FRR Could Raise Costs, Impede New Jersey’s Energy Goals Say Renewable Developers, Power Generators, Environmental Advocates, Consumer Watchdogs and Policy Analysts
In comments submitted to New Jersey utility regulators, diverse stakeholders urge caution in pursuing the Fixed Resource Requirement (FRR) to procure power in New Jersey – a path that could significantly raise electricity costs, hinder clean energy development and undermine the benefits of competition.
The Electric Power Supply Association urges states to look to competitive power markets and encourage competition to achieve emissions reductions goals while benefiting consumers and reliability.
“FRR may facilitate achievement of New Jersey’s policy goals, but would not necessarily provide an accelerated or cost-effective pathway to do so.” – American Wind Energy Association, Advanced Energy Economy, Mid-Atlantic Renewable Energy Coalition, Solar Energy Industries Association
“FRR could increase capacity costs for New Jersey ratepayers by 29%… this estimate may be low. In addition, and of equal concern, there appears to be no feasible route to a New Jersey FRR that does not implicate significant market power issues… The state and the participating load-serving entities would face additional costs and risks, primarily due to the inflexibility of the FRR provisions, the complexity of the FRR and RPM.” – State of New Jersey Division of Rate Counsel
“Although technically feasible, the pursuit of FRR service areas in New Jersey may raise numerous legal and policy challenges that could ultimately increase energy costs for the state’s retail customers…. Leaving the PJM capacity market to create FRRs could hinder attainment of New Jersey’s clean energy goals.” – Atlantic Shores Offshore Winds
“Even if the FRR approach adopted in New Jersey were as centralized as possible… the resulting search and transaction costs are still bound to be higher than those arising from participation in PJM’s RPM… It is strongly recommended that New Jersey consider the option of adopting an energy market carbon dispatch price, in addition to RGGI, in lieu of an FRR approach.” – New York University School of Law’s Institute for Policy Integrity
“Based on the analysis, the creation of a New Jersey FRR, a PSEG FRR or a JCPL FRR, is likely to increase payments for capacity by customers in New Jersey.” – Monitoring Analytics, PJM Interconnection’s Independent Market Monitor
“It is critical, in our view, for the BPU to recognize the current uncertainty of future prices under the FRR… the risk of high FRR prices is, in our view, the most substantial potential challenge to overcome before the state should elect the FRR alternative…” – New Jersey Conservation Foundation and New Jersey Sustainable Business Council
“Vitol urges the NJBPU to exercise caution in considering policy solutions. In particular, we recommend that the Board avoid adopting solutions that are command-and control in design, or that disconnect New Jersey from the PJM energy markets.” – Vitol
“Market driven investments bear the most reliable indicator of demand by end users and price signals tell developers where and when to build new capacity… In terms of pricing/rate implications that FRR could have on New Jersey’s consumers, historic deployment of FRRs by utilities in Ohio and Michigan have consistently resulted in higher costs for consumers… With New Jersey’s energy costs ranking among the top 10 states with the highest electric rates in the country, and in this time of extreme economic turmoil around COVID-19, it is critical New Jersey policy makers consider the impact higher energy bills will have on New Jersey consumers and businesses as they ‘get back to normal.’” – Direct Energy
“We caution the BPU against pursuing the FRR route at this time. The FRR would fail to maximize penetration of clean energy across PJM and does not appear to be a cost-effective or risk-free option. Electing the FRR would not only decrease New Jersey’s ability to meet its clean energy goals, but also chill clean energy development throughout the entire PJM region… An FRR plan only passes further risks onto ratepayers…” – Enel
“The State should… reject any notion that FRR would provide an easy to implement, cost-effective alternative that will enable the State to cast off the shackles of Federal regulation. Rather, the tremendous effort required to implement and oversee an FRR regime, coupled with the likely creation of market power and increased energy costs, should weigh decisively against pursuing FRR which, in truth, would be an unattractive, cumbersome and financially risky alternative to the PJM capacity market.” – New Jersey Large Energy Users Coalition
“FRR capacity is more expensive than market capacity. Most entities pushing for FRR are doing so because they want capacity prices that are higher than the current capacity market can deliver… Not only does the FRR election hurt New Jersey consumers, it also helps the very states that New Jersey is competing with.” – PJM Power Providers Group (P3)
“FRR alternative will likely reduce market competition and have an adverse financial impact on customers as well as TPSs. RESA members are concerned about the likely increase in costs under an FRR alternative due to the impacts of reduced competition and distortion of market power… Adopting the FRR alternative would likely result in higher prices for New Jersey customers than would occur through a PJM competitive auction process.” – Retail Energy Supply Association
“Capacity costs may increase dramatically under state-run procurement programs… Therefore, in advance of making a determination on whether to implement the FRR Alternative, NGSA urges the Board to hire a consultant or request that PJM or PJM’s Independent Market Monitor thoroughly explore the cost impacts of selecting an FRR option and seek stakeholder comment on those cost projection studies.” – Natural Gas Supply Association