FCM Minimum Offer Price Rule (MOPR) Exemption For Renewables & Efficiency

1. FCM Minimum Offer Price Rule (MOPR)Exemption For Renewables & Efficiency Abigail Krich, Boreas Renewables for RENEW Doug Hurley, Synapse Energy Economics

2. Background • MOPR benchmark prices for Class I Renewables expected to be high • With a high benchmark, renewables will not clear as new resources in the FCA • To meet RPS goals, renewables would be built without recognition in capacity market • Load would in effect pay for this capacity twice • First through power purchase agreements • Second through purchasing un-needed capacity in FCA

3. FERC Order • Did not require but left door open for stakeholder process to develop an exemption for “legitimate public policy goals” • In concurring statement, Wellinghoff and LaFleur wrote that they “believe that the ability to seek exemptions from mitigation may be a critical component of entities’ efforts to satisfy their renewable portfolio standard obligations… the Commission has permitted PJM to exempt certain types of generation resources from mitigation. We encourage ISO-NE and its stakeholders to consider whether similar exemptions are appropriate for New England…. We encourage all interested parties to think creatively.” (emphasis added)

4. How PJM Handles Exemptions • New nuclear, coal, IGCC, hydro, wind, and solar exempted from MOPR and may offer at $0 • Wind and solar exemptions added in 2011 because • it would be “beyond the point of diminishing returns” to develop a suitable benchmark price*, and • “Wind and solar are a poor choice if a developer’s primary purpose is to suppress capacity market prices” ** • Only non-exempted new resources and expansions subject to MOPR • Focus is on ability to estimate reliable benchmark pricing and deter exercise of buyer-side market power * PJM Interconnection, LLC, Docket No. ER-11-__-000, 2/11/2011, page 19 ** FERC Order in Docket No ER11-2875-000, 4/12/2011, paragraph 153

5. Price Correction Needed • MOPR intended to prevent OOM price suppression • Any new resource that is exempted from the MOPR will suppress clearing price • “But for” clearing price could be calculated to correct for suppression, but FCA cannot purchase more than ICR • Three options result in the same total FCM payment levels: • No exemptions. Price equals “but for” price but renewables don’t clear and load pays for capacity twice • Exemptions. Only bids below true clearing price clear, all cleared bids paid “but for” price • Exemptions. All bids below “but for” price clear, all cleared bids prorated and paid “but for” price so no more than ICR is purchased

6. Megawatts Expected • If all incremental Class I RPS requirements were met by onshore wind in FCA 7 – FCA 11 (‘16-’17 to ‘20-’21) • About 100 MW of new wind capacity value needed per year • Represents about 0.3% of Net ICR per year • Proration level due to exemption would rise from about 0.3% in FCA 7 to 1.5% in FCA 11

7. Energy Efficiency • Unclear what benchmark price would be • If near $0, no need for exemption • If higher, would have same concerns as renewables

8. Feedback • We are looking for feedback from the committee now • Or contact us later with your thoughts krich@boreasrenewables.com dhurley@synapse-energy.com