was held on March 4, 2021. PJM initiated the series of workshop sessions to discuss and explore with stakeholders potential enhancements to the PJM capacity market and to determine whether or not a formal stakeholder process to consider capacity market reforms should be pursued.

At the conclusion of the Session 2 workshop, PJM staff outlined that stakeholders could provide feedback on the same issues addressed by speakers during the session, which focused on the following:

1. What problem are we trying to solve through this effort?
2. Do you agree with PJM that we should be attempting to advance this discussion at this time?
3. What are the principles that possible enhancement should be built upon? and,
4. Do you have particular issues or a proposed prioritization that you would like to propose?

EPSA and its member companies have been actively engaged at every phase of the development and refinement of the PJM capacity market since its inception. We do agree with PJM that the discussion should be advanced at this time. Accordingly, to assist PJM and stakeholders with consideration of the issues, EPSA has developed several guiding principles on capacity markets that possible enhancement should be built on.

EPSA Guiding Principles for Capacity Markets
March 2021

1. In lieu of state-level integrated resource planning or an energy-only market, regional
   capacity markets utilize pre-determined reliability targets to procure the lowest cost
   set of resources to meet regional resource adequacy needs. A forward capacity
   market, which provides needed revenue to resources that may seldom run but are
   needed during extreme conditions, has been a highly successful regional resource
   adequacy tool to maintain grid reliability and is an efficient, cost effective, and
   durable mechanism for integrating the evolving resource mix.
2. To address state policy goals, capacity markets should integrate state-preferred
   resources that are not procured via a competitive, market-based procurement
   process only when the RTO is confident that both reliability and market integrity will
   be adequately maintained. The capacity market must still ensure buyer-side and
   seller-side market power is appropriately mitigated.
3. Capacity markets should not be a barrier to renewable integration; all resources
   should have the ability to compete based on their contribution to the reliability target
   regardless of how it is measured (e.g., traditional UCAP or ELCC)
4. All market participants must have the opportunity to recover their investment to
   maintain confidence in the market and incentivize continued new development and
   retirement through market price signals.
5. Competitive wholesale markets are the most effective tool to achieve policy
   objectives by encouraging private capital deployment and innovation at the lowest
   cost while appropriately shifting investment risk to resource developers and
   operators, not consumers.
6. Wholesale energy markets that incorporate both environmental and reliability
   requirements will yield the lowest cost set of resources and technologies that jointly
   produce the greatest emission abatement while maintaining the highest level of
   reliability.