We believe that PJM Interconnection, L.L.C.’s (PJM) filing—the “Focused MOPR”—is just and reasonable and not unduly discriminatory or preferential, consistent with the requirements of section 205 of the Federal Power Act (FPA). It provides PJM’s capacity market with appropriate protection against anti-competitive conduct without stymying competition or interfering with the authority that Congress reserved for the states when it enacted the FPA. In so doing, the Focused MOPR will help PJM’s capacity market achieve its purpose of ensuring resource adequacy, and, thus, reliability, at just and reasonable rates.
The Focused MOPR also rights the wrongs created by the Commission’s most recent orders on the topic, which imposed on PJM an “Expanded MOPR.” Those orders were fundamentally flawed. They created a Byzantine system of administrative pricing—unprecedented in both scope and complexity—that would have imposed on consumers billions of dollars in unjustified costs, all based on the flawed notion that states’ exercise of their undisputed authority over generation resources interfered with what the Commission called “market integrity.”
The Focused MOPR puts an end to all that. It restores PJM’s MOPR to its original purpose: eliminating the incentive that large net buyers of capacity may have to take uneconomic action to decrease capacity prices. Equally important, it abandons the Commission’s deeply misguided campaign to “nullify” the effects of legitimate state policies. As a result of those changes, PJM’s capacity market will better reflect the forces actually shaping supply and demand and do so at a far lower cost to customers.
Which is not to say that the Focused MOPR is perfect. Indeed, certain aspects of the Focused MOPR strike us as unnecessary and are not the choices we would have made. But our statutory role when considering a filing under section 205 of the FPA does not permit the perfect to be the enemy of the good and those imperfections do not preclude us from concluding that the Focused MOPR is a just and reasonable rate.
In the balance of this statement, we lay out our “views . . . with respect to the change” submitted by PJM, as section 205(g) of the FPA requires when a filing goes into effect by operation of law following a 2-2 vote of the Commission. We begin by first outlining our shared perspective on the Commission’s use of MOPRs generally. We then turn to discuss the principal issues raised in the record of this proceeding and why we believe PJM has met its burden with respect to each issue to show that the Focused MOPR is just and reasonable and not unduly discriminatory or preferential.
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When first introduced in the 2000s, MOPRs were justified as a means to protect the nascent capacity markets from the exercise of buyer-side market power. In the context of capacity markets, buyer-side market power is used to refer to a net buyer of capacity that has the ability to take an otherwise uneconomic action to depress the capacity price, thereby benefitting its net-short position. The exercise of buyer-side market power in a capacity market is “possible in part because many utility companies are both buyers and sellers of capacity in the capacity auctions,” meaning that net buyers frequently own or contract with resources that offer to sell capacity. Largely because sellers that clear the capacity market generally receive the same market clearing price, it is at least theoretically possible that a net buyer could direct a resource that it owns or with which it contracts to submit an uneconomic capacity offer that would so depress the capacity price that the net buyer would more than recover any loss on the uneconomic capacity offer through the savings realized by reducing its total cost of capacity.
A MOPR can address the exercise of buyer-side market power by setting a minimum offer level that prevents an uneconomically low capacity offer from a net buyer from depressing the capacity price below the competitive level, thereby benefitting a seller’s net-short position. So deployed, a MOPR can effectively mitigate anti-competitive efforts to depress the capacity price. But, as discussed further below, an overly broad MOPR can do more harm than good. Where a capacity offer is low for legitimate rather than anti-competitive reasons, artificially raising that offer hurts competition, potentially pushing the offeror out of the market and forcing capacity prices above the competitive level. Moreover, by producing high capacity prices notwithstanding an abundance of low-cost supply, an overly broad MOPR can lead to uneconomic price signals that falsely suggest that new capacity is needed or that existing capacity should be retained.
Cognizant of the costs of over-mitigation, the Commission has traditionally approached MOPRs by balancing the need to mitigate the exercise of buyer-side market power against the harms that can come from over-mitigation. For example, the Commission has in many instances limited the reach of the MOPR, by applying it only to resources that are the most likely to be used by buyers that have both the incentive and ability to exercise buyer-side market power to depress capacity prices, or to only those classes of resources that could be used effectively for the purpose of depressing capacity prices. That said, in other instances, the Commission sanctioned a certain degree of MOPR mission creep by extending the MOPR to address what it called “price suppression,” even where there was no evidence or reason to believe that the MOPR was addressing the exercise of buyer-side market power. And while that precedent has not been a model of consistency, the Commission consistently attempted to balance the application of the MOPR against the harms of over-mitigation.
At least until recently. Over the last few years, the Commission cast aside its traditional balancing and adopted sweeping MOPR rules in all three Eastern RTOs/ISOs that made no effort to tailor mitigation to the risk of buyer-side market power, thereby abandoning its duty to weigh whether the benefits of mitigation outweigh the harms.  As a result, MOPRs have transitioned from a rarely invoked tool for addressing a particular form of anti-competitive conduct to a comprehensive regime that mitigates the capacity offer of most new resources—regardless of market power—fundamentally distorting the market that it is nominally supposed to protect.
PJM is the most extreme example of this shift. Beginning in 2018, the Commission rewrote PJM’s MOPR rules in an apparent effort to “nullify” the effects of disfavored state policies—explicitly abandoning any link to actual buyer-side market power and, at best, disregarding the harms caused by its actions. To achieve that end, the Commission created a convoluted system of over-mitigation that would force resources that have neither the incentive nor the ability to exercise buyer-side market power to participate in PJM’s capacity market based on the PJM independent market monitor’s (IMM) assessment of what the resource “should” cost rather than compete on the most aggressive terms it was willing to accept. Ironically, the Commission justified this system of administrative pricing on the basis that it would promote market competition.
In reality, the Expanded MOPR imposed upon PJM undermines competition in the capacity market. A basic premise of competition is that sellers should vie to offer the best terms, including price, to provide a particular product or service. Competition within capacity markets should be no different. Capacity markets were created to provide the “missing money” that resources need to provide capacity in a given delivery year, but are unable to earn by providing energy and ancillary services alone. In the context of capacity markets, that means that a competitive market is one where resources compete with each other to submit capacity offers that are as low as possible to cover their net going forward costs, receive a capacity commitment, and contribute to resource adequacy. To achieve an efficient capacity market outcome along those lines, resources’ capacity offers must reflect all relevant costs minus all relevant revenues, including costs and revenues that are not derived from Commission-jurisdictional markets. True competition along those lines can produce enormous benefits for consumers by creating accurate capacity price signals to inform investment decisions and thus facilitating the entry of relatively efficient resources (and the retirement of inefficient ones), and spurring the development and deployment of new technologies and business models—all while procuring capacity from the lowest-cost set of resources needed to keep the lights on. By contrast, if the capacity market ignores some of a resource’s actual costs and revenues, then the set of resources selected by the capacity market may not actually reflect the lowest-cost or most efficient means of ensuring resource adequacy.
And that is what the Expanded MOPR did. By requiring PJM to ignore revenues received by a wide swath of “state-supported” resources, the Expanded MOPR divorced the PJM capacity market clearing prices from the actual net going forward costs of would-be capacity suppliers, which served only to prop up capacity prices, protect incumbent generators, and increase the costs of state policies. Instead of promoting competition, the Expanded MOPR was really an effort to strip away any the influence of disfavored state policies on capacity prices, notwithstanding the Commission’s prior history of allowing the economic effects of legitimate policies set by external regulators to flow through organized wholesale markets.
But as former Commission Chairman Norman Bay correctly observed, an “idealized vision of markets free from the influence of public policies . . . does not exist, and it is impossible to mitigate our way to its creation.” Instead, public policy and electricity markets are inextricably intertwined. Nearly every aspect of the electricity market is affected by at least one—and more often many—federal, state, or local policies. Even if the Commission were successful in ferreting out state efforts to shape the generation mix through an ever more expansive application of the MOPR to resources associated with state policies, the result would not be a “competitive” capacity market, even by the Commission’s definition, as it would remain profoundly influenced by local, state, and federal policies—the last of which the Commission completely and unreasonably ignored in its Expanded MOPR orders.
Nor would the resulting capacity market be even remotely efficient. As noted, the Expanded MOPR causes PJM’s capacity market to ignore resources that are required by state policies, meaning that they will, in most cases, still be developed and available to provide capacity. As a result, PJM’s capacity market will procure redundant capacity that is not actually needed to ensure resource adequacy. That is doubly bad for consumers, as they will be forced to pay for more capacity than is actually needed, and to do so at a higher price than they should, because the MOPR will allow a relatively high-cost resource to set the capacity price for the entire set of resources procured through PJM’s capacity market.
In addition, over-mitigation undermines a capacity market’s ability to establish price signals that efficiently guide resource entry and exit. States will continue to exercise their authority over the resource mix no matter how hard the Commission tries to frustrate those efforts, especially given the ever-growing threat posed by climate change. Where a MOPR causes a capacity construct to effectively ignore state policies, it will produce price signals that do not reflect capacity supply fundamentals or the factors that are actually influencing the development of new resources. Instead, it will send artificially inflated capacity price signals that encourage the participation of resources that are not needed to serve the region’s capacity needs. It is hard for us to see how a price signal that encourages redundant investment is a “competitive” or desirable outcome, much less a just and reasonable one.
We got to this point largely because of the Commission’s misguided belief that it must “protect” capacity markets from the influence of state policies. Not so. Although the cost and inefficiency of over-mitigation is itself a more-than-sufficient reason to change course, course correction is also warranted because the Commission’s recent MOPR orders undermine the jurisdictional balance that is at the heart of the FPA.
The FPA is clear. The states, not the Commission, are responsible for shaping the generation mix. Although the FPA vests the Commission with jurisdiction over wholesale sales of electricity, as well as practices affecting those wholesale sales, Congress expressly precluded the Commission from regulating “facilities used for the generation of electric energy.” Congress instead reserved to the states exclusive jurisdiction to regulate generation facilitates.
But while those jurisdictional lines are clearly drawn, the spheres of jurisdiction themselves are not “hermetically sealed.” One sovereign’s exercise of its authority will inevitably affect matters subject to the other sovereign’s exclusive jurisdiction. For example, any state regulation that increases or decreases the number of generation facilities will, through the law of supply and demand, inevitably affect wholesale electricity rates. But the existence of such cross-jurisdictional effects is not a “problem” for purposes of the FPA. Rather, those cross-jurisdictional effects are the product of the “congressionally designed interplay between state and federal regulation” and the natural result of a system in which regulatory authority over a single industry is divided between federal and state government. Maintaining that interplay and permitting each sovereign to carry out its designated role without direct interference by the other sovereign is essential to the cooperative federalism regime that Congress made the foundation of the FPA.
Consistent with this interplay, the Commission has expressly recognized the valid economic effects of state policies by, for example, accounting for the opportunity costs of operating a generation facility where state emissions limits restrict that facility to running for only a small number of hours per year. In using the MOPR to block the economic effects of state policies from flowing through to the capacity market, the Commission embarked on an arbitrary and ultimately futile quest to neutralize the indirect but inevitable effects of state policies, arrogating to itself the role that Congress reserved for the states. That is true even where the Commission claims that its only “policy” is to block the effects of state policies, not the state policies themselves. After all, a federal policy of eliminating the effects of state policies is itself a form of public policy—just not one that Congress gave the Commission authority to pursue.
It is past time to abandon the misguided focus on state policies and take the MOPR back to basics. Instead of interfering with state policies, the Commission’s buyer-side market power mitigation regime should be all about—and only about—actual buyers with market power. In the event that a resource is not owned or controlled by a net buyer with market power, its capacity offer generally should not be subject to buyer-side market power mitigation. An approach along those lines is necessary to ensure just and reasonable rates by avoiding the harms of over-mitigation outlined above. In addition, that result is both more consistent with the Commission’s core responsibility as a regulator of actual monopoly/monopsony power as well as the FPA’s federalist foundation and, in particular, the authority that Congress reserved to the states when it enacted the FPA. And finally, taking the MOPR back to the core function of addressing actual buyer-side market power also provides a path for the Commission to get out of the interminable disputes that have plagued the Commission in recent years and cast a cloud of uncertainty over the Eastern RTO/ISO capacity markets—which, after all, is the last thing one should want for a construct that is supposed to send investment-guiding price signals.
“Actual” is an important distinction here. The Commission has at times come close to justifying mitigation of resources that receive state support on the basis that the state itself is exercising buyer-side market power because it looks out for the interests of all consumers in the state. That notion never held water. States regulate for a variety of reasons, and treating all state regulation as anti-competitive or an exercise of market power fundamentally misunderstands and distorts the states’ central role in electric power generation, as recognized explicitly in the FPA. What is more, states are often concerned with the interests of sellers within their borders and yet the Commission has never found, to our knowledge, that state efforts that benefit particular sellers should be treated like seller-side market power. But even if states could be said to exercise something like “indirect buyer-side market power,” the Draconian mitigation scheme created by the Expanded MOPR is a “cure” far worse than the “disease,” even assuming, for the sake of argument, that it was correctly diagnosed.
For all these reasons, we believe that PJM had no choice but to return the MOPR’s focus to the core problem of actual buyer-side market power, free from the misguided notion that state resource decision making is inherently anti-competitive. PJM’s Focused MOPR does just that. In the balance of this statement, we address the principal issues raised by the parties in this proceeding and explain why, in our view, the Focused MOPR is just and reasonable and not unduly discriminatory or preferential and we therefore would have voted to approve it.
Before addressing PJM’s proposal, it is helpful to briefly summarize the specific history of PJM’s MOPR, to illustrate how significantly the Commission’s most recent orders departed from earlier precedent and how the Focused MOPR is, in many respects, a return to the original premise of the MOPR.
PJM’s current capacity market regime, the Reliability Pricing Model (RPM), was established in 2006. Under the RPM, load-serving entities (LSEs) can meet their resource adequacy needs by participating in the centralized capacity auction (called the Base Residual Auction, or BRA), through self-supply, or by meeting their own capacity needs though the Fixed Resource Requirement (FRR) alternative. Since its inception, PJM’s capacity market has included a MOPR to protect against the exercise of buyer-side market power. The rule was originally justified based on the possibility that a net buyer may have the incentive to depress capacity prices below the competitive level, such as by offering capacity that it owns or otherwise controls at below competitive levels to benefit its purchases in the same capacity market auction. With some exceptions, offers for the sale of capacity by net buyers that could lower capacity prices through self-supply were mitigated to an estimate of a competitive offer, based on the resource’s net cost of entry. The initial MOPR applied only to new natural gas resources, as they were relatively cheap, dispatchable, and quick to build, making them the most efficient resources to be used to attempt to exercise buyer-side market power. Nuclear, coal, and hydroelectric facilities were exempt from the MOPR as they were not considered to be the likely choice of a net buyer seeking to reduce capacity prices. Additionally, the initial MOPR included a state mandate exemption, which exempted any new entry developed for reliability projects built under state mandate on the grounds that such an exemption “enable[d] states to meet their responsibilities to ensure local reliability.”
In 2011, PJM proposed several changes to the MOPR. As relevant here, PJM proposed to eliminate the state mandate exemption in light of certain state programs, for example in New Jersey and Maryland, that were designed to support the entry of new generation into PJM’s capacity market. PJM contended that it was not “well-suited” to either pass on the adequacy of state administrative processes or to determine whether an offer was intended to address a projected capacity shortfall, which the existing rule required. The Commission accepted PJM’s proposal to eliminate the state exemption, but in doing so acknowledged the rights of states to pursue legitimate state interests, including ensuring resource adequacy and favoring particular generation resources.
The MOPR underwent further change in 2013 when the Commission conditionally accepted PJM’s proposal to categorically exempt competitive entry and self-supply LSEs, within net-short and net-long thresholds, subject to PJM retaining the unit-specific review process. The Commission reasoned that PJM’s proposed competitive entry and self-supply exemptions were justified by the lack of incentive on the part of competitive entrants and self-supply LSEs, within net-short and net-long thresholds, to exercise buyer-side market power, but required PJM to retain the unit-specific review process to ensure that resources ineligible for an exemption would have the opportunity to demonstrate that their costs were lower than the default offer floor, and be allowed to bid at that lower cost floor. In both 2011 and 2013, the Commission sought to balance (1) the need to address a particular form of what it viewed to be anti-competitive conduct with (2) a recognition of the potential harms caused by over-mitigation.
That all changed beginning in 2018. After Calpine Corporation filed a complaint arguing that so-called “out-of-market” state support distorted capacity prices, PJM made its own filing to expand the MOPR. The Commission rejected PJM’s proposal as unjust and unreasonable, but found PJM’s then-existing Tariff unjust and unreasonable because it failed to “protect the integrity of competition in the wholesale capacity market against unreasonable price distortions and cost shifts caused by out-of-market support.” The Commission explained that these “out-of-market payments by certain PJM states [had] reached a level sufficient to significantly impact the capacity market clearing prices and the integrity of the resulting price signals on which investors and consumers rely to guide the orderly entry and exit of capacity resources.” The Commission therefore instituted a sua sponte FPA section 206 proceeding to establish the replacement rate.
After a paper hearing, the Commission set forth a replacement rate that expanded the MOPR to apply to both new and existing resources that receive “State Subsidies.” The Commission stated that “[t]he replacement rate directed in this order will enable PJM’s capacity market to send price signals on which investors and consumers can rely to guide the orderly entry and exit of economically efficient capacity resources.” In justifying that decision, the Commission cast aside any remaining notion that the MOPR was primarily an effort to address buyer-side market power, rather than one aimed at propping up wholesale market prices, explaining that “the expanded MOPR does not focus on buyer-side market power mitigation, but rather addresses the impact of State Subsidies on the market.”
Fast forward to 2021. Even before PJM ran its first capacity market auction with the Expanded MOPR in place, commenters overwhelmingly expressed serious concerns. The discussion at the Commission’s March 23, 2021 technical conference on the role of capacity markets in the Eastern RTOs/ISOs, as well as the majority of comments filed thereafter, argued that the Expanded MOPR was flawed. Several commenters generally argued that the Expanded MOPR will send inefficient price signals about the need for, and cost of, new capacity and result in other inefficient market outcomes.
PJM opened the 2022/2023 BRA on May 19, 2021, with the Expanded MOPR in place.
On July 30, 2021, PJM submitted its Focused MOPR proposal, describing the filing as an effort to go back to basics by deploying the MOPR principally as a means of mitigating buyer-side market power rather than a scheme for blocking the effects of state policies.
PJM’s filing is just and reasonable and not unduly discriminatory or preferential
PJM filed its Focused MOPR proposal pursuant to section 205 of the FPA, which places on the filing utility—in this case PJM—the obligation to show that its proposal is just and reasonable and not unduly discriminatory or preferential. Under section 205, a utility does not need to show that the existing tariff is unjust and unreasonable, nor must it demonstrate that its proposal is the best option. Rather, it must show only that its proposed tariff is just and reasonable. A utility may file to update its tariff at any time by proposing what it believes to be a just and reasonable rate even if it differs from past filings, as “[a] rate order is not res judicata. Every rate order made may be superseded by another.”
For the reasons explained below, we believe that PJM has met its burden to show that the Focused MOPR is just and reasonable and not unduly discriminatory or preferential. By returning the focus of PJM’s MOPR to the problem of buyer-side market power, ending the prior efforts to hermetically seal PJM’s capacity market from the effects of state policies, the Focused MOPR addresses the core problems of over-mitigation, outlined above. In addition, the specific choices that PJM made to implement that course correction via its Focused MOPR proposal amount to a just and reasonable and not unduly discriminatory approach to these issues.
That is not to say that the Focused MOPR is the only just and reasonable mechanism for protecting PJM’s capacity market against anti-competitive conduct (in the form of the actual exercise of buyer-side market power) without unreasonably interfering with states’ exercise of their legitimate authority and other legitimate commercial activity to the detriment of consumers. To the contrary, as explained below, we believe that certain elements of PJM’s filing, particularly the certification requirement and the application of the MOPR to resources receiving Conditioned State Support, are not necessary elements of a just and reasonable rate. Nevertheless, those elements of PJM’s filing are not harmful and, thus, do not preclude us from finding that the Focused MOPR is just and reasonable and not unduly discriminatory or preferential.
In the balance of this statement, we review the principal issues raised in the record and explain the basis for our findings. In particular, we address the following: PJM’s proposal to permit revenues earned pursuant to state policies to be included in capacity offers, which represents a change in policy from the Commission’s recent PJM MOPR orders; the application of the MOPR to capacity offers based on the Exercise of Buyer-Side Market Power; the application of the MOPR to resources receiving or expecting to receive Conditioned State Support; and exemptions from the application of the MOPR for certain resources.
Inclusion of revenues earned under state policies in capacity offers
The principal dispute in this proceeding concerns PJM’s proposal to allow capacity market sellers to reflect all state support in their offers, except for Conditioned State Support, which is discussed further below. In supporting this change from the Expanded MOPR, PJM noted that in the three years since its 2018 MOPR filing, state policy support has only been expanded and extended, and there is “scant prospect” that states will discontinue those programs. PJM explained that state policies are often designed to address externalities that are neither accounted for nor compensated in PJM’s wholesale markets. PJM also argued that the Expanded MOPR has the potential to prevent state-supported resources from clearing the capacity market, which would cause the market to effectively ignore that capacity and send price signals that incremental capacity is needed, when in fact it is not. In addition to distorting capacity price signals, PJM stated that this dynamic would result in consumers overpaying for capacity because it would lead to the procurement of more capacity than is actually needed. PJM also argued that by excluding resources that participate in the energy and ancillary services markets from the capacity market, the Expanded MOPR inappropriately puts downward pressure on energy market prices, which are the largest source of revenue. PJM asserted that the Expanded MOPR amplifies the “missing money” problem the capacity market was designed to solve because capacity market clearing prices will no longer reflect the cost of supplying energy during a shortage.
PJM argued that although state policies favoring certain generation resources may reduce capacity prices, that does not amount to an inappropriate secondary impact of one state’s policies on other states. Rather, PJM contended, the reduction in prices is a natural consequence of PJM’s capacity market appropriately reflecting state policies and customer preferences for certain types of resources.
Many commenters, including generators, LSEs, consumer counsels, state regulators, and non-governmental organizations, supported PJM’s proposal. In general, these commenters argued that including state support (with the exception of Conditioned State Support) in price offers will result in just and reasonable rates, and that the proposal represents a more reasonable accommodation of the conflicting policy objectives that were earlier addressed with the Expanded MOPR.
Protesters broadly argued that PJM’s Focused MOPR is unjust and unreasonable because it fails to mitigate so-called “out-of-market” state support. They claimed that state programs and policies can be used to exercise buyer-side market power, and that the Commission and appellate precedent makes clear that the Commission cannot ignore the exercise of buyer-side market power by states. Protesters also contended that PJM’s proposal is so narrow that it will fail to address the artificial price suppression caused by “out-of-market” subsidies and other market behavior that unduly discriminate against competitive, non-subsidized capacity resources. These protesters argued that the Commission has consistently acted to ensure that the MOPR mitigates price-suppressive effects and has explained that “all uneconomic entry has the effect of depressing prices below the competitive level and that this is the key element that mitigation of uneconomic entry should address.”
Protesters continued by arguing that acceptance of PJM’s proposal would be irreconcilable with prior Commission orders on PJM’s MOPR, in which the Commission found that the PJM Tariff was unjust and unreasonable because the then-effective MOPR failed to address the fact that “[state] subsidies allow resources to suppress capacity market clearing prices.” EPSA argued that absent a relevant change in circumstances, the Commission cannot accept as just and reasonable a section 205 filing that would put in place a MOPR narrower than that in effect when it made those section 206 findings. EPSA contended that courts have rejected claims that the application of a MOPR would prevent a state from using the resources it has chosen to promote, and that the Commission has acted within its jurisdiction when it approved rules to prevent a state’s choice from adversely affecting wholesale capacity rates.
Protesters also argued that PJM’s Focused MOPR fails to balance consumer and investor interests, and does not ensure that suppliers are provided the opportunity to recover their costs. Some parties also claimed that PJM’s proposal, if adopted, would not protect the interests of existing investors who made investment decisions in reliance on the Expanded MOPR. Protesters argued that a broadly applicable MOPR is necessary to protect both states that have chosen not to subsidize any resources and unsubsidized resources themselves.
Protesters also attempted to dispute PJM’s arguments in defense of its proposal. EPSA and NRG challenged PJM’s contention that a narrower MOPR is necessary to prevent customers from paying twice for capacity. EPSA argued that consumers can only even arguably be said to “pay twice” for capacity if the subsidy involves a payment for capacity. EPSA argued that if payments are for attributes separate and distinct from capacity, then consumers are not paying twice for anything. EPSA asserted that even if customers are paying twice, the onus is on the subsidizing state to address double payment concerns. Cogentrix, NGSA, and P3 contended that the results of the most recent BRA show that there is no material impact from the application of the Expanded MOPR on state-supported resources because 93% of the capacity offers were not subject to the Expanded MOPR, and 82% of the offers subject to the Expanded MOPR cleared. Calpine and LS Power took issue with PJM’s contention that the Expanded MOPR puts downward pressure on energy prices because drops (or increases) in energy prices would be reflected in the Variable Resource Requirement (VRR) demand curve, whereas there is no guarantee that price suppression in the capacity market would be reflected in higher energy rates, and therefore, they claimed that PJM’s proposal will aggravate the missing money problem.
Analysis of PJM’s Proposal
PJM’s proposal to allow capacity market sellers to reflect all state support in their offers, except for the limited instances of Conditioned State Support (as discussed further below), is just and reasonable and not unduly discriminatory or preferential. At bottom, the Focused MOPR is an attempt to return the MOPR to its original purpose by focusing on actual buyer-side market power. Unsurprisingly, under the Focused MOPR, resources will generally be able to reflect the effects of state policies in their capacity offers, which will allow resources to compete based on their actual net going forward costs.
That dynamic has several significant benefits. For one, the Focused MOPR will allow PJM’s capacity market to provide accurate price signals to investors that reflect actual supply and demand fundamentals by allowing capacity market sellers to include state support in their offers. Investors and consumers alike will benefit from a market construct that more accurately reflects the facts and realities on the ground, including the existence and resource adequacy contributions of state-supported resources that will be developed to meet state policies, with or without a broadly applicable MOPR.
For another, under the Focused MOPR, PJM’s capacity market will provide a sufficient opportunity for resources to recover their costs. That is because with the Focused MOPR, PJM’s capacity market clearing price will generally equal the capacity offer of the marginal resource (or resources), and that marginal capacity offer will include the resource’s net going forward costs and needed return on investment to supply capacity in the given delivery year (whether for a new or existing resource). As such, PJM’s capacity market clearing price will cover the costs the marginal resource incurs to supply capacity and, by definition, the costs of all of the inframarginal capacity resources that clear the auction (i.e., the rate will be non-confiscatory). While it is true that, under the Focused MOPR, resources will be allowed to reflect a more complete version of their net costs in their offers and, as such, a different mix of resources may clear the market, that fact does not render the Focused MOPR unjust and unreasonable. After all, as the Commission has explained, “suppliers in competitive wholesale electricity markets are not guaranteed full cost recovery, but only the opportunity to recover their costs.”
But perhaps most important is the fact that the Focused MOPR will avoid the significant drawbacks of the Expanded MOPR. Before discussing those specific harms, we pause to recognize that, as recently as last year, the Commission supported the Expanded MOPR, notwithstanding (and, in some cases, because of) those harms. Allowing the Focused MOPR to go into effect is a change from that prior policy. Nevertheless, the FPA and the Administrative Procedure Act (APA) permit an administrative agency to change course when faced with a record sufficient to support its course correction. In our view, the prior Commission orders on PJM’s MOPR were wrongly decided. But whether or not those prior orders were wrong, a change in policy is well-supported by the record before us, which demonstrates the substantial harms that the Expanded MOPR would cause, that the changing role of the capacity market undercuts the rationale for a broad MOPR, and that PJM’s Focused MOPR is consistent with the FPA and superior to the Expanded MOPR. In light of these conclusions, it is not only appropriate but past time to revise the Commission’s prior policy.
On that point, a majority of Commissioners agree. Like Commissioner Christie, we believe “that the current PJM MOPR structure needs to be replaced or significantly modified” and that the Expanded MOPR is “simply unsustainable,” as it fails to adequately account for capacity provided by state supported resources and results in additional costs to consumers. Accordingly, while we disagree about whether PJM’s proposed replacement rate satisfies the statutory standard, we agree that a change of course is warranted and that a replacement rate of some sort is necessary. Equally important, the discussion of the need for that change in either this statement or Commissioner Christie’s would be more than sufficient to support a change of course under established APA precedent.
For that reason, Commissioner Danly is wrong to suggest that the Focused MOPR is inconsistent with the APA. FPA section 205(g) indicates that the Commission’s failure to act is an order for the purposes of FPA section 313(a) and (b) and, as the statements issued today make clear, three Commissioners—a majority of those participating—in their statements accompanying that “order” explicitly support the conclusion that the Expanded MOPR is unjust and unreasonable and that a change of course is required. Commissioner Danly also introduces the head-scratching argument that the Focused MOPR must be invalidated because the Commission did not respond to the various protests. But Commissioner’s Danly’s interpretation would have the consequence of ensuring that every filing that goes into effect by operation of law under section 205(d) of the FPA would be guaranteed to lose on appeal under section 205(g) because, by definition, the Commission could not possibly address the relevant protests. Such an absurd result—which would interpret section 205(g) to sub silentio gut the operation-of-law provisions in section 205(d)—finds no support in the text or history of any part of section 205. In any case, we note that the protests he describes are fully addressed in this statement.
With that, we start with the considerable set of harms that are avoided by PJM’s adoption of the Focused MOPR. First, the Focused MOPR prevents the one-two punch of forcing customers to pay higher capacity prices for resources that are not needed to meet the system’s resource adequacy needs. Although an appropriately targeted MOPR can deter the exercise of buyer-side market power by eliminating the financial reward for such conduct, there is no compelling reason to believe that applying a MOPR to state-supported resources will cause states to abandon their public policy commitments. To meet the requirements of state laws and policies, state-supported resources will, in most cases, still be developed even if application of the MOPR causes them to be priced out of the capacity market. Because state-supported resources are available to provide resource adequacy, but those contributions are effectively ignored by PJM when they are pushed out of the market, applying a MOPR to state-supported resources causes an RTO/ISO to procure redundant capacity that is not needed to ensure resource adequacy. The potential for redundant capacity grows each year, as there is no mechanism in the Expanded MOPR framework to ever recognize capacity provided by state-supported resources where the MOPR blocks that capacity from clearing in the capacity market.
Under the Focused MOPR, consumers not only avoid paying for this redundant capacity, but also the inflated prices that result from administratively raising the offers of certain resources that receive compensation from state programs. Applying the MOPR to state-supported resources forces them to submit capacity offers at prices higher than they would otherwise be willing to accept to provide capacity, which will likely result in artificially inflated capacity prices. The record here reflects this dynamic: States have continued to expand (not abandon) state policies shaping the resource mix since the imposition of the Expanded MOPR, and consumers face a growing cost. Initial estimates indicated that the Expanded MOPR would increase costs by approximately $1.0-2.6 billion annually and more recent analyses that factor in the increasing state support place the total annual costs at $3.4 billion by 2030.
While some protesters dispute these consumer harms, arguing that the results from the most recent BRA show that there is no material impact from the application of the Expanded MOPR, they overlook the fact that the Expanded MOPR grandfathered-in most existing resources that receive support from programs. It is reasonable to expect that the impacts of the Expanded MOPR would be limited in the first BRA to which it applied, since the vast majority of state-supported resources were categorically exempted. The adverse impacts of the Expanded MOPR would have grown over time as state programs expand, and as the number of new resources (and thus MW of capacity) subject to the Expanded MOPR increased. For example, several states in PJM have policies requiring the development of offshore wind resources, which will be available to provide capacity in the near future, and there is every reason to believe that the Expanded MOPR would prevent those resources from clearing the market.
Moreover, the record suggests that the Expanded MOPR did have an impact on the most recent BRA, even if that impact was limited due to the various exemptions for existing resources. As Exelon and PSEG note, Exelon’s Quad Cities Generating Station benefits from the Illinois’ zero-emission credit and was subjected to the Expanded MOPR in the most recent BRA. Quad Cities failed to clear, and according to PJM’s post-auction scenario analysis, capacity prices likely increased by over $10/MW-day, or an additional $90 million in the ComEd zone, as a result. Thus, despite the Expanded MOPR’s relatively limited applicability for the first auction, its harms have already materialized. These harms can be expected to increase significantly as states continue to support resources that will not benefit from the Expanded MOPR’s grandfathering provision.
PJM’s approach, by contrast, avoids over-mitigation by re-focusing MOPR as a tool to deter anti-competitive conduct. Unlike state policies, which the Commission cannot permissibly seek to deter, and which have not been completely deterred in practice via the MOPR, anti-competitive conduct is appropriately deterred by the application of a minimum offer price. By preventing buyer-side market power mitigation from occurring in the first instance, the Focused MOPR can be expected to prevent consumers from unjustly paying for redundant capacity. Given this sound basis in economic theory, PJM’s decision to confine the scope to anti-competitive conduct is reasonable.
Second, the same dynamic that harms consumers also impedes the basic purpose of the capacity market, causing the capacity market to send inaccurate signals to market participants about the need for and price of additional capacity. In particular, an artificially inflated price will falsely signal that new entry is needed or that existing resources should forestall retirement. Such inaccurate signals in the capacity market, in turn, could have detrimental effects on PJM’s energy and ancillary services markets. For example, scarcity pricing is a part of PJM’s energy and ancillary services markets intended to ensure resources have the proper incentives to be available when supply is tight. Carrying redundant capacity interferes with the ability of scarcity pricing to send these signals. Diminishing the opportunities for resources to earn revenues from scarcity pricing prevents these signals from more efficiently incenting the appropriate amount and types of supply resources to meet scarcity needs.
We do not find persuasive protesters’ arguments that participation of state-supported resources would cause capacity market prices to become uncompetitive or unreasonably “suppressed” in the absence of a construct such as the Expanded MOPR. We recognize, as the protests pointed out, that in some cases, participation of state-supported resources under the Focused MOPR could result in a lower price than under the Expanded MOPR, and that the Commission has in previous orders described this phenomenon as “price suppression” that must be remedied. As we have explained, we believe that those orders were wrong. Instead, offers that incorporate the reality of state policies reflect the real world economic decisions facing particular resources, as opposed to those that they might face in a theoretical world where states do not exercise the authority that Congress reserved to them under FPA section 201(b). As a result, the capacity price resulting from an auction conducted with capacity offers that reflect state policies will be just and reasonable because the market will reflect supply and demand fundamentals.
The policies of states and other regulatory entities have always affected the pricing inputs of resources into wholesale electricity markets. Siting policies, tax rules, and labor regulations, for example, are inputs to supply and demand fundamentals. State “subsidies” targeted by the Expanded MOPR are no different. Similarly, out-of-market sources of revenue from things like renewable energy credits, which are subject to the Expanded MOPR, affect the economics of particular resources just as much as out-of-market revenue associated with coal ash sales or steam heat sales, which are not. Where offers reflect revenues earned pursuant to state policies and yield decreased capacity prices, that is an economic and competitive outcome. Conversely, it is the Expanded MOPR that distorts market outcomes by forcing the market to operate as if legally binding state policies did not exist, ignoring valid economic inputs to offer prices and thereby ignoring resources that will be available to provide capacity and support resource adequacy whenever the Expanded MOPR operates in a manner that causes an otherwise competitive state-supported resource not to clear.
In addition to avoiding redundant capacity at artificially inflated rates, the Focused MOPR also abandons the impossible task of seeking to “hermetically seal” PJM’s capacity market from the influence of state policies, the pursuit of which created tremendous uncertainty, frequent re-drawing of the boundaries of “price suppressive” conduct, and substantial administrative burden. The impracticality of the exercise is ably demonstrated by the Expanded MOPR’s internal inconsistencies. The Commission justified its imposition of the Expanded MOPR on the theory that revenues from state policies have the ability to “suppress” the wholesale rate. But then the Commission created exemptions for a whole host of policies, without explaining why some policies “suppress” wholesale prices, while others do not. For example, the Commission stated that it could not mitigate federal subsidies, though the scale of such support is tremendous and, by the Commission’s logic, would have the same effect of “artificially” reducing a resource offer. Similarly, the Commission’s Expanded MOPR orders did nothing to address the effects of state policies that increase capacity offers, such as state-directed carbon pricing, even though those policies could equally affect wholesale rates. Because so many federal, state, and local policies shape the demand and supply fundamentals of the market, seeking to segregate their effects inevitably leads to such arbitrary and burdensome line-drawing.
Finally, we believe that continued application of the Expanded MOPR would have threatened one of the Commission’s signal achievements of the last 20 years: the fostering of large regional markets for the wholesale sale of electricity and related services, which provide customers with significant benefits in terms of scale and diversity of supply. The record before us suggests that continued application of an overly broad MOPR poses a significant threat to at least some aspects of those markets, as several states have considered abandoning the capacity market altogether rather than have the resources needed to meet their public policy goals be subjected to mitigation. The potential loss of those benefits would be significant and weighs heavily against whatever benefits an Expanded MOPR might provide, even under the most optimistic assessment.
And while these harms of the Expanded MOPR would have increased over time, its purported rationale has become less compelling. Even if one accepted the logic that there is a benefit to insulating capacity prices from “suppression,” the relative benefits of such insulation have declined. States are playing a more active role in shaping the resource mix—including both entry and exit—than they were at the time the Commission issued previous orders addressing the scope and purpose of PJM’s MOPR. Consequently, the relative importance of capacity market price signals in guiding resource entry and exit, a key consideration when PJM’s capacity market was first developed, has declined and likely will continue to decline in the future, further tilting the balance against the sort of extreme mitigation imposed by the Expanded MOPR.
The well-substantiated evidence of the cumulated harms that would result from the Expanded MOPR, alongside the changing circumstances that weaken any argument that such measures are necessary to achieve the capacity market’s purpose, provide a compelling basis for the Commission to change course from its prior orders. This is so even if guarding against price “suppression” from legitimate state policies were a valid aim. The Commission must “weigh the danger of price suppression against the counter-danger of over-mitigation, and determine where it wishes to strike the balance.” The abstract concept of market integrity does not outweigh the impaired functioning of PJM’s capacity market and undue costs on consumers wrought by the Expanded MOPR.
None of the protesters’ remaining arguments tilt the balance. Arguments that the Expanded MOPR must be preserved because investors relied on it are unavailing. As an initial matter, PJM’s capacity market is very much an administrative construct with rules and regulations that are always subject to prospective change, under sections 205 and 206 of the FPA. The idea that any particular party has an entitlement to the maintenance of particular features of the market is inconsistent with the FPA, not to mention the history of PJM’s capacity market, which has been in a state of flux in almost every significant respect since its inception. In any case, only one auction has run with the Expanded MOPR in place, and it has been well-publicized since before that auction that PJM was exploring the possibility of replacing the Expanded MOPR. As such, no investor had valid reason to assume that the Expanded MOPR would necessarily be a long-term feature of PJM’s capacity market.
Some protesters contended that allowing state policies to go unmitigated will harm resources required for reliability. That claim is speculative, and protesters presented no evidence to support it. Furthermore, in a properly designed capacity market, including one with the Focused MOPR, as supply tightens, the price for capacity will increase to reflect the need for additional capacity and provide an incentive for investment. To be sure, under the Focused MOPR, the mix of resources used to meet capacity demand might change, with state-supported resources playing a greater role than in the past. However, such an outcome reflects the states’ prerogative, consistent with its authority over generation resources in section 201(b) of the FPA. And, in any case, the Commission’s role is to ensure just and reasonable rates, not protect individual competitors or particular business models. Indeed, market rules designed explicitly with the purpose of maintaining particular business models or supporting the viability of particular participants would raise serious undue discrimination concerns.
P3 and other protesters expressed concern that the Focused MOPR will allow states supporting particular resources to shift costs to other states that may have different priorities. But indirect cross-border price effects are an inevitable consequence of any form of state regulation. The reality is that states in an interstate market cannot be wholly insulated from legally valid policy choices of other states. The Expanded MOPR was a unique, misguided effort to insulate states from the effects of an arbitrary subset of state policies, contrary to the Commission’s general practice of allowing one state’s policies to indirectly affect other states consistent with the overlapping jurisdictional framework of the FPA. Even under the Expanded MOPR, a variety of subsidies and state policy choices were not mitigated that may affect the market and cause cross-border impacts. Furthermore, the impacts will not shift costs per se; as PJM observes, allowing capacity market offers to reflect revenues from one state’s policies will most likely lower total costs for consumers in other states.
Protesters argued that the courts have agreed with the Commission’s exercise of its jurisdiction to subject state-supported resources to the MOPR, citing the U.S. Court of Appeals for the Third Circuit’s decision in NJBPU. But no case, including NJBPU, requires the Commission to mitigate those resources. For example, in NJBPU, the court held only that the Commission’s acceptance of a PJM section 205 filing to eliminate an exception that existed for state-mandated resources from PJM’s original MOPR was not arbitrary and capricious. Finding that the Commission “has adequately advanced a rationale for its about-face,” the court upheld the Commission’s decision to eliminate the MOPR exemption for state-mandated resources. The court did not in any way suggest that mitigation of state-mandated resources is mandatory under the FPA or that it was always necessary to prioritize preventing what the Commission described as “price suppression” over the adverse impacts of the MOPR, especially as circumstances change. For the same reasons, we disagree with EPSA’s and P3’s argument that PJM’s concerns about consumers paying twice for capacity is misplaced because, in their view, the court in NJBPU found that consumers paying twice is permitted as a consequence of the Commission ensuring just and reasonable wholesale rates. Again, NJBPU does not require that consumers be forced to pay twice for capacity. Indeed, the NJBPU court went out of its way to underscore FERC’s authority to revisit and revise its determinations, even in the absence of “changed circumstances.” As set forth above, there is an ample record to support the conclusion that mitigating the impacts of state policies does not produce just and reasonable rates, and that is all that is required by NJBPU.
Nothing in Commissioner Danly’s statement undermines our conclusion that PJM’s Focused MOPR is a permissible and, indeed, a preferable approach to addressing the threat of buyer-side market power in PJM’s capacity market than the Expanded MOPR. His assertion that the Commission must address “price suppression” is based on a misreading of caselaw and the false premise that the Commission lacks the discretion to determine which market conduct is anti-competitive and poses a risk to just and reasonable rates. The FPA requires the Commission to ensure “just and reasonable” rates, not eliminate any factor that could reduce prices or be labelled “price suppression.” To argue that the just and reasonable standard necessitates both that the Commission mitigate buyer-side market power and further that the Commission equate state adoption of certain policies to an exercise of buyer-side market power, Commissioner Danly must disregard statutory text, rewrite the history of the Commission’s MOPR orders, and stretch legal precedent beyond reasonable bounds. The aim of these legal contortions appears to be to effectively set in stone one of the Commission’s prior policy judgments. But the Commission has changed its mind on the proper scope of measures to mitigate buyer-side market power before and may do so again. Indeed, the Fair Rates Act statements of three Commissioners reflect the judgment that the Expanded MOPR, the zenith of the Commission’s approach to aggressively mitigate state policy, is not just and reasonable. Ultimately, in sharp contradiction to his effort to impose bright-line rules, even Commissioner Danly must concede that all the FPA requires is adequate market power mitigation. But that is exactly what PJM’s Focused MOPR achieves, as explained throughout this statement—mitigation that is tailored to address the relatively low risk of buyer-side market power in PJM’s capacity market, and that avoids the very real perils of over-mitigation.
We respond first to Commissioner Danly’s mischaracterization of the caselaw and Commission precedent as requiring the Commission to address price suppression. Next, we turn to Commissioner Danly’s mistaken conclusion that the Commission is legally obligated to deem select state policies a form of buyer-side market power. Finally, we address Commissioner Danly’s internally contradictory claims that, even as “subsidized” resources so threaten the integrity of the capacity market as to legally require them to be subject to the MOPR, these resources are also so competitive that the application of the Expanded MOPR does not affect their participation in the capacity market and therefore results in no harm.
Starting with the caselaw, Commissioner Danly’s primary thrust, and one echoed by several protesters, is that RTO/ISO capacity markets cannot be just and reasonable under the FPA absent provisions designed to protect against the exercise of both seller-side and buyer-side market power, including buyer-side market power purportedly exercised by the states. But, of course, the Focused MOPR is a mechanism to protect the capacity market from the exercise of buyer-side market power. Commissioner Danly is really arguing that the FPA does not permit the Commission to make determinations about which conduct constitutes an exercise of buyer-side market power, or, more broadly, whether particular conduct is anti-competitive in nature and may pose a risk to just and reasonable rates. But this interpretation of the FPA neither comports with the past decade and a half of caselaw, nor the pendulous swings of Commission precedent.
To support his position, Commissioner Danly offers up a smattering of cases, none of which establish that buyer-side market power mitigation mechanisms are a precondition to the Commission’s reliance on market-based approaches to ensure just and reasonable rates. Nor do these cases hold that “price suppression” or particular state policies necessarily constitute an exercise of buyer-side market power. In Federal Power Commission v. Texaco, the Supreme Court rejected a Commission order that would relieve small natural gas producers of direct rate regulation. In invalidating the order, the Court found that the Commission had failed to adequately explain how its approach of “indirect” regulation ensured just and reasonable rates. Though not essential to the holding, the Court went on to opine that it was not reasonable to assume that just and reasonable rates could conclusively be determined by reference to market price. However, the Court never grounded these concerns in buyer-side market power in particular. Moreover, Texaco reiterated the long-established principle that, while the Natural Gas Act directs that all rates must be just and reasonable, “it does not specify the means by which that regulatory prescription is to be attained.” To the extent it is relevant at all, Texaco affords the Commission ample discretion to determine what means are necessary to ensure just and reasonable rates, rather than barring it from reaching an informed determination as to whether and what measures are required to address anti-competitive conduct in a particular market.
Likewise, reading Tejas Power Corp. v. FERC to foreclose the Commission’s discretion to determine whether particular restrictions on buyer-side market power are necessary to ensure just and reasonable rates grossly misstates its holding. In Tejas Power, the Commission approved as just and reasonable a settlement agreement governing gas inventory charges between a dominant gas pipeline company and several of its local distribution company customers without examining or addressing the pipeline’s potential market power, which the court suggested might allow the pipeline to extract above-market or anti-competitive rates from its buyers. As in Texaco, the court found that the Commission had failed to adequately explain its decision to approve the settlement. In remanding the case to the Commission, the court expressly recognized the possibility that the Commission could approve the settlement based on a finding that the concerns about market power were unwarranted; a permissible justification could entail, for example, particular findings about the market’s structure. Rather than supporting Commissioner Danly’s sweeping conclusion that mitigation is required by the Commission’s statutory duty to ensure that PJM’s capacity rates are just and reasonable, Tejas Power stands for the modest proposition that the Commission must offer a reasoned explanation, backed by substantial evidence, for its determination that a rate is just and reasonable.
Commissioner Danly also points to a handful of cases as relying on Tejas Power, but none of these is helpful to his position. While each of these cases rejected challenges to market-based rates based upon the various safeguards or screens in place to address seller-side market power, none even mention buyer-side market power and certainly do not condition use of market-based rates on its mitigation. If anything, these cases reflect that the Commission permissibly makes technical and policy judgments about both the scope of conduct that may impact just and reasonable rates, and the measures that must be adopted to address that risk.
Commissioner Danly fares no better in his marshalling of the most relevant caselaw reviewing Commission orders addressing buyer-side market power mitigation. Pointing to NEPGA, he contends that the courts have held that the Commission has a statutory obligation to ensure that rates are appropriate by mitigating the market-suppressive effects of state subsidies that are paid to certain types of generation resources. But such a holding is nowhere to be found in NEPGA. To the contrary, courts have upheld Commission approvals of both expansion and contraction of buyer-side market power protections in particular RTO/ISO capacity markets. In so doing, reviewing courts have consistently recognized that decisions regarding whether and how to mitigate buyer-side market power entails “balancing competing interests,” and have declined to read into the FPA a bright-line requirement to do so. Rather, where supported by substantial evidence, courts have deferred to the Commission’s findings regarding the risk of anti-competitive conduct, as well as the Commission’s assessments of whether that risk is significant enough to warrant mitigation in light of the harm to competing interests. Nor does this precedent impose a one-way ratchet, or otherwise preclude the Commission from revisiting its earlier assessments of competing interests. Instead, reviewing courts have recognized that the weight given to competing interests may change over time, and have deferred to Commission determinations that changing market conditions may require striking a different balance.
Commissioner Danly simply disregards the inconvenient chapters of the Commission’s history of MOPR orders, arguing that the Commission has consistently held that RTO capacity markets must have provisions mitigating the price suppressive effects of state subsidies. This glosses over that the Commission has accepted—and the courts have upheld, when challenged—capacity market tariff provisions that contained no provision for mitigation of state policies, minimal provision for mitigation of state policies, or relaxed provisions for mitigation of state policies. But even if Commissioner Danly were correct, and the Commission had consistently determined state policies constitute an exercise of buyer-side market power, the Commission would not be precluded from reassessing that finding now.
Commissioner Danly then relies on his faulty interpretation of caselaw and selective retelling of Commission precedent to conclude that PJM’s determination to exclude state support from the definition of the exercise of buyer-side market power is an attempt to avoid the precedent holding that the Commission has a statutory obligation to prevent the exercise of buyer-side market power. But Commissioner Danly does not even engage with PJM’s reasoning for concluding that the sovereign act of a state to adopt legally valid policies are not the equivalent of buyer-side market power. To the extent he has an answer for why this must be so, it seems to be that state actions to provide support to resources take the same form as the actions of the net buyers who seek to gain financial advantage by paying owners of generation to submit below cost offers to sell capacity into the RTO capacity markets.
But this is not a principled rationale. Many legitimate actions can take the form of providing additional revenue to an owner of generation, including paying them for products or attributes other than capacity—which is exactly what PJM contends non-conditional state support should be treated as. The challenge of properly targeting anti-competitive conduct, while excluding legitimate conduct, has long been a feature of not only the Commission’s efforts to address buyer-side market power mitigation, but the courts in other non-FPA contexts. Because vigorous competition (i.e., buyers legitimately seeking the lowest price possible) can be difficult to distinguish empirically from the exercise of buyer-side market power, and overzealous policing of suspect conduct can itself harm competition, courts have generally rejected a categorical condemnation of conduct that may appear exclusionary, but also can be procompetitive. The Commission’s efforts to balance over- and under-mitigation similarly reflect not only the harms caused by over-mitigation when pro-competitive behavior is wrongly targeted, but that defining what constitutes anti-competitive behavior is a technically challenging task, susceptible to different judgments. Commissioner Danly does not explain why state policies must be treated as the equivalent of anti-competitive conduct, beyond his flawed, categorical conclusion that the FPA itself demands it. Instead, the closest he comes is to suggest that state-supported resources have the same effect as the exercise of buyer-side market power in that they reduce capacity prices. But that begs more questions than it answers. The fact that the entry of state-supported resources may result in a lower capacity price than in their absence hardly explains why the Commission should—much less must—treat those state policies as anti-competitive conduct. Commissioner Danly’s failure to adequately explain this crucial point, which is the foundation for nearly all his legal arguments, is fatal to the theory that is the through line for his entire statement.
After all, state policymakers (like a vast range of entities including federal policymakers, market participants, and, in the aggregate, just about any end-user who regularly turns their lights on) have the “ability” to “affect” rates. But that “ability” does not compel categorical mitigation of state-supported resources, as Commissioner Danly asserts. Such mitigation is neither required as a matter of policy nor, even more importantly, as a matter of law. Commissioner Danly’s position was in fact unanimously rejected by the Supreme Court in Northwest Central, supra, where the Court upheld a Kansas regulation that reduced the state’s purchases of old, federally regulated natural gas despite the regulation’s impact on FERC-regulated natural gas prices. There, the Court held that “[i]t would be strange indeed to hold that Congress intended to allow the States to take measures to prorate [natural gas] production . . . but that—because enforcement might have some effect on interstate rates—it did not intend that the States be able to enforce these measures.” The Court further explained that it “must take seriously the lines Congress drew in establishing a dual regulatory system,” and accordingly concluded that Kansas’ regulation of “production or gathering” was within its power under the Natural Gas Act.
Nor are states engaging in anti-competitive conduct when validly exercising their authority to shape their resource mix, merely because such policies may affect market prices. Recognizing that state legislatures may have a host of legitimate reasons for adopting such policies, Commissioner Danly does not argue for the application of MOPR based on an inferred anti-competitive intent to benefit the state’s consumers. Rather, he argues that the MOPR must apply because state policies distort market prices. Yet federal and state policies have extensively shaped the generation mix throughout the history of the capacity market, and correspondingly affected market prices. What qualifies as a “distorting” or “price-suppressive” effect is necessarily judgment-laden, and a matter in which the Commission may permissibly change its views.
The history of the Commission’s buyer-side market power orders is again illustrative. In PJM, the Commission initially approved a state policy exemption from the MOPR, and later approved elimination of the exemption but only with respect to policies that benefited new gas-fired generation. More recently, in the Expanded MOPR orders, including those that Commissioner Danly voted for, the Commission carved out from mitigation state policies, such as participation in the Regional Greenhouse Gas Initiative, that could result in the increase in capacity market prices, as well as all federal subsidies, irrespective of how significantly they affected prices. If, as Commissioner Danly contends, the mere fact that a policy incentivizes a resource to offer at a different value than it would have without the policy is sufficient to result in rates that are not just and reasonable, the Commission could not have accepted such exemptions.
Taken to its logical conclusion, Commissioner Danly’s position would require the Commission to mitigate not only price suppression, but also price inflation due to state policy effects, presumably, through a mechanism to mitigate seller-side market power. States are equally capable of increasing RTO/ISO capacity market prices through their policies, and indeed, regularly do so. There is no principled distinction that explains why policies that decrease offers (i.e., policies that produce additional revenues) are a threat to “market integrity” but policies that increase offers (i.e., policies that increase costs) are not. Notably, Commissioner Danly does not advocate for treating states as exercising seller-side market power, nor to expand seller-side market power mitigation to eliminate the effects of price-inflating policies. To the contrary, Commissioner Danly has persistently argued for more limited mitigation of seller-side market power, without reconciling this position with his reading of the FPA to require mitigation of both seller- and buyer-side market power as a precondition to market-based rates.
Finally, Commissioner Danly fails to give any weight to the way in which his extreme approach to buyer-side market power would undermine the PJM capacity market’s primary purpose of ensuring resource adequacy at least-cost. Even if one were to accept Commissioner Danly’s characterization of state policies as “price suppressive,” the Commission’s responsibility to ensure just and reasonable rates would nevertheless require it to assess whether mitigating such policies causes more harm than good to the capacity market. The logical and inevitable outcome of mitigating state-supported resources based on a view that any state policy that can influence a resource’s offer into the capacity market “distorts” the true market price is that significant quantities of capacity would be pushed out of the market, which in turn would necessarily result in price signals that are misaligned with supply and demand fundamentals.
Indeed, state policies newly on the books since 2018 could support the entry of more than 44,000 MW of capacity into PJM’s capacity market over the next decade and a half. The distortion of price signals and redundant capacity purchase requirements stemming from ignoring the contributions of such capacity to resource adequacy are likely to cost customers several billion dollars per year by 2030.
Here, three Commissioners agree that the harm of the Expanded MOPR is worse than any purported benefit it may bring to “market integrity,” based upon substantial record evidence. To argue the contrary, Commissioner Danly makes much of the most recent BRA, which he claims shows that the Expanded MOPR had little impact on the ability of state-supported resources to clear the auction. He argues that the auction shows that state-supported resources are cost-competitive, even with the Expanded MOPR in place. As we explained above, the Expanded MOPR did have an impact on the most recent auction. Regardless, we are also permitted to make findings based on “reasonable predictions rooted in basic economic principles,” and we explained above why the negative impacts of the Expanded MOPR will continue to grow in future auctions, in particular as additional offshore wind resources complete development. In any case, while holding up the most recent BRA as evidence of the Expanded MOPR’s limited impact, Commissioner Danly elsewhere acknowledges that it did have an impact and agrees that it will also likely affect offshore wind resources in the near future. He argues that this is a good thing and proof that the Expanded MOPR works as intended. But he cannot have it both ways. The MOPR cannot both have only a limited effect and also block thousands—and soon tens of thousands—of MWs of capacity from nuclear and offshore wind resources.
Finally, Commissioner Danly mistakenly asserts that we are ignoring or downplaying reliability concerns. Nothing could be further from the truth. Stating that the MOPR is a reliability tool reflects a fundamental misunderstanding of how the capacity markets work. Regardless of the exact clearing price, the capacity market ensures reliability by clearing resources that then have a capacity supply obligation. It is critical that resources can meet that capacity supply obligation and market rules should limit what they can sell to what those resources can actually deliver. Contrary to the suggestion by Commissioner Danly, the way to accomplish that is not to use the MOPR to erect barriers to entry into the market, but instead to accurately value the capacity contribution of each resource. That is the goal of the Effective Load Carrying Capability (ELCC) construct discussed in Commissioner Danly’s statement. The ELCC construct ensures that as penetration of a given type of non-dispatchable capacity increases, those resources will receive a correspondingly diminished capacity valuation (in line with the decreased likelihood that such resources are available when the grid is most stressed). In so doing, the ELCC construct is designed to ensure that PJM has adequate capacity as the resource mix changes. The purpose of the MOPR, by contrast, has never—not in any Commission order—been justified as a means for addressing the decreasing capacity valuations associated with growth in certain resources. Nor would that make any sense.
PJM’s application of the MOPR to the Exercise of Buyer-Side Market Power
As explained above, PJM’s proposal appropriately targets the actual exercise of buyer-side market power, that is the anti-competitive behavior of a capacity market seller with a load interest to suppress capacity prices through an uneconomically low capacity offer. PJM proposed to define Buyer-Side Market Power as the “ability of Capacity Market Sellers with a Load Interest to suppress RPM Auction clearing prices for the overall benefit of their (and/or affiliates) portfolio of generation and load.” PJM then proposed to define the “Exercise of Buyer-Side Market Power” as the anti-competitive behavior of a capacity market seller with a load interest, or directed by an entity with a load interest, to uneconomically lower its capacity offer in order to suppress capacity prices for the overall benefit of the capacity market seller’s (and/or affiliates of capacity market seller) portfolio of generation and load or that of the directing entity with a load interest as determined pursuant to PJM’s Tariff, Attachment DD, section 5.14(h-2)(2)(B). Under PJM’s proposal, a bilateral contract between the capacity market seller and an entity with a load interest with the express purpose of lowering capacity prices is evidence of the Exercise of Buyer-Side Market Power.
As a way to administer the Focused MOPR, PJM proposed an initial certification process whereby, before every capacity market auction, capacity market sellers would be required to certify that the seller acknowledges the prohibition of the Exercise of Buyer-Side Market Power and does not intend to Exercise Buyer-Side Market Power for a particular generation capacity resource. PJM argued that the certification requirement has a disciplining effect, given that the submittal of a false affidavit could make the capacity market seller subject to action by the Commission’s Office of Enforcement.
PJM stated that if PJM or the IMM suspects a fraudulent certification or has a reasonable basis to initiate an inquiry that a capacity market seller may commit an Exercise of Buyer-Side Market Power with respect to a certain resource, PJM or the IMM will initiate a fact-specific review. PJM stated that although it did not propose to establish a bright-line test for when it may have a reasonable basis to initiate an inquiry, it may do so if a capacity market seller intends to offer a resource or technology believed to be uneconomic (i.e., a resource that generally would not clear the market), in a location where the capacity market seller and/or its affiliates have a net-short position.
PJM explained that during a fact-specific review, PJM and/or the IMM will review whether the capacity market seller has both the ability and incentive to Exercise Buyer-Side Market Power through a capacity offer for the subject resource. PJM and/or the IMM will test first for ability by determining the extent to which a shift in the supply curve equal to the size of the resource would have a “material effect” on capacity market clearing prices. If the seller fails the ability test (meaning it has market power), PJM explained that PJM and/or the IMM will consider whether the seller has the incentive to Exercise Buyer-Side Market Power by testing whether the seller could receive a net benefit to its portfolio of generation and load due to the submission of an offer that is below the resource’s avoidable going forward costs net of expected revenue. PJM stated that the seller “will have the opportunity to explain and justify why a Sell Offer for the Generation Capacity Resource would not be an Exercise of Buyer-Side Market Power.” For example, PJM stated, a seller may be able to demonstrate that the generation capacity resource is a purely merchant generation resource and has no direct relationship with any load interest.
PJM further explained that just because a given offer may provide the seller with an overall benefit does not necessarily mean that the offer is improper. PJM thus proposed that “[i]f a resource offer can be justified, economically or otherwise, without consideration of the benefit to the Capacity Market Seller of the suppressed prices, the Capacity Market Seller shall be deemed not to have the incentive to exercise Buyer-Side Market Power with respect to that resource.” Further, to reduce ambiguity, PJM proposed that “[o]ut-of-market compensation (such as from renewable energy credits and zero emission credits)” is permissible and “may be used to support the economics of the resource under review” but only to the extent that such compensation is “not tied to either Conditioned State Support or a bilateral contract that directs the submission of an offer to lower market clearing prices.”
PJM stated that to the extent it determines that a generation capacity resource may be engaged in an Exercise of Buyer-Side Market Power through the inquiry process, the offer for such resource would be mitigated through the MOPR. PJM noted that any seller that disagrees with PJM’s determination that a generation capacity resource is subject to the MOPR “may seek any remedies available to it from [the Commission],” though PJM “will proceed with administration of the Tariff and market rules based on its determination hereunder unless [the Commission] by order directs otherwise.”
Anticipating protests, PJM argued that its proposal to mitigate Buyer-Side Market Power need not be commensurate with its rules to mitigate seller-side market power because the two types of market power are not symmetrical. PJM stated that seller-side market power is exercised by economically or physically withholding supply of capacity. In contrast, PJM stated, buyers with the ability and incentive to suppress capacity prices cannot symmetrically and directly withhold demand for capacity from the market, as demand is determined through an administrative demand curve (i.e., the VRR curve). Thus, PJM argued that the proposed provisions relating to Buyer-Side Market Power would not be appropriate to mitigate seller-side market power.
PJM also argued that the risk of an Exercise of Buyer-Side Market Power is lower than the risk of an exercise of seller-side market power. PJM argued that this is due to the significant obstacles to successfully accomplishing an Exercise of Buyer-Side Market Power (e.g., the large cost outlay to construct a new resource, and the likely need to suppress prices over multiple years for a Buyer-Side Market Power strategy to be economic). Thus, PJM stated, in designing market power mitigation mechanisms, one must balance the objectives of minimizing “false positives” (or over-mitigation), false negatives (or under-mitigation), and the administrative burden to PJM and market participants. PJM argued that its proposed process is a just and reasonable approach because it properly balances over- and under-mitigation, and administrative burdens.
The majority of commenters supported PJM’s proposal to apply the MOPR to capacity market sellers that have the economic incentive and ability to suppress capacity market prices through an Exercise of Buyer-Side Market Power, arguing that this approach returns PJM’s MOPR to its original intent, based on economic theory that the Commission and courts have long found reasonable. Commenters agreed with PJM that capacity market sellers with no load interest have no ability or incentive to exercise Buyer-Side Market Power. They argued that the ability test properly targets scenarios in which uneconomic price manipulation is most likely to occur, avoiding the harms of over-mitigation, and that the incentive test is reasonably tailored to actual risks of the exercise of buyer-side market power through uneconomic supply offers. And, because the Focused MOPR will ensure that offers are not based on an Exercise of Buyer-Side Market Power, commenters contended that the resulting capacity prices will be just and reasonable and restore investor confidence in the capacity market by providing much needed clarity.
Protesters disagreed with PJM that the exercise of buyer-side market power and seller-side market power are asymmetrical and thus warrant different rules. According to protesters, because seller-side market power rules do not require incentive or intent, the Focused MOPR would result in less mitigation of buyer-side market power than seller-side market power. These protesters contended that while successfully engaging in seller-side market power only impacts one auction, under-mitigation of buyer-side market power allows uneconomic entry in one auction and suppressed capacity market prices in subsequent auctions.
PJM responded that the economic risk for a seller exercising seller-side market power that the price does not increase (or increase enough) to cover the capacity revenues not obtained by the withheld resource is short-term—i.e., only for the relevant delivery year—as the seller could modify its behavior for the next year, or bilaterally contract the withheld megawatts to provide replacement capacity in that delivery year. In contrast, PJM stated, the economic risks associated with exercising buyer-side market power are significant and long-term because, generally, the buyer must financially support an uneconomic resource, and hope that it can reduce the capacity price sufficiently and over a period that its load’s reduced capacity cost is greater than the financial support. Plus, PJM added, such commitment of financial support generally must be for the remaining life of the resource, which, in the case of a new resource, would include construction and development costs. PJM argued that these different economic risks make the decision to exercise supply-side market power easier to contemplate and explained why instances of buyer-side market power are exceedingly rare.
Protesters also disagreed with PJM’s proposed certification and inquiry processes. On certification, protesters generally argued that a certification by a seller that it is not exercising buyer-side market power is insufficient to ensure no market power exists. PJM responded that the certification requirement is not the end of the inquiry with respect to whether an entity can Exercise Buyer-Side Market Power. Rather, PJM stated, the proposed Tariff language includes the ability for both PJM and the IMM to initiate a fact-specific review of whether a capacity market seller may commit an Exercise of Buyer-Side Market Power with respect to a certain resource.
Protesters also took issue with PJM’s proposed inquiry process and incentive and ability tests to determine whether a seller is Exercising Buyer-Side Market Power. Generally, protesters argued that the Tariff language leaves PJM with too much discretion in making its determination, and that the inquiry process is opaque, leaving market participants with little information on PJM’s determinations and the reasons behind them. PJM responded that the Tariff language is clear as to what is permitted, referring to easily understood and recognizable terms, and that sellers must actually document the economics of the resources for which they seek to demonstrate there is no Exercise of Buyer-Side Market Power. For example, PJM stated that sellers wishing to use well demonstrated customer preferences to support a resource’s economics must inform PJM of their intent to do so in advance of or in the course of a fact-specific review and provide documentation to support the claim. PJM stated that to provide additional clarity on the provisions, PJM will reflect what constitutes a “well demonstrated customer preference,” and how capacity market sellers can demonstrate such preference, in the relevant PJM Manuals.
The IMM claimed that there will be insufficient time to conduct an inquiry. PJM disagreed, asserting that whether PJM and the IMM initiate an inquiry should be known at least 135 days prior to the relevant capacity market auction because the initial screen focuses only on whether the market seller has a load interest and is attempting to offer a generally uneconomic resource. PJM contended that uneconomic resources are known in advance of any seller certifications and in the unlikely event that PJM or the IMM discovers a potential exercise of Buyer-Side Market Power after the initial 135-day deadline, PJM and/or the IMM could refer the offending seller to the Commission’s Office of Enforcement.
Protesters also challenged PJM’s proposal to reintroduce impact and net-short tests that were previously removed from the MOPR. Specifically, protesters asserted that PJM’s ability test incorporates an impact screen that was removed from the MOPR in 2011 because it undermined the effectiveness of mitigation by ignoring the joint effect of multiple below cost offers, and that buyer-side market power rules must protect against the combined effects of entry by numerous, small, subsidized resources. Similarly, protesters argued that the proposed incentive test relies on a “net-short” analysis that was removed from the MOPR in 2011 because it was ineffective and unnecessary and could be gamed. PJM responded that the proposed tests are distinguishable from the 2011 ones. PJM argued that the proposed net-short requirement cannot be gamed because it addresses the ability of buyers to structure transactions with third-party sellers to evade the MOPR. PJM continued, moreover, that the incentive test restores the MOPR to its original purpose of mitigating offers that may be a result of buyer-side market power. Regarding the 2011 impact test, PJM noted that the Commission expressly disavowed finding that the impact test was unjust and unreasonable and instead held that, under FPA section 205, PJM “must demonstrate only that the new tariff is just and reasonable.” Further, PJM argued, the proposed ability test is much different from the 2011 impact test, in that the current test requires an ex ante test to determine if the market seller’s offer could suppress prices and would only mitigate offers that have a material effect on the capacity market clearing price.
The IMM challenged the incentive test on the basis that it is impossible to evaluate whether a potential action benefits an entire portfolio because there is a lack of knowledge about all aspects of a market seller’s portfolio, including financial positions taken either bilaterally or on platforms to which PJM and the IMM do not have access. The IMM also argued that PJM, by proposing a profitability test, was assuming that market power is only market power when the exerciser benefits rather than when the rest of the market is hurt.
Analysis of PJM’s proposal
As explained above, we believe that the MOPR should be used to deter the actual exercise of buyer-side market power by eliminating the incentive that large net buyers of capacity may have to take uneconomic action to decrease capacity market prices. PJM’s proposal accomplishes this return to the original premise of the MOPR by applying the MOPR to capacity market sellers that have the economic incentive and ability to suppress capacity market prices through “uneconomic behavior to lower offers below the competitive level” and is therefore a just and reasonable and not unduly discriminatory or preferential approach to protecting PJM’s capacity market against anti-competitive conduct.
PJM’s proposal appropriately targets the textbook definition of buyer-side market power because it speaks to ability and incentive. PJM proposed to define Buyer-Side Market Power and the Exercise of Buyer-Side Market Power so as to capture those capacity supply offers that are based on actual “anti-competitive behavior” by capacity market sellers. PJM explained that anti-competitive behavior necessarily rests on two key elements—sellers must have the ability to suppress capacity market prices below the competitive level, and they must have a load interest which gives them an incentive to suppress those prices. Having the ability to suppress prices is important because without it, any attempt to exercise Buyer-Side Market Power would necessarily fail. And requiring an economic incentive is reasonable because without such an incentive, a seller would not take the risk of offering a resource below net going forward costs given the likelihood of not recovering sufficient revenue in the long term to recover the costs of funding the uneconomically low offer.
Indeed, attempting to exercise buyer-side market power in PJM’s capacity market is a risky and difficult proposition. As Dr. Graf explains, sellers wishing to lower capacity prices must offer an uneconomic resource sufficiently below its economic costs so that it clears, displacing more expensive, though economic, resources. For new resources, this requires a long-term commitment because recouping the above market costs of that resource require low clearing prices over multiple years, but, in the long-run, capacity sellers also adjust their supply offers over time in response to low prices and thus capacity prices would increase over the years. This fundamental concept of supply and demand thus undermines the efficacy of exercising buyer-side market power through a new uneconomic resource as the seller would likely not recover its costs of offering the resource over the long-term, posing substantial risks to the seller. Likewise for existing resources—because the high cost of capital expenditures are unlikely to be recovered in one year—the seller likely needs prices to be suppressed for multiple years, presenting the same risk of failure as with new resources. Thus, given the difficulty of being successful in an attempt to exercise buyer-side market power, very few sellers try it. As Dr. Graf explained, while “it is theoretically possible to exercise buyer-side market power . . . it poses substantial risks to the market participant” and therefore a seller may have an incentive to depress prices only when it is sufficiently net short. Given this, and the need to strike an appropriate balance between the risks of over- and under-mitigation, PJM has appropriately tailored its MOPR to focus on mitigating actual exercises of buyer-side market power.
Rather than an Exercise of Buyer-Side Market Power, PJM’s proposal recognizes that a capacity offer from a net buyer may be low for many valid reasons, and is not necessarily a result of uneconomic behavior, but rather may be commercially reasonable conduct. For example, sellers look at long-term market forecasts, future revenues and costs, and other factors to make offers based on the unique long-term view of a particular resource. Therefore, a capacity offer may be based on a self-supply entity’s long-term resource plan, which will typically reflect a longer planning horizon as well as other considerations besides achieving the lowest possible price for capacity. The Focused MOPR also would not inappropriately apply the MOPR to a buyer with a large load interest, where that buyer is vertically integrated with a generator that does not have the ability to influence prices given the size of PJM’s capacity market. Similarly, a seller with a new resource and no load interest has no incentive to reduce capacity prices because doing so would directly lower its revenues and conflict with its financial interest. PJM will consider such factors on a case-by-case basis.
Instead of proposing broadly applicable MOPR rules in the name of the need to preserve “market integrity,” PJM sought to tailor its mitigation rules. Contrary to protesters’ claims that the Focused MOPR will under-mitigate by failing to mitigate offers that do not satisfy the definition of an Exercise of Buyer-Side Market Power but that could nonetheless suppress capacity prices, PJM adopted a targeted MOPR that appropriately balances the risk of under- and over-mitigation. Courts have recognized the threat that over-mitigation poses to otherwise reasonable business conduct, acknowledging in other circumstances the need to carefully consider alleged anti-competitive behavior because of the risk of condemning conduct that may be indistinguishable from legitimate behavior. In the antitrust context, for example, courts apply a rule of reason case-by-case approach, to reflect the need to balance pro-competitive and anti-competitive effects of particular behavior. And in predatory bidding cases that are unrelated to the exercise of buyer-side market power in PJM’s capacity market, but nonetheless informative of how courts have considered buyer-side market power, the courts have found that the plaintiff must show that a firm alleged to have engaged in predatory bidding have a “dangerous probability” of being able to recoup the revenue its loses through the alleged predatory bids in the future, because higher bid prices may have procompetitive effects. PJM’s approach to buyer-side market power applies the same principle to weighing the risks of over- and under-mitigation and determining whether payments to a particular resource should be deemed anti-competitive and subject to market power mitigation. The Commission has previously recognized that evaluating incentive and ability is an appropriate means of balancing such concerns. PJM’s proposal uses an incentive and ability based test to help distinguish anti-competitive conduct from economically rational decision making. By focusing on incentive and ability, the Focused MOPR requires a connection between the capacity market seller’s offer and benefits to a buyer as a result of the Exercise of Buyer-Side Market Power by that seller. This poses significantly less risk of over-mitigation and thus is less likely to obstruct legitimate and competitive behavior than the Expanded MOPR. In particular, the Focused MOPR will deter the anti-competitive conduct that poses the greatest threat to PJM’s capacity market but will mitigate commensurate with the low risk of an exercise of buyer-side market power and appropriately recognize legitimate business conduct.
The IMM argued that a capacity market seller that submits an offer below the relevant default MOPR floor should have its offer mitigated even if the market participant is not doing so “for the overall benefit of [its] portfolio.” We do not agree with the IMM’s broad sweep, and concur with PJM’s decision to target only sellers that have an incentive to exercise market power, rather than applying buyer-side market power mitigation to even those resources with no incentive to reduce the price. As the record reflects, exercising buyer-side market power is exceedingly difficult, usually unsuccessful, and therefore rare—not unsurprisingly, since the cost of failure is that the seller loses money, making it highly unlikely that a seller would attempt anti-competitive behavior simply to harm other market participants without a personal gain.
We recognize that the Commission has in the past stated that so-called “out-of-market” support affects capacity market prices, regardless of intent, and applied a MOPR on that basis alone. But, as explained above, those orders were wrongly decided. Such an approach inappropriately treats any and all entry that benefits from state support as “uneconomic” and as “depressing prices below a competitive level,” contrary to the Commission’s practice of treating other revenue sources outside the markets as competitively derived. Simply put, sell offers do not become anti-competitive or otherwise improper simply because the seller has earned revenues pursuant to state policy. Further, even if such revenues were “uneconomic,” the harms of an approach premised on that assumption would vastly outweigh any benefits that it might provide.
As for arguments related to asymmetrical treatment of buyer-side and seller-side market power, these protests are a red herring. Buyer-side market power and seller-side market power (1) present different incentives for sellers, (2) are exercised in different ways given the structure of the capacity market, and (3) present radically different risks and chances of success to would-be exercisers. It is therefore both reasonable and appropriate for the Commission to accept different mitigation regimes for buyer-side market power and seller-side market power.
Net buyers and net sellers have different incentives: Net sellers benefit from higher capacity market prices, whereas net buyers benefit from lower capacity market prices. Accordingly, mitigation targeted at net sellers with market power is designed to ensure their offers are not uncompetitively high and take the form of offer caps or ceilings and mitigation targeted at net buyers with market power is designed to ensure that offers are not uncompetitively low, and take the form of offer floors. Offer caps and offer floors need not be equal to each other to be just and reasonable.
Although these different incentives alone could justify different treatment, the structure of PJM’s capacity market also requires different approaches to addressing buyer-side and seller-side market power. To understand why, it is helpful to recall a few basics about how the capacity market functions. Capacity resources participate in PJM’s capacity market by submitting offers to sell capacity, which collectively form the capacity market supply curve. Buyers, by contrast, do not submit demand bids in PJM’s capacity market. Instead, the demand curve for capacity buyers is administratively determined by PJM. Therefore, all market activity takes the form of offers to sell capacity. A given capacity resource can be owned or otherwise associated with an entity that is, in aggregate, a net seller or a net buyer.
Given that capacity offers are in fact offers to sell, PJM applies seller-side mitigation to capacity offers without first establishing that the resource is, in aggregate, a net seller because the resource is engaging in the capacity market as an individual seller. In other words, PJM presumes capacity market sellers have the standard incentives of a net seller in any market, including the obvious preference to receive a higher price when possible, and applies mitigation that is consistent with those incentives. This presumption is employed in day-ahead and real-time energy markets, where seller-side market power mitigation is automatically applied to energy supply offers without first establishing whether each resource is a net seller.
Exercising buyer-side market power in the capacity market is different. Given the general economic incentive to maximize profits, it is not reasonable to presume that a capacity market seller has an incentive to lower capacity prices absent evidence that the seller is owned or controlled by a net buyer, and thus benefits from a lower capacity price. Rather, it is reasonable for PJM to consider the economic incentives of capacity market sellers when applying buyer-side market power mitigation while at the same time declining to adopt a similar screen for seller-side market power.
In addition to the different incentives and different ways in which buyer-side and seller-side market power are exercised in PJM’s capacity market, the risks associated with attempts to exercise buyer-side and seller-side market power differ. As discussed above, exercising buyer-side market power is more difficult to accomplish in PJM’s capacity market, and the practical risk of a successful exercise of buyer-side market power is low relative to the risk of a successful exercise of seller-side market power. By contrast, capacity market sellers that seek to exercise seller-side market power need only consider their own benefits (i.e., profits), as there is no need to consider an associated and offsetting load interest.
Protesters also challenged PJM’s proposed inquiry process for several reasons: they argued that (1) the proposal allows PJM too much discretion and lacks transparency, (2) the proposed tests for incentive and ability suffer from technical flaws, including some of the same technical flaws as the tests removed in 2011, and (3) the timeline for conducting inquiries is unreasonable. Below we address each issue in turn.
Starting with discretion and transparency, PJM’s Tariff language requires action by PJM and/or the IMM. Specifically, Tariff, Attachment DD, section 5.14(h-2)(B)(i) states that PJM and/or the IMM “shall initiate a fact-specific review” when either suspects that a capacity offer may be based on an Exercise of Buyer-Side Market Power. In addition, if PJM and/or the IMM suspect that the seller committed a Market Violation, they are obligated to make a referral to the Commission’s Office of Enforcement.
Protesters also challenged PJM’s proposed Tariff language stating that a market seller will “be deemed not to have the incentive to exercise Buyer Side Market Power with respect to the resource” if the “resource offer can be justified, economically or otherwise, without consideration of the benefit to the Capacity Market Seller of the suppressed prices.” This language recognizes that sellers that possess Buyer-Side Market Power could submit offers below the relevant default MOPR floor not because their overall portfolios will benefit from lower prices (even if that is the outcome), but because their offers incorporate either lower-than-average net costs or out-of-market revenues that are not Conditioned State Support or for other legitimate commercial reasons. The language provides guidance to PJM in distinguishing where an offer is competitive, and does not provide PJM unfettered discretion to deem an offer justified based on economics or otherwise.
The IMM argued that because “material” is not defined, determining whether an Exercise of Buyer-Side Market Power will have a “material impact” is unenforceable. Although PJM answered that it did not oppose adding a specific level of materiality to the Tariff, we do not believe that not defining materiality renders PJM’s proposal unjust and unreasonable. Rather, it gives PJM the discretion to judge materiality on a case-by-case basis. Such flexibility is appropriate because a particular seller’s effect on the capacity price against its portfolio and the price impact that is significant enough to incentivize the Exercise of Buyer-Side Market Power could vary in each unique circumstance.
Some protesters argued that PJM’s proposed inquiry lacks transparency because PJM is not planning to keep stakeholders apprised of determinations made during an inquiry, or to provide the reasons behind those determinations. Yet, PJM proposed that prior to initiating an inquiry, PJM and/or the IMM will provide the capacity market seller a written notification stating the bases for PJM’s and/or the IMM’s inquiry, and after conducting the relevant market power tests, will give that capacity market seller the opportunity to justify its offer. Although PJM did not also propose to provide a general overview to stakeholders of its mitigation efforts, we believe that these measures provide sufficient transparency at this point and do not render the proposal unjust and unreasonable.
Second, we disagree with protesters’ allegations that PJM’s proposed incentive and ability tests have technical flaws that render them unjust and unreasonable. Protesters argued that PJM proposed, without justification, to revive ability and incentive tests that were removed from its MOPR in 2011. However, as PJM noted, because PJM removed the tests through an FPA section 205 filing, the Commission never found that the 2011 tests were unjust and unreasonable. Furthermore, in its answer, PJM explained how the ability and incentive tests that are part of the Focused MOPR are distinguishable from the 2011 tests. Most importantly, PJM explained that its proposed incentive test cannot be gamed in the way that the 2011 net-short test could have been. Moreover, PJM explained that the incentive test facilitates reviewing offers that may be a result of buyer-side market power and we thus view it as an essential component of the mitigation scheme. PJM also explained how the proposed ability test differs significantly from the 2011 impact test: The 2011 impact test was an ex post test that required re-running auctions, whereas here PJM proposed to perform an ex ante test to estimate the extent to which the market seller’s offer could suppress prices. As explained above, we believe that PJM’s proposed incentive and ability tests are just and reasonable; the Commission’s decisions in 2011 to approve PJM’s section 205 filings to remove different incentive and ability tests do not impact this assessment.
With regard to the incentive test, the IMM argued that it is impossible to evaluate whether a potential action benefits a market seller’s portfolio because PJM and the IMM cannot access a seller’s entire portfolio and (presumably) the seller will not truthfully disclose the entire portfolio in response to an information request. However, under the Tariff, PJM and/or the IMM may request from the capacity market seller “additional information and documentation that is reasonably related to the basis for its inquiry” and the capacity market seller is required to “provide any additional supporting information and documentation requested” by PJM and/or the IMM. Further, the IMM has access to all information collected by or provided to PJM, and a market participant may not refuse a reasonable request for additional information, which should provide the IMM with the information it needs to assess whether a potential action benefits the seller’s portfolio. We believe that those avenues provide a sufficient array of tools for implementing the incentive test to find that it is just and reasonable.
Third, protesters challenged PJM’s proposed timeline for conducting inquiries, arguing that the proposed timeline will prevent PJM or the IMM from acquiring the necessary information to conduct an inquiry, mitigate resources properly, or even carry out any inquiry at all. Again, we disagree. The initial screens focus only on whether the seller has a load interest and is attempting to offer a generally uneconomic resource. Nothing in this record explains why those analyses cannot be completed on the timeline PJM proposed.
In sum, we believe that PJM’s and/or the IMM’s obligation to examine fraudulent certifications and offers suspected to be the result of an Exercise of Buyer-Side Market Power, and the ensuing ability and incentive tests are sufficient protections against actual anti-competitive conduct. In addition, PJM’s certification requirement provides a complementary layer of protection to these procedures. While we do not believe that PJM’s certification requirement is necessary for a just and reasonable rate, it is a reasonable step in the process of administering the MOPR. Because a false affidavit would make the capacity market seller subject to action by the Commission’s Office of Enforcement, it is an additional deterrent to sellers engaging in prohibited behavior.
Application of the MOPR to Conditioned State Support
PJM’s Focused MOPR mitigates generation capacity resources receiving or expecting to receive Conditioned State Support, which is defined as:
any financial benefit required or incentivized by a state, or political subdivision of a state acting in its sovereign capacity, that is provided outside of PJM Markets and in exchange for the sale of a FERC-jurisdictional product conditioned on clearing in any RPM Auction, where “conditioned on clearing in any RPM Auction” refers to specific directives as to the level of the offer that must be entered for the relevant Generation Capacity Resource in the RPM Auction or directives that the Generation Capacity Resource is required to clear in any RPM Auction.
PJM argued that when state support is conditioned on such a bid-to-clear requirement, the seller is indifferent as to its resource’s economics when submitting an offer, which intrudes on wholesale market price formation. PJM asserted that although this standard largely overlaps with the standard in Hughes, applying that standard in the Focused MOPR is necessary because court review may not be able to protect the market in a timely manner. Moreover, PJM stated, in a judicial proceeding, the court’s principal remedy is to void the offending portion of the relevant statute or regulatory order. That remedy, PJM argued, could have the unintended effect of harming non-utility entities that may also benefit from the state law or program.
As part of its proposal, PJM’s Focused MOPR includes a new Tariff, Attachment DD-3, which will list state policies the Commission has determined to be Conditioned State Support. PJM stated that the Commission should be the arbiter of which state support qualifies as Conditioned State Support, and only upon a Commission determination will a resource receiving Conditioned State Support be subject to the MOPR. While PJM did not propose to itself determine which state policies or programs constitute Conditioned State Support, PJM will identify for the Commission those policies and programs it suspects may constitute Conditioned State Support. To effectuate this, PJM will, before the applicable capacity market auction, submit an FPA section 205 filing to the Commission proposing that such policy or program be classified as Conditioned State Support. PJM stated that this will allow the Commission sufficient time to act, and parties will know before the auction whether the identified state policy constitutes Conditioned State Support. PJM stated that interested parties, including the seller of any resource receiving such support, will be afforded the opportunity to make their case to the Commission as to whether or not such policy constitutes Conditioned State Support. PJM stated that any resource for which a seller certifies that it is receiving Conditioned State Support or PJM, with the advice and input of the IMM, identifies as being “reasonably expected to receive such Conditioned State Support” “will be subject to the provisions of the Minimum Offer Price Rule.”
In addition, to add clarity, PJM’s Focused MOPR will codify the types of policies and programs that do not constitute Conditioned State Support. The Tariff thus includes a non-exhaustive list of “Government policies or programs that do not provide payments or other financial benefit outside of PJM markets and in exchange for the sale of a FERC-jurisdictional product conditioned on clearing in any RPM Auction,” including, for example, state retail default service auctions and incentives related to fuel supplies.
Finally, PJM stated that Conditioned State Support “shall not be determined solely based on the business model of the Capacity Market Seller” and “the fact that a Self-Supply Entity is the Capacity Market Seller, for example, is not a basis for determining Conditioned State Support.” PJM argued that the long-standing business models of these public power entities do not qualify as Conditioned State Support for the simple reason that such support is not conditioned on specific bidding behavior.
Like the rules applicable to the Exercise of Buyer-Side Market Power, capacity market sellers are required under the Focused MOPR to certify whether they are “receiving or expected to receive Conditioned State Support under any legislative or other governmental policy or program that is effective at the time of this certification.” According to the Tariff, “[b]y submitting ‘No’, the Capacity Market Seller certifies that the Generation Capacity Resource is not receiving or expected to receive Conditioned State Support under any legislative or other governmental policy or program that is effective at the time of this certification.” In addition, if PJM and/or the IMM is aware of Conditioned State Support that the resource may receive, PJM and/or the IMM may inquire with the capacity market seller. PJM stated that the outcome of such inquiries may result in the capacity market seller’s resource being subject to the MOPR. PJM stated that the certification requirement for Conditioned State Support, once made, will not need to be repeated for each auction, unless there is a change in the expectation of receiving Conditioned State Support. PJM stated that its certification proposal is based on the existing Commission-approved certification process for the Expanded MOPR, in which capacity market sellers certify whether they expect to receive a State Subsidy. PJM argued that the certification requirement will have a disciplining effect, given that the submittal of a false affidavit could make the capacity market seller subject to action by the Commission’s Office of Enforcement. PJM stated that the proposed certification plus review process properly balances over- and under-mitigation.
As a final matter, PJM proposed to categorically exclude from the definition of “Conditioned State Support” any currently effective policy or program and proposes that such Legacy Policies will not result in resources being subject to the MOPR. PJM stated that exempting existing policies and programs and prospectively applying the Focused MOPR is reasonable, as it is least disruptive to the states and efficiently allows states to craft future policies and programs to avoid improperly interfering with the capacity market.
Many parties supported PJM’s proposed definition of “Conditioned State Support,” arguing that the proposal recognizes that the majority of state policies are adopted to pursue objectives within state authority, and that the PJM markets should recognize resources supported by those policies rather than exclude them, even if those state policies include provisions that could influence capacity market prices. Some parties voiced particular support for PJM’s Legacy Policy exemption, noting that the Expanded MOPR similarly provided exemptions for a number of classes of then-existing resources. They argued that applying the MOPR to existing state support programs or policies could force states to change programs which are already in place pursuant to long-term contracts.
A number of protesters challenged the definition and application of the Conditioned State Support language. The protests fall generally into the following three categories: (1) protests that the definition is overbroad, since it goes beyond the holding of Hughes, and should therefore be scaled back, (2) protests that the definition is not broad enough, and should also include state actions that are not preempted but that could arguably affect wholesale prices, and (3) protests that the Commission either cannot or should not be making determinations as to preempted state actions. Other protesters argued that PJM’s exemption for Legacy Policies is legally indefensible, contending that neither PJM nor the Commission has the authority under the FPA to approve a state program that violates Hughes.
Protesters arguing that the provisions are not broad enough repeated, in essence, their claims that state policies result in price suppression and more expansive mitigation is needed to ensure just and reasonable rates. They argued that a preemption standard is inappropriate because it is not intended to ensure just and reasonable rates.
Protesters arguing that the provisions are too broad contended that the definition extends beyond the strict holding of Hughes. PIOs claimed that Hughes preempted the challenged Maryland program because it disregarded a wholesale rate by guaranteeing a price to the seller, which is different from requiring participation in the capacity market as a condition for receiving funds. They further argued that the preemption determination in Hughes did not turn on whether the state program conditioned payment on clearing in the RTO market, and discussion of that fact pattern in Hughes is dicta. The IMM similarly argued that Hughes did not hold that state programs are preempted just because they include a requirement to offer at a certain price. Other protesters went a step further and argued that it is the role of the courts, rather than PJM or the Commission, to define the outer limits of preemption. They contended that incorporating a preemption standard into the Tariff creates additional investment uncertainty.
In its answer and in response to a request for clarification, PJM clarified that state-imposed conditions “to bid ‘competitively,’ or ‘at cost’ or other non-specific exhortations or to bid into all markets in which it is eligible to sell” are not “bid to clear” requirements that would trigger application of the MOPR. PJM explained that Conditioned State Support applies when the state conditions support on (1) the capacity market seller following the state’s “specific directives as to the level of the offer that must be entered” for the resource in the auction; or (2) a “bid to clear” requirement. PJM clarified that the first criterion covers state requirements for the capacity market seller to offer the resource at a specific price. PJM explained that state-specified directives as to the price level at which the capacity market seller must offer a resource into the market could constitute Conditioned State Support, but general offer requirements to bid “competitively” or “at cost” would not fall within the first criterion.
Furthermore, in response to PIOs’ request that the Commission remove the first criterion described above from the definition of “Conditioned State Support,” PJM argued that the first criterion is appropriate because it addresses instances in which the state would be improperly intruding on price formation in the wholesale capacity market. PJM reiterated its position that the capacity market should not accommodate state policies that direct sellers’ offer behavior that would directly affect the capacity market clearing price.
Analysis of PJM’s proposal
We believe that PJM’s proposed definition of “Conditioned State Support,” and its proposal to apply the MOPR to resources receiving Conditioned State Support, are just and reasonable and not unduly discriminatory or preferential. Nevertheless, as with the certification requirement, we do not believe that the Conditioned State Support component of the Focused MOPR is necessary to render it just and reasonable. Instead, we believe that PJM has carried its burden, on this particular record, to show why this facet of the Focused MOPR is just and reasonable. PJM’s approach is a reasonable effort to track existing precedent, and is justified given its ability to provide determinations more quickly than would be provided by the courts.
PJM’s definition of “Conditioned State Support” accomplishes two objectives. First, based on the preemption standard articulated in Hughes, it seeks to ensure that state practices that cross the FPA’s “bright line” between federal and state authority will be subject to the MOPR. Second, it ensures that non-preempted state practices do not in and of themselves trigger application of the MOPR. This definition, and the procedures for applying that definition to specific state support mechanisms, are just and reasonable because they will allow states and market participants to determine in a timely fashion whether a resource will be subject to the MOPR. A capacity market structure like the RPM, which adjusts its aggregate resource mix every year and must be able to rely on the availability of those resources, is ill suited to the duration and complexity of multi-year Constitutional law litigation to make those determinations. We conclude that the application of PJM’s MOPR to resources receiving Conditioned State Support is reasonable, not because such policies constitute a form of buyer-side market power, but because such state programs are likely preempted under the Hughes standard. Application of the MOPR to such resources ensures that their offers do not reflect revenues that they are unlikely to receive once a legal proceeding challenging an unconstitutional state program has run its course.
As an initial matter, we disagree with protesters’ arguments that the scope of Conditioned State Support is not broad enough. These arguments are little more than a repackaging of protesters’ views that any state support constitutes a form of buyer-side market power that must be mitigated, which have been addressed above.
For the same reasons, we would reject protesters’ argument that PJM’s definition of Conditioned State Support is too broad because it is not limited to state programs that precisely fit the holding of Hughes. PJM’s proposed definition is clearly not intended merely to codify or restate Hughes, but rather to give guidance to market participants as to state actions that might be preempted in the future by virtue of the Hughes analysis. The Commission has applied the Hughes’ reasoning beyond the original fact pattern of the case, finding that a state program that “provides financial support to certain generation facilities by directly setting the rate at which utilities must offer to purchase the output from those facilities . . . establishes a rate for a Commission-jurisdictional wholesale sale” and is therefore preempted. Again, we cannot conclude that the definition of Conditioned State Support is so far afield from this standard as to result in significant over-mitigation of resources receiving state support.
We disagree with protesters who contend that PJM’s proposal inappropriately puts PJM and the Commission in the position of determining whether a state program meets the preemption criteria under Hughes. The FPA’s provision for “a federal-state relationship marked by interdependence” has required the Commission throughout its history, both pre- and post-Hughes, to make preemption calls. PJM’s assessment of the Hughes standard, on the other hand, is neither authoritative nor binding on states. Instead, PJM incorporates these provisions to provide greater certainty to market participants regarding resources whose offers may be excluded from the market because they receive state support that is likely unconstitutional.
In addition, we are not persuaded by the argument that PJM’s provisions addressing Conditioned State Support will create additional investment uncertainty. Irrespective of the Focused MOPR, a state law that provides Conditioned State Support will always face the possibility of a preemption challenge, which can take years to resolve and can itself produce considerable investment uncertainty. By contrast, PJM’s filing provides a clearly defined standard and expedited procedures for resolution of disputes. Accordingly, we see no basis in the record before us to conclude that the Focused MOPR will produce additional investment uncertainty, much less uncertainty so significant as to render the proposal unjust and unreasonable.
We agree with commenters that a state-directed but non-specific exhortation to bid “competitively” or “at cost” are likely not “bid to clear” requirements that should trigger application of the MOPR. We also agree with PJM that the definition of Conditioned State Support already addresses this question, since it would only trigger mitigation “where the state conditions support on (1) the Capacity Market Seller following the state’s ‘specific directives as to the level of the offer that must be entered’ for the resource in the auction,” a criterion that “covers state requirements for the Capacity Market Seller to offer the resource at a specific price.”
We also disagree with protests challenging various exemptions to the definition of Conditioned State Support. We believe that PJM appropriately identified the business model of self-supply entities as falling outside of the scope of the definition of Conditioned State Support and the standard of preemption set forth in Hughes. PJM’s explanation that self-supply entities do not qualify as Conditioned State Support because “such support is not conditioned on specific bidding behavior” is reasonable and consistent with how other market behavior would be evaluated under PJM’s definition of Conditioned State Support. Additionally, as explained in greater detail below, self-supply entities construct and/or bilaterally contract for resources through long-range resource plans to maintain a relative balance between supply and demand and make decisions consistent with those long-term plans. The protesting parties have not explained how such behavior would necessarily be preempted under Hughes or any other authority.
We also disagree with P3 that PJM needs to adopt a formal process, under the Tariff, for entities to raise concerns about state programs. If an entity suspects that a certain program or policy qualifies as Conditioned State Support, it can either file a protest when PJM files proposed Attachment DD-3 of the Tariff (containing the list of Conditioned State Support programs and policies), or file a complaint arguing that Attachment DD-3 is unjust and unreasonable for excluding certain policies or programs.
For the reasons set forth in our discussion of certification requirements in connection with Buyer-Side Market Power, we also agree that PJM’s proposed use of certifications, as one part of administering Conditioned State Support section of the Focused MOPR, is just and reasonable. As PJM points out, certifications are a common tool used to aid in the administration of capacity markets and the electric industry more generally. Here, as with the Expanded MOPR, PJM is requiring capacity market sellers to provide certifications as an initial screen for determining whether the MOPR may apply to a resource that intends to offer into the capacity market auction and failure to timely certify will result in that resource being subject to the MOPR. In addition, capacity market sellers will have an ongoing obligation to update their status in the event there is a material change in status and submittal of a false affidavit could make the capacity market seller subject to action by the Commission’s Office of Enforcement. Together, we find that these requirements will help ensure compliance with the Conditioned State Support provisions of PJM’s Focused MOPR. In any case, because we do not find that the Conditioned State Support facet of the Focused MOPR is necessary to render the filing just and reasonable, we believe that these concerns regarding its implementation, even if valid, would not render the filing unjust and unreasonable.
Finally, we believe that PJM’s proposal to categorically exclude from the definition of “Conditioned State Support” any policy or program that is currently in effect (Legacy Policy) is just and reasonable. Exempting such existing policies and programs from PJM’s proposed Focused MOPR recognizes that states enacted these programs prior to PJM’s filing in this proceeding and so were not on notice of these proposed changes. Again, because we do not believe that the Conditioned State Support facet of the Focused MOPR is necessary to render the filing just and reasonable, PJM can reasonably limit its scope, including by recognizing the fact that states were not on notice of this aspect of the MOPR when they enacted Legacy Policies.
P3 and other protesters argued that the proposed exclusion cannot as a matter of law grandfather existing state policies and programs that are clearly preempted by virtue of the Hughes decision. We agree. Any existing Legacy Policies could, if found to be preempted, be subject to remedies such as those that were imposed in the Hughes litigation, where the court determined that the preempted contracts for differences were void ab initio. But that fact, true as it is, does not preclude us from accepting these aspects of PJM’s filing.
Exemptions for certain generation capacity resources
Next, we turn to the categories of resources that PJM proposed to categorically exempt from the MOPR. Those categories include: (1) “merchant generation supply resource[s] that [are] not contracted to an entity with a Load Interest” (merchant resource exemption); (2) generation capacity resources “acquired by or under the contractual control of the Capacity Market Seller through a competitive and non-discriminatory procurement process open to new and existing resources” (procurement process exemption); and (3) generation capacity resources “owned by or bilaterally contracted to a Self-Supply Seller” where “such resource[s are] demonstrated as consistent with or included in the Self-Supply Seller’s long-range resource plan (e.g., a long-range hedging plan) that is approved or otherwise accepted by” the Relevant Electric Retail Regulatory Authority (RERRA), “provided that any such plan approval or contracts do not direct the submission of an uneconomic offer to deliberately lower market clearing prices or for the Capacity Market Seller to otherwise perform an Exercise of Buyer-Side Market Power” (self-supply exemption).
PJM justified the merchant resource exemption on the basis that merchant sellers do not have the incentive to suppress prices because, without a load interest, such sellers would not benefit from lower prices (i.e., price suppression would lower profits thus such resources have no incentive to lower prices). Regarding the procurement process exemption, PJM argued that sellers of resources procured through a competitive and non-discriminatory procurement process open to new and existing resources would not have the ability to suppress prices with these types of resources because such a procurement process is unlikely to result in the procurement of resources (whether new or existing) that would not otherwise have entered or remained in the market absent the procurement.
Regarding the self-supply exemption, PJM proposed to exempt these resources because Self-Supply Sellers construct and/or enter into long-term contracts for resources to maintain a relative balance between supply and demand. According to PJM, these entities and their customers benefit from relatively stable costs primarily reflecting their cost to maintain a portfolio that balances supply and demand, rather than volatile costs reflecting large capacity purchases at uncertain prices from PJM’s capacity market. As a result, PJM argued, it is economic for such entities to make long-term plans, and to offer resources consistent with these plans into PJM’s capacity market.
PJM also proposed to exempt Demand Resources (demand resource exemption) and Energy Efficiency Resources (energy efficiency exemption) from application of the MOPR. PJM argued that application of the MOPR to only generation capacity resources is consistent with historic MOPR practices before the Expanded MOPR. Further, PJM stated that it was not aware of any evidence that would support extension of buyer-side market protections to these small-scale, generally low-cost, and disparate resources.
As an initial matter, no party opposed the merchant resource exemption.
While some parties either supported or did not oppose PJM’s proposed procurement process exemption in theory, a few parties contended that additional restrictions are needed to ensure that the exemption is not unduly discriminatory or preferential. In particular, they urged the adoption of certain established principles for competitive solicitations and a requirement that the procurement process be technology- and location-neutral.
Parties were also divided on PJM’s proposed self-supply exemption. Supporters contended that the Expanded MOPR does not adequately accommodate self-supply entities, instead imposing undue burdens (e.g., double payment), which could result in self-supply entities exiting the PJM capacity market. In contrast, they argued that PJM’s proposed self-supply exemption is an improved accommodation for self-supply entities that does not inhibit PJM’s ability to mitigate offers that are determined to be an Exercise of Buyer-Side Market Power and appropriately recognizes the disincentives to exercise Buyer-Side Market Power contained in the self-supply business model itself. The IMM opposed PJM’s proposed self-supply exemption, arguing that self-supply entities’ guaranteed rate recovery constitutes a subsidy that affects their offer behavior and that self-supply entities have structural market power.
Several parties supported PJM’s proposed demand resource and energy efficiency exemptions, arguing that there is no evidence of the incentive or ability to exercise buyer-side market power with these resources and that it would be illogical to apply the MOPR to these resources given that they are in an entirely different market position from generating resources. On the other side, the IMM argued that Demand Resources and Energy Efficiency Resources should be subject to the same rules that apply to generators and other capacity resources. In response, PJM contended that those resources are differently situated in the market from traditional generation resources. In particular, PJM stated that Demand Resources provide an opportunity for customers who pay capacity charges through retail rate pass-throughs to offer the capacity value of reductions in their demand back to the PJM market to offset those charges, and Energy Efficiency Resources enable reduced consumption and energy conservation. According to PJM, as a result of those features, both types of resources have limited or no incentive and ability to Exercise Buyer-Side Market Power.
Analysis of PJM’s proposal
We believe that PJM’s proposed exemptions from application of the MOPR are just and reasonable and not unduly discriminatory or preferential. We’ll take each individual exemption in turn.
Starting with PJM’s proposed merchant resource exemption, as PJM explained, merchant sellers do not have the incentive to suppress prices because, without a load interest, such sellers would not benefit from lower prices and to the contrary would suffer financial harm. As explained above, a MOPR should apply only to those resources that have the incentive and ability to exercise buyer-side market power, which is not the case for resources eligible for the merchant resource exemption since, by definition, they lack a load interest or other feature that would create an incentive to exercise buyer-side market power.
As for PJM’s proposed procurement process exemption, the record suggests that eligible resources would lack the ability to exercise buyer-side market power because it is highly unlikely that a competitive and non-discriminatory procurement process open to new and existing resources would select resources that would not otherwise have entered or remained in the market. On the contrary, by definition, a competitive and non-discriminatory procurement process will identify the least-cost resource. Although protesters sought further specification of what constitutes a competitive and non-discriminatory procurement process, we believe that PJM’s proposed approach satisfied PJM’s burden under section 205. Not only does PJM have expertise in what constitutes a competitive and non-discriminatory procurement process given the markets it oversees and administers, PJM is the appropriate entity to make any such determination in the first instance, as is true for other determinations related to application of the MOPR. We therefore believe that it is appropriate for PJM to have flexibility to evaluate each procurement process to determine whether it satisfies the standard in the Tariff, including evaluating any resource types and resource locations specified in the process.
Turning to PJM’s proposed self-supply exemption, we are persuaded that broadly applying the MOPR to Self-Supply Sellers with long-range resource plans will result in over-mitigation that inappropriately interferes with their legitimate and long-standing business model. As PJM explained, Self-Supply Sellers construct and/or bilaterally contract for resources through long-range resource plans to maintain a relative balance between supply and demand. The record is replete with evidence showing that Self-Supply Sellers and their customers benefit from costs that are relatively stable over time owing to a conscious, longer-term planning effort that results in a capacity portfolio that balances supply and demand over a longer term planning horizon rather than PJM’s annual capacity market, which can result in more volatile year-to-year cost swings. Self-supply entities make resource decisions based on market prices and consumer preferences with the goal of maintaining a stable long-term hedge against price uncertainty in PJM’s capacity market. Given this longer-term approach, Self-Supply Sellers are not looking solely to annual PJM capacity market prices to determine the entry and exit decisions of their portfolio, but rather consider other legitimate factors. Accounting for such legitimate factors does not constitute an anti-competitive effort to Exercise Buyer-Side Market Power to suppress capacity prices for one delivery year. In other words, self-supply entities make long-term plans based on economics and customer preferences, including a preference to manage long-term risks, and thus it is both economic and efficient for them to offer resources consistent with these plans into the capacity market. Subjecting such resources to the MOPR based on the hypothetical fear that Self-Supply Sellers might be seeking to Exercise Buyer-Side Market Power would have the effect of inappropriately obstructing an otherwise legitimate and long-standing business model and conduct by entities that make resource decisions on a long-term basis. We accordingly agree with PJM that exempting Self-Supply Sellers from the Focused MOPR is just and reasonable.
Moreover, to qualify for the self-supply exemption, an entity must have a long-range resource plan approved or otherwise accepted by a RERRA, which is “an entity that has jurisdiction over and establishes prices and policies for competition for providers of retail electric service to end-customers.” As PJM pointed out, each Self-Supply Seller must be rate regulated or have regulatory oversight of its long-range resource planning by some regulatory entity (i.e., the RERRA); as such, Self-Supply Sellers’ ability to exercise market power is limited as the retail regulator would have to approve the investment. The RERRA requirement provides more assurances that Self-Supply Sellers will not be permitted to Exercise Buyer-Side Market Power in PJM’s capacity market. Finally on this point, we note that PJM’s proposed self-supply exemption is consistent with prior Commission determinations that “the purpose and function of the MOPR is not to unreasonably impede the efforts of resources choosing to procure or build capacity under long-standing business models.”
Similar to the discussion elsewhere in this statement, we acknowledge that the Commission previously declined to exempt resources controlled by self-supply entities from application of the MOPR on the grounds that self-supply entities have the ability to suppress capacity prices due to the receipt of so-called State Subsidies, in this case, guaranteed rate recovery and approval by the state. The IMM made a similar argument here. As explained in greater detail above, based on PJM’s filing and the record before the Commission, we believe that a departure from the Commission’s prior reasoning is necessary in light of the adverse effects of the Expanded MOPR identified by PJM and the majority of its stakeholders. PJM’s proposed self-supply exemption is just and reasonable because, unlike the Expanded MOPR, it allows Self-Supply Entities to participate in the capacity market in a manner consistent with their long-standing business models, which as explained above, does not constitute an anti-competitive abuse of buyer-side market power but rather reflects long-term planning considerations not reflected in PJM’s annual capacity market. Furthermore, the fact that certain self-supply entities are able to obtain more favorable financing than a generic merchant unit simply reflects the complex realities of the energy landscape in the United States, and does not in any way constitute anti-competitive payments or conduct that should be mitigated through the MOPR.
PJM’s proposed demand resource and energy efficiency exemptions are also just and reasonable and not unduly discriminatory or preferential. While we acknowledge that Demand Resources and Energy Efficiency Resources could theoretically be used as a tool to seek to uneconomically depress prices, we believe that it is reasonable for PJM to exempt them from the MOPR given the lack of evidence that they have ever been, or are likely to be, used in this way. The IMM pointed to the quantity of Demand Resources and Energy Efficiency Resources participating in PJM’s capacity market. But prevalence is not evidence that these resources are a practical tool by which a seller could seek to Exercise Buyer-Side Market Power. We agree with PJM that these resources appear a poor mechanism for such action due to their generally low costs and disparate nature. In reaching this conclusion, we are also cognizant of the importance of avoiding unnecessary barriers to demand resource participation in wholesale markets, an interest expressed both by Congress and by the Commission’s longstanding policy. Nonetheless, we note PJM’s commitment to continue monitoring for evidence of potential Buyer-Side Market Power exercised by Demand Resources and Energy Efficiency Resources and to revisit these exemptions if necessary.
Several protesters pointed to the fact that the Expanded MOPR did not include exemptions for Demand Resources and Energy Efficiency Resources. We reiterate, however, our belief that those orders were wrongly decided and led to serious over-mitigation that harmed consumers and market efficiency. The mere fact that a resource is eligible to receive a state payment is not a reason to categorically presume that the resource is being used as a tool to exercise buyer-side market power or “suppress” prices. PJM’s proposal rightly abandons that approach in favor of one tailored to the actual threat of buyer-side market power.
* * *
For more than a decade, the Commission’s MOPR precedent has been all over the map, espousing the language of buyer-side market power and yet routinely requiring the mitigation of resources that were not buyers, much less ones with market power. And then, with the most recent orders, PJM’s MOPR expanded from a narrow rule focused on a particular form of anti-competitive conduct into a sweeping administrative pricing regime so pervasive that it called into question the purpose and long-term viability of PJM’s entire capacity market.
The Focused MOPR puts PJM back on course. It provides protections that are proportional to the threat of buyer-side market power, but that avoid the considerable harms imposed by the Commission’s Expanded MOPR orders. In so doing, it establishes a construct that is just and reasonable and not unduly discriminatory or preferential. Every bit as important, it also provides, for the first time in more than a decade, a coherent framework for addressing buyer-side market power in the capacity market. As such, we believe that this construct, which was backed by the overwhelming majority of PJM’s stakeholders, may finally provide the durable solution to these issues that PJM has lacked almost from the moment the capacity market was introduced. That, in turn, would prove immensely valuable for every party with an interest in these proceedings, even those that might oppose the substance of the Focused MOPR.
Entities filing comments, protests, and/or answers:
Short Name or Acronym
Advanced Energy Buyers Group
Advanced Energy Economy
American Clean Power Association
American Municipal Power, Inc.
Buckeye Power, Inc.
Calpine Corporation and LS Power
Carrol County Energy LLC (jointly filed protest with SFE)
Cogentrix Energy Power Management, LLC
Delaware Division of the Public Advocate
East Kentucky Power Cooperative, Inc.
Electric Power Supply Association
Exelon Corporation, Exelon Generation Company, and affiliates (filed jointly with PSEG)
Harvard Electricity Law Initiative
Institute for Policy Integrity, New York University School of Law
J-POWER USA Development Co., Ltd.
Maryland Office of People’s Counsel
Maryland Public Service Commission
Monitoring Analytics, LLC, acting in its capacity as the Independent Market Monitor for PJM
National Rural Electric Cooperative Association
Natural Gas Supply Association
New Jersey Board of Public Utilities
New Jersey Division of Rate Counsel
North Carolina Electric Membership Corporation
Natural Resources Defense Council/Sustainable FERC Project
NRG Power Marketing LLC and Midwest Generation, LLC
Nuclear Energy Institute
Office of the Ohio Consumers’ Counsel
Office of the People’s Counsel of the District of Columbia
Ohio Senators Matt Huffman and Rob McColley
Ohio Senator Mark Romanchuk
Old Dominion Electric Cooperative
Organization of PJM States, Inc.
Pennsylvania Public Utility Commission (filed comments jointly with PUCO)
Pine Gate Renewables, LLC
PJM Power Providers Group
Public Service Commission of the District of Columbia
Public Service Electric and Gas Company, PSEG Power LLC, PSEG Energy Resource & Trade, LLC (jointly filed comments with Exelon)
Public Utilities Commission of Ohio (filed comments jointly with PAPUC)
Solar Energy Industries Association
South Field Energy LLC (jointly filed protest with CCE)
Southern Maryland Electric Cooperative, Inc.
Union of Concerned Scientists
Wabash Valley Power Association, Inc.
Wolverine Power Supply Cooperative, Inc.
List of Coalitions’ Individual Members:
Clean Energy Trades (CET): SEIA and ACP
Indicated Cooperatives: ODEC, Wolverine, Wabash, and NCEMC
Joint Consumer Advocates (JCA): DDPA, MDOPC, NJDRC, and OPCDC
Joint PJM Cooperatives: EKPC, Buckeye, and SMECO
Public Interest Organizations (PIOs): Natural Resources Defense Council/Sustainable FERC Project, Sierra Club, and the Union of Concerned Scientists
 A “MOPR” is a “minimum offer price rule”—essentially a floor below which a resource is not permitted to offer to sell its service in wholesale electricity markets. More on this below. See infra PP 6-7.
 16 U.S.C. § 824d.
 Though we refer to “state” policies, programs, and support throughout, we also intend for this term to capture “localities.”
 16 U.S.C. § 824d(g); PJM Interconnection, L.L.C., Notice, Docket No. ER21‑2582‑000 (issued Sept. 29, 2021) (taking effect by operation of law). This statement reflects and responds to Commissioner Danly’s arguments as of Tuesday, October 19th. The FPA requires that parties seeking judicial review have made their arguments to the Commission in rehearing requests, which are due 30 days after the Commission order in question. 16 U.S.C. § 825l(a) (FPA section 313(a)). The parties to this proceeding are entitled to a full and fair opportunity to consider and respond to the arguments made in the Commissioners’ section 205(g) statements in any rehearing request they may file. Given this need, it would not be fair to further withhold our statement, even though we recognize that our colleague’s arguments may evolve. For that reason, we are not providing direct quotes or pin cites to Commissioner Danly’s anticipated statement, and have attempted to describe what we understand to be his concerns in more general terms where possible.
 See PJM Interconnection, L.L.C., 117 FERC ¶ 61,331, at PP 103-104 (2006) (2006 RPM Settlement Order) (finding that the MOPR was “a reasonable method” of addressing the concern that net buyers might have an incentive to depress market clearing prices by offering some self-supply at less than a competitive level); PJM Interconnection, L.L.C., 143 FERC ¶ 61,090, at P 20 (2013) (2013 MOPR Order) (stating that “PJM’s MOPR is a mechanism that seeks to prevent the exercise of buyer-side market power in the forward capacity market”), order on reh’g & compliance, 153 FERC ¶ 61,066 (2015), vacated on other grounds, NRG Power Mktg., LLC v. FERC, 862 F.3d 108 (D.C. Cir. 2017) (NRG); Consol. Edison Co. of N.Y. v. N.Y. Sys. Operator, Inc., 150 FERC ¶ 61,139, at P 2 (ConEd v. NYISO) (stating that “[t]he original purpose of buyer-side mitigation rules—and minimum offer price rules (MOPR) generally—was to address buyer-side market power”), order on reh’g & compliance, 152 FERC ¶ 61,110 (2015); ISO New England Inc., 135 FERC ¶ 61,029, at P 166 (2011) (finding that “offer-floor mitigation would deter the exercise of buyer-side market power and the resulting suppression of capacity market prices associated with uneconomic entry”), reh’g denied, 138 FERC ¶ 61,027 (2012), aff’d sub nom. New Eng. Power Generators Ass’n v. FERC, 757 F.3d 283 (D.C. Cir. 2014) (NEPGA).
 See N.J. Bd. of Pub. Utils. v. FERC, 744 F.3d 74, 85 n.7 (3d Cir. 2014) (NJBPU) (describing the “imprecise usage” of the term “monopsony” as applied by the parties to the MOPR “to mean net-buyers in the auction who sell into the auction at artificially low prices in order to depress the clearing price”). “Net buyer” refers to a seller with a net-short position, meaning it purchases more capacity from the capacity market than it sells into it. Net buyers have an incentive to depress the capacity price to benefit their purchases.
 Id. at 85.
 See, e.g., 2013 MOPR Order, 143 FERC ¶ 61,090 at P 26 (finding that PJM’s MOPR “appropriately balances the need for mitigation of buyer-side market power against the risk of over-mitigation”); N.Y. Pub. Serv. Comm’n v. N.Y. Indep. Sys. Operator, Inc., 154 FERC ¶ 61,088, at PP 18, 31 (2016) (stating that the Commission’s “focus on incentive and ability appropriately balances the need to mitigate the exercise of buyer-side market power to ensure just and reasonable . . . market prices with the risk of over-mitigating new entrants”).
 See ConEd v. NYISO, 150 FERC ¶ 61,139 at P 50 (stating that the “fundamental objective of NYISO’s buyer-side mitigation rules . . . is to protect against new entrants that have the ability and incentive to suppress capacity market prices through the exercise of buyer-side market power”); N.Y. Pub. Serv. Comm’n v. N.Y. Indep. Sys. Operator, Inc., 153 FERC ¶ 61,022, at P 10 (2015) (requiring NYISO to exempt from its MOPR “renewable and self-supply resources that have limited or no incentive and ability to exercise buyer-side market power”).
 See, e.g., 2006 RPM Settlement Order, 117 FERC ¶ 61,331 at PP 34, 103-04 (discussing the buyer-side market power mitigation provisions imposed as part of the settlement that created PJM’s capacity market).
 ISO New England Inc., 135 FERC ¶ 61,029 at PP 170-171 (in determining whether state-supported resources should be subject to the MOPR, stating that out-of-market support “suppresses prices regardless of intent”); PJM Interconnection, L.L.C., 135 FERC ¶ 61,022, at PP 141, 142 (2011 MOPR Order) (accepting PJM’s proposal to remove the MOPR exemption for state-mandated resources because “uneconomic entry can produce unjust and unreasonable wholesale rates by artificially depressing capacity prices”), order granting reh’g for further consideration & establishing tech. conf., 135 FERC ¶ 61,228, order on compliance, reh’g, & tech. conf., 137 FERC ¶ 61,145 (2011) (2011 MOPR Rehearing Order), reh’g denied, 138 FERC ¶ 61,194 (2012), aff’d sub nom. NJBPU, 744 F.3d at 74.
 E.g., 2011 MOPR Order, 135 FERC ¶ 61,022 at PP 66, 70 (accepting PJM’s proposal to change conduct screen because it reasonably balanced the need to prevent uneconomic entry with the administrative burden of justifying generator specific cost); see also ISO New England Inc., 147 FERC ¶ 61,173, at P 83 (2014) (accepting ISO-NE’s proposal to exempt a set amount of state-supported renewable resources from the MOPR because there were limited price suppression concerns); 2013 MOPR Order, 143 FERC ¶ 61,090 at P 26 (stating that the MOPR appropriately balanced need for buyer-side market power mitigation measures against the risk of over-mitigation in adopting competitive entry and self-supply exemptions and retaining unit specific review).
 Eastern RTOs/ISOs refers to the three regional transmission organizations (RTOs) and independent system operators (ISOs) in the Eastern portion of the United States: PJM; ISO New England Inc. (ISO-NE); and New York Independent System Operator, Inc. (NYISO).
 ISO New England Inc., 162 FERC ¶ 61,205 (2018) (CASPR); Calpine Corp. v. PJM Interconnection, L.L.C., 169 FERC ¶ 61,239 (2019) (December 2019 Order), order on reh’g, 171 FERC ¶ 61,035 (2020) (December 2019 Rehearing Order I), order on reh’g & clarification, 173 FERC ¶ 61,061 (2020) (December 2019 Rehearing Order II), order setting aside prior order, in part, 174 FERC ¶ 61,109 (2021) (vacating note 134), review pending sub nom. Ill. Com. Comm’n v. FERC, Case Nos. 20-1645, et al. (7th Cir. Apr. 20, 2020).
 Md. People’s Counsel v. FERC, 761 F.2d 768, 779 (D.C. Cir. 1985) (stating that the law “demand[s] an articulation, in response to serious objections, of the Commission’s reasons for believing that more good than harm will come of its action” (emphasis added)); see Edison Mission Energy, Inc. v. FERC, 394 F.3d 964, 969 (D.C. Cir. 2005) (acknowledging that the seller-side market power mechanism at issue “may well do some good by protecting consumers and utilities against price increments caused by the exercise of market power” but may “also wreak substantial harm-in curtailing price increments attributable to genuine scarcity”). Although this case involved seller-side market power—which we explain later in this statement is appropriately addressed in a distinct manner from buyer-side market power—the discussion of the Commission’s required balancing of potential benefits and harms to come from its actions is no less relevant in the buyer-side market power context.
 The Commission, while targeting resources that receive state support, specifically declined to do the same with regard to federal support (such as tax credits), even though they concededly present exactly the same dynamics that the Commission claimed to be concerned about when it came to state policies. The Commission stated that application of the MOPR to resources supported by federal policies would “disregard or nullify the effect” of the relevant federal policy under which the support was being provided. December 2019 Order, 169 FERC ¶ 61,239 at PP 10, 89.
 The relevant orders focused exclusively on state policies that might reduce capacity prices, ignoring all state policies that might instead increase those prices. See, e.g., December 2019 Rehearing Order I, 171 FERC ¶ 61,035 at P 390 (clarifying that the Regional Greenhouse Gas Initiative is not a State Subsidy subject to mitigation under the Expanded MOPR); id. (not applying the Expanded MOPR to carbon pricing programs that require generators to pay fees to a state); Hollow Rd. Solar LLC, 174 FERC ¶ 61,200, at P 20 (2021) (finding that a Virginia pollution control statute was not a State Subsidy for purposes of the Expanded MOPR).
 As the Commission succinctly stated in response to arguments that the Expanded MOPR imposed buyer-side market power mitigation rules in the absence of anti-competitive concerns, “the [E]xpanded MOPR does not focus on buyer-side market power mitigation, but rather addresses the impact of State Subsidies on the market.” December 2019 Rehearing Order I, 171 FERC ¶ 61,035 at P 45; see Edison Mission Energy, 394 F.3d at 969 (describing “the Commission’s contradiction of its prior rulings acknowledging the potential ill effects of forcing down prices absent structural market distortions” as “the epitome of agency capriciousness”).
 See, e.g., December 2019 Order, 169 FERC ¶ 61,239 at P 38 (discussing the Commission’s finding on the need to maintain the “integrity of competition”); id. P 17 n.38 (“This Commission determined many years ago that the best way to ensure the most cost-effective mix of resources is selected to serve the system’s capacity needs was to rely on competition.”); CASPR, 162 FERC ¶ 61,205 at P 24 (asserting that states’ exercise of their authority over generation facilities “raises a potential conflict with . . . competitive wholesale electric markets”).
 See, e.g., James F. Wilson, “Missing Money” Revisited: Evolution of PJM’s RPM Capacity Construct 1 (2016), https://www.publicpower.org/system/files/documents/markets-rpm_missing_money_revisited_wilson.pdf (discussing the concept of missing money and the origin of capacity markets); Roy J. Shanker, Comments, Docket No. RM01-12-000 (filed Jan. 10, 2003) (discussing the idea of missing money).
 The periodic demand curve resets that occur in the Eastern RTOs/ISOs illustrate the variety of factors that go into determining the missing money, or Cost of New Entry net of energy and ancillary services revenues (Net CONE), of the reference unit used to establish the demand curve. For example, the development of CONE in NYISO’s most recent demand curve reset addressed factors ranging from federal, state, and local requirements related to environmental considerations, regional differences in capital and labor costs, as well as differences resulting from the impacts of the COVID-19 pandemic. See N.Y. Indep. Sys. Operator, Inc., 175 FERC ¶ 61,012, at PP 63-66, 90, 161-62 (2021) (discussing emissions reduction requirements, state renewable energy legislation, and labor costs); see also NYISO, Tariff Filing, Docket No. ER21-502-000, Ex. E, at 41, 68 (filed Nov. 30, 2020) (discussing adjustments to labor costs based on productivity changes resulting from “weather, union rules, construction parking and laydown space limitations,” among other factors, and the impacts of the COVID-19 pandemic on return on equity calculations). Those factors affect not only what resource gets built and where, but also how it is operated and, therefore, what its resulting costs and revenues will be. Considering all those factors is thus necessary to produce efficient capacity price signals guiding when and where to site new capacity resources, notwithstanding the fact that they are not derived from Commission-jurisdictional markets.
 See, e.g., Policy Integrity Comments at 8-10 (explaining why economic efficiency is reached when the external costs and benefits, like taxes on carbon pollution or subsidies to carbon free resources, are reflected in market prices).
 The Commission’s orders extended PJM’s MOPR to existing resources but made them subject to a different—and generally more lenient—pricing regime than new resources. December 2019 Order, 169 FERC ¶ 61,239 at P 2 (“[T]he default offer price floor for applicable new resources will be the [Net CONE] for their resource class; the default offer price floor for applicable existing resources will be the Net Avoidable Cost Rate (Net ACR) for their resource class.” (footnotes omitted)); id. (Glick, Comm’r, dissenting at PP 32-35) (criticizing the Commission for using different offer floor formulae for existing and new resources).
 See infra P 57.
 See infra P 19.
 N.Y. Pub. Serv. Comm’n v. N.Y. Indep. Sys. Operator, Inc., 158 FERC ¶ 61,137 (2017) (Bay, Chairman, concurring at 2).
 As the FPA itself recognizes, “the business of transmitting and selling electric energy for ultimate distribution to the public is affected with a public interest.” 16 U.S.C. § 824.
 See December 2019 Order, 169 FERC ¶ 61,239 (Glick, Comm’r, dissenting at PP 27-28) (discussing the scope of federal and state subsidies affecting PJM’s capacity market); Calpine Corp. v. PJM Interconnection, L.L.C., 163 FERC ¶ 61,236 (2018) (June 2018 Order) (Glick, Comm’r, dissenting at 6-9) (explaining how “[g]overnment subsidies pervade the energy markets and have for more than a century”); CASPR, 162 FERC ¶ 61,205 (Glick, Comm’r, dissenting in part and concurring in part at 3) (“Our federal, state, and local governments have long played a pivotal role in shaping all aspects of the energy sector, including electricity generation.”).
 See infra PP 51-52.
 See, e.g., December 2019 Order, 169 FERC ¶ 61,239 (Glick, Comm’r, dissenting at P 55).
 See, e.g., December 2019 Order, 169 FERC ¶ 61,239 at P 5 (explaining that the Commission is applying a MOPR to state-supported resources in order to “protect PJM’s capacity market from the price-suppressive effects of resources receiving out-of-market support”); N.Y. Pub. Serv. Comm’n v. N.Y. Indep. Sys. Operator, Inc., 170 FERC ¶ 61,119, at P 37 (2020) (NYPSC v. NYISO) (finding that applying the MOPR to electric storage resources in NYISO “appropriately protects the capacity market from the price suppressive effects of resources receiving out-of-market” state support), order on reh’g, 173 FERC ¶ 61,060 (2020); CASPR, 162 FERC ¶ 61,205 at P 24 (“It is . . . imperative that such a market construct include rules that appropriately manage the impact of out-of-market state support[.]”).
 Specifically, the FPA applies to “any rate, charges, or classification demanded, observed, charged, or collected by any public utility for any transmission or sale subject to the jurisdiction of the Commission” and “any rule, regulation, practice, or contract affecting such rate, charge, or classification.” 16 U.S.C. § 824e(a); see also id. § 824d(a) (similar).
 See id. § 824(b)(1); Hughes v. Talen Energy Mktg., LLC, 136 S. Ct. 1288, 1292 (2016) (Hughes) (describing the jurisdictional divide set forth in the FPA); FERC v. Elec. Power Supply Ass’n, 577 U.S. 260, 266 (2016) (EPSA) (explaining that “the [FPA] also limits FERC’s regulatory reach, and thereby maintains a zone of exclusive state jurisdiction”); Panhandle E. Pipe Line Co. v. Pub. Serv. Comm’n of Ind., 332 U.S. 507, 517-18 (1947) (recognizing that the analogous provisions of the NGA were “drawn with meticulous regard for the continued exercise of state power”). Although these cases deal with the question of preemption, which is of course different from the question of whether a rate is just and reasonable under the FPA, the Supreme Court’s discussion of the respective roles of the Commission and the states remains instructive when it comes to evaluating how the application of a MOPR squares with the Commission’s role under the FPA.
 16 U.S.C. § 824(b)(1); Hughes, 136 S. Ct. at 1292; see also Pac. Gas & Elec. Co. v. State Energy Res. Conservation & Dev. Comm’n, 461 U.S. 190, 205 (1983) (recognizing that issues including the “[n]eed for new power facilities, their economic feasibility, and rates and services, are areas that have been characteristically governed by the States”).
 EPSA, 577 U.S. at 281; see Oneok, Inc. v. Learjet, Inc., 135 S. Ct. 1591, 1601 (2015) (explaining that the natural gas sector does not adhere to a “Platonic ideal” of the “clear division between areas of state and federal authority” that undergirds both the FPA and the Natural Gas Act).
 See EPSA, 577 U.S. at 281; Oneok, 135 S. Ct. at 1601; Coal. for Competitive Elec. v. Zibelman, 906 F.3d 41, 57 (2d Cir. 2018) (Zibelman) (explaining that the Commission “uses auctions to set wholesale prices and to promote efficiency with the background assumption that the FPA establishes a dual regulatory system between the states and federal government and that the states engage in public policies that affect the wholesale markets”).
 Zibelman, 906 F.3d at 57 (explaining how a state’s regulation of generation facilities can have an “incidental effect” on the wholesale rate through the basic principles of supply and demand); id. at 53 (“[I]t would be ‘strange indeed’ to hold that Congress intended to allow the states to regulate production, but only if doing so did not affect interstate rates.” (quoting Nw. Cent. Pipeline Corp. v. State Corp. Comm’n of Kan., 489 U.S. 493, 512-13 (1989) (Northwest Central))); Elec. Power Supply Ass’n v. Star, 904 F.3d 518, 524 (7th Cir. 2018) (explaining that the subsidy at issue in that proceeding “can influence the auction price only indirectly, by keeping active a generation facility that otherwise might close . . . . A larger supply of electricity means a lower market-clearing price, holding demand constant. But because states retain authority over power generation, a state policy that affects price only by increasing the quantity of power available for sale is not preempted by federal law.”).
 Hughes, 136 S. Ct. at 1300 (Sotomayor, J., concurring) (quoting Northwest Central, 489 U.S. at 518); id. (“recogniz[ing] the importance of protecting the States’ ability to contribute, within their regulatory domain, to the [FPA]’s goal of ensuring a sustainable supply of efficient and price-effective energy”).
 Cf. Star, 904 F.3d at 523 (“For decades the Supreme Court has attempted to confine both the Commission and the states to their proper roles, while acknowledging that each use of authorized power necessarily affects tasks that have been assigned elsewhere.”).
 For example, the Commission instructed PJM that its Tariff must “explicitly provide for the inclusion of opportunity costs, especially for . . . environmentally-limited resources,” (i.e., resources whose operation is limited by state or federal environmental regulations). PJM Interconnection, L.L.C., 126 FERC ¶ 61,145, at P 42 (2009). Similarly, NYISO’s Tariff, approved by the Commission, includes within going-forward costs “the costs . . . necessary to comply with federal or state environmental . . . requirements that must be met in order to supply Installed Capacity.” NYISO, NYISO Tariffs, NYISO MST, Attach. H, § 23.2.1 (45.0.0).
 State polices that exceed the states’ jurisdiction because they set or aim at wholesale rates would, of course, remain preempted. See, e.g., Hughes, 136 S. Ct. at 1298.
 Cf. Nat’l Ass’n of Reg. Util. Comm’rs v. FERC, 475 F.3d 1277, 1280 (D.C. Cir. 2007) (noting that “FERC’s authority generally rests on the public interest in constraining exercises of market power”); Interstate Nat. Gas Ass’n of Am. v. FERC, 617 F.3d 504, 511 (D.C. Cir. 2010) (“FERC’s decision is consistent with the NGA’s ‘fundamental purpose . . . to protect natural gas consumers from the monopoly power of natural gas pipelines.’” (quoting Nat’l Fuel Gas Supply Corp. v. FERC, 468 F.3d 831, 833 (D.C. Cir. 2006)); Assoc. Gas Distribs. v. FERC, 824 F.2d 981, 1003 (D.C. Cir. 1987) (stating that the Commission has “broad duties to assure consumers access to natural gas at prices such as would prevail in the absence of pipeline market power”).
 See infra PP 24-31; see also N.Y. Pub. Serv. Comm’n v. N.Y. Indep. Sys. Operator, Inc., 170 FERC ¶ 61,120, at PP 3-7, 16-20 (2020) (detailing the history of application of NYISO’s MOPR to certain demand response resources, including the Commission’s numerous policy changes from 2008 to 2020, and granting rehearing to once again change course).
 See, e.g., NYPSC v. NYISO, 170 FERC ¶ 61,119 at PP 37, 39 (rejecting complaint alleging that energy storage resources developed to meet New York’s energy and environmental goals should not be subject the NYISO’s MOPR, which requires the incentive and ability to exercise buyer-side market power); see also N.Y. Pub. Serv. Comm’n v. N.Y. Indep. Sys. Operator, Inc., 158 FERC ¶ 61,137 (Bay, Chairman, concurring at 3) (“The MOPR is not applied to the state, which may not actually be a buyer and which is acting on behalf of its citizenry, but to the resource, which is offering to sell capacity to the market and which may be a commercial entity. The theory, in other words, assumes such a congruence of interests between the state and the resource that the resource is mitigated for the conduct of the state.”).
 See PJM Interconnection, L.L.C., 115 FERC ¶ 61,079, at P 29 (2006) (finding PJM’s existing capacity market unjust and unreasonable because it failed to ensure reliable service ); 2006 RPM Settlement Order, 117 FERC ¶ 61,331 at P 1 (accepting settlement proposal establishing PJM’s capacity market rules).
 The FRR Alternative is available to an LSE (i.e., investor-owned utility, electric cooperative, or public power entity), at its election, to satisfy its obligation to provide unforced capacity outside of PJM’s capacity market auction. PJM, Intra-PJM Tariffs, Reliability Assurance Agreement, §§ 7.4 (0.2.0) (FRR Alternative), 8.1 (1.0.0) (Nature of Charges). The FRR Alternative must be selected for a minimum term of five consecutive years. Id. at Sched. 8.1.C.1 (4.0.0).
 As discussed above, net buyer refers to a seller that purchases more capacity from the capacity market than it sells into it. See supra P 3 & n.6.
 See 2006 RPM Settlement Order, 117 FERC ¶ 61,331 at PP 103-04. For example, a buyer could contract with a seller outside of PJM’s capacity market and direct the seller to submit a capacity offer below the supplier’s net going-forward costs (e.g., at zero) in PJM’s capacity market auction to lower the capacity market clearing price. Such a strategy could lower the buyer’s total capacity procurement costs if the savings the buyer achieves from the lower capacity market clearing price paid for the total quantity of capacity the buyer purchased in PJM’s capacity market auction exceeds the losses (excess costs in this example) the buyer incurred from the out-of-market contract with the seller. See, e.g., 2013 MOPR Order, 143 FERC ¶ 61,090 at P 20 & n.16.
 See, e.g., 2011 MOPR Order, 135 FERC ¶ 61,022 at PP 153, 155 (agreeing with PJM that new natural gas resources have the shortest development time and are thus the more efficient resources to suppress capacity prices).
 2006 RPM Settlement Order, 117 FERC ¶ 61,331 at P 104.
 2011 MOPR Order, 135 FERC ¶ 61,022 at PP 125-26; see also NJBPU, 744 F.3d at 88 (explaining that Maryland and New Jersey intended to offer the resources developed pursuant to state initiatives into PJM’s capacity market at prices below the resources’ actual costs to ensure that they would clear).
 2011 MOPR Order, 135 FERC ¶ 61,022 at PP 139-43; see also id. P 143, quoted with approval in NJBPU, 744 F.3d at 100, cited in Hughes, 136 S. Ct. at 1296; 2011 MOPR Rehearing Order, 137 FERC ¶ 61,145 at P 3 (“Our intent is not to pass judgment on state and local policies and objectives with regard to the development of new capacity resources, or unreasonably interfere with those objectives.”). PJM also proposed to add wind and solar facilities to the list of resources permitted to make zero-priced offers. The Commission accepted PJM’s proposal, finding these resources “a poor choice if a developer’s primary purpose is to suppress capacity market prices.” 2011 MOPR Order, 135 FERC ¶ 61,022 at P 153.
 “Being in a net-short position refers to the circumstance where an LSE owns and/or contracts for an amount of capacity . . . that is less than its capacity needs. Being in a [n]et-long position refers to the circumstance where an LSE owns or contracts for generation in excess of its capacity needs . . . .” 2013 MOPR Order, 143 FERC ¶ 61,090 at P 25 n.19.
 Id. PP 19, 24-26, 53. The Commission had accepted the unit-specific review process in 2011.
 Id. PP 25-26, 107-108, 141. In 2017, the U.S. Court of Appeals for the District of Columbia Circuit found that the Commission exceeded its FPA section 205 authority in modifying PJM’s proposal and vacated and remanded the relevant Commission orders. NRG, 862 F.3d at 117. On remand, the Commission rejected PJM’s proposal to categorically exempt competitive entry and self-supply without a unit-specific review process. PJM Interconnection, L.L.C., 161 FERC ¶ 61,252, at P 41 (2017).
 2013 MOPR Order, 143 FERC ¶ 61,090 at P 26 (stating that “[b]y targeting those resources most likely to raise price suppression concerns (i.e., gas-fired resources), adopting exemptions for competitive entry and self-supply, and retaining the unit-specific review process for resources not eligible for the exemptions,” the MOPR “appropriately balance[d] the need for mitigation of buyer-side market power against the risk of over-mitigation”); 2011 MOPR Order, 135 FERC ¶ 61,022 at P 70 (balancing protecting against “unreasonable exercises of market power and recognizing the imperfection of administrative estimates and the burden of the cost justification process” in accepting PJM’s proposed percentage factor for its MOPR conduct screen); 2011 MOPR Rehearing Order, 137 FERC ¶ 61,145 at P 209 (accepting unit-specific review as sufficiently accommodating self-supply on the basis that such a process “appropriately balances the need to protect against uneconomic entry while also mitigating parties’ concerns about having to pay twice for capacity as a result of failing to clear”).
 See June 2018 Order, 163 FERC ¶ 61,236; June 2018 Rehearing Order, 171 FERC ¶ 61,034; December 2019 Order, 169 FERC ¶ 61,239; December 2019 Rehearing Order I, 171 FERC ¶ 61,035; December 2019 Rehearing Order II, 173 FERC ¶ 61,061 (orders adopting the Expanded MOPR applicable to new and existing resources with few exemptions).
 June 2018 Order, 163 FERC ¶ 61,236 at P 150. We note that the “out-of-market” in this context refers to revenues earned outside organized wholesale electricity markets; such revenue may include compensation earned via sales of non-FERC jurisdictional products in other (non-FERC jurisdictional) markets.
 Id. P 156.
 December 2019 Order, 169 FERC ¶ 61,239 at P 41.
 December 2019 Rehearing Order I, 171 FERC ¶ 61,035 at P 45.
 See Modernizing Electricity Market Design, Docket No. AD21-10-000, Notice of Technical Conference on Resource Adequacy in the Evolving Electricity Sector (Feb. 18, 2021).
 See, e.g., PJM, Comments, Docket No. AD21-10-000, at 2 (filed Apr. 26, 2021); Public Interest Organizations, Comments, Docket No. AD21-10-000, at 2, 10 (filed Apr. 26, 2021); Public Interest Organizations, Reply Comments, Docket No. AD21-10-000, at 2 (filed May 10, 2021).
 16 U.S.C. § 824d; see New England Power Generators Ass’n, Inc. v. FERC, 881 F.3d 202, 205 (D.C. Cir. 2018).
 Emera Me. v. FERC, 854 F.3d 9, 21 (D.C. Cir. 2017) (citing Ala. Power Co. v. FERC, 993 F.2d 1557, 1571 (D.C. Cir. 1993)).
 PJM Interconnection, L.L.C., 170 FERC ¶ 61,243, at P 57 (2020) (citing Petal Gas Storage, L.L.C. v. FERC, 496 F.3d 695, 703 (D.C. Cir. 2007); City of Bethany v. FERC, 727 F.2d 1131, 1136 (D.C. Cir. 1984); Cal. Indep. Sys. Operator Corp., 128 FERC ¶ 61,282, at P 31 (2009)).
 See City of Winnfield v. FERC, 744 F.2d 871, 874-75 (D.C. Cir. 1984). What is more, section 205 “is intended for the benefit of the utility,” id. at 875, and the Commission plays “an essentially passive and reactive role,” Atl. City Elec. Co. v. FERC, 295 F.3d 1, 10 (D.C. Cir. 2002) (internal quotations omitted) (quoting City of Winnfield, 744 F.2d at 876).
 Tagg Bros. & Moorhead v. United States, 280 U.S. 420, 445 (1930).
 Transmittal at 7 (citing Virginia Clean Economy Act, HB 1526, 2020 Sess. (Va. 2020); An Act to Amend Title 26 of the Delaware Code Relating to Renewable Energy Standards, S.B. 33, 151st Gen. Assembly (Del. 2021); Clean Energy DC Omnibus Amendment Act of 2018, D.C. Act 22-583 (D.C. 2019); Maryland Clean Energy Jobs Act of 2019, S.B. 516, 2019 Sess. (Md. 2019)).
 Id. at 8 (citing PJM, Filing, Attach. E, Affidavit of Dr. Walter F. Graf (Graf Aff.) ¶ 17).
 Id. at 9.
 Id. at 15 (citing PJM, Filing, Attach. C, Affidavit of Peter Cramton (Crampton Aff.) ¶¶ 25, 37).
 Id. at 15-16 (citing Crampton Aff. ¶ 11).
 Id. at 10 (citing Graf Aff. ¶ 17 n.3).
 See Exelon and PSEG Comments at 5-7; DCPSC Comments at 2-3; CET Comments at 1; JCA Comments at 2; PIOs Comments at 1; Maryland PSC Comments at 1-2.
 See Exelon and PSEG Comments at 5-6; AMP Comments at 7; CET Comments at 1-2; JCA Comments at 2; PIOs Comments at 5-7; Pine Gate Comments at 2-3; AEE Comments at 12-14; NEI Comments at 4-5; NJBPU Comments at 3; Policy Integrity Comments at 12.
 Appendix 1 identifies entities that submitted comments, protests, and/or answers and lists the abbreviated names for entities.
 See P3 Protest at 35; Vistra Protest at 7-9; Cogentrix Protest at 7; NGSA Protest at 7-8; EPSA Protest at 42-43.
 P3 Protest at 36.
 See id. at 35; EPSA Protest at 31; NGSA Protest at 10; Calpine-LS Power Protest at 15; CCE and SFE Protest at 3; Cogentrix Protest at 13-14; NRG Protest at 8; IMM Protest at 4-5.
 EPSA Protest at 32-34 (citing N.Y. Indep. Sys. Operator, Inc, 124 FERC ¶ 61,301, at P 29 (2008)); Calpine-LS Power Protest at 17.
 EPSA Protest at 51 (quoting June 2018 Order, 163 FERC ¶ 61,236 at P 149); see also Cogentrix Protest at 15, 23; P3 Protest at 46-52; NRG Protest at 7, 9-10.
 EPSA Protest at 51.
 Id. at 27-28 (quoting NJBPU, 744 F.3d at 97, citing Conn. Dep’t Pub. Util. Control v. FERC, 569 F.3d 477 (D.C. Cir. 2009) (Connecticut DPUC)).
 Id. at 54-55; Calpine-LS Power Protest at 21-22.
 CCE and SFE Protest at 3; see also Calpine-LS Power Protest at 2; Cogentrix Protest at 16-17; P3 Protest at 54-60; NGSA Protest at 9; EPSA Protest at 64-66; NRG Protest at 8-9.
 See P3 Protest at 50; EPSA Protest at 17, 55-56; OCC Comments at 4, 7; Calpine-LS Power Protest at 19-20; CCE and SFE Protest at 3.
 EPSA Protest at 61-62.
 Id. at 63.
 See Cogentrix Protest at 11; NGSA Protest at 4; P3 Protest at 41.
 Calpine-LS Power Protest at 24.
 See CXA La Paloma v. Cal. Indep. Sys. Operator Corp., 165 FERC ¶ 61,148, at P 71 (2018) (citing Bridgeport Energy, LLC, 113 FERC ¶ 61,311, at P 29 (2005)); see also ISO New England Inc., 135 FERC ¶ 61,029 at PP 251-254 (rejecting arguments that participants in the ISO-NE capacity market were entitled to earn a desired rate); ISO New England Inc., 135 FERC ¶ 61,029 at P 254 (stating that “as in all markets, regardless of what investment-backed expectations a resource may have had at the time that it chose to enter the ISO-NE markets, each market entrant was aware of the possibility that at some times, it might earn substantially more than a traditional cost-based-rate, but that at other times, it might earn less than its costs”).
 See December 2019 Rehearing Order I, 171 FERC ¶ 61,035; December 2019 Rehearing Order II, 173 FERC ¶ 61,061.
 To do so, an agency must simply show its new policy “is permissible under the statute, that there are good reasons for it, and that the agency believes it to be better.” FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009) (emphasis omitted); see also NJBPU, 744 F.3d at 102 (upholding the Commission’s decision to change course and eliminate a MOPR exception for state-mandated resources because the Commission “adequately advanced a rationale for its about-face”).
 See supra PP 10-22.
 See Fox Television, 556 U.S. at 515 (emphasis omitted); see also Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983) (“[W]e fully recognize that regulatory agencies do not establish rules of conduct to last forever.”) (internal quotations omitted).
 Comm’r Christie Statement at P 2.
 Comm’r Christie Statement at PP 6-7 (stating that his envisioned replacement rate would “ensure that each state could fund its preferred policy resources and eliminate any potential for its consumers ‘paying twice’”).
 It is also important not to overstate the extent of our disagreement. Removing load and reserve requirements associated with the capacity of the designated public-policy resources, as Commissioner Christie proposes, would result in a clearing price similar to that which would result in retaining such resources and load, as PJM proposed in its Focused MOPR. This is because under both mechanisms, the same set of resources would likely be procured to serve the same total quantity of load. To be sure, the mechanics would look different, and there might be incremental transparency benefits of Commissioner Christie’s proposal, but the end result—i.e., the impact on rates, the touchstone of Commission jurisdiction—would be similar.
 See supra P 46 nn.94 & 96.
 This over-procurement is distinguishable from procurements in the PJM capacity auction that occur above the applicable target reserve margin, as such results do not reflect an inefficient over-procurement of capacity. Rather, they reflect the intersection of capacity supply and capacity demand, with demand being represented by the VRR demand curve.
 Since 2018, states’ efforts to shape the resource mix within their borders have increased significantly, both in their scope and their ambition. In 2019, Maryland increased its RPS requirements from 25% by 2020 to 50% by 2030, and the state now requires the construction of at least 1.2 GW of offshore wind projects. Maryland Clean Energy Jobs Act, MD PUB. UTIL § 7-703, S.B. 516, 2019 Reg. Sess. (Md. 2019), https://mgaleg.maryland.gov/2019RS/bills/sb/sb0516E.pdf. Also in 2019, New Jersey increased its offshore wind goal from 3,500 MW by 2030 to 7,500 MW by 2035 and awarded zero-emissions credits to the Salem I, Salem II, and Hope Creek nuclear units, which represent approximately 3,700 MW of capacity. Exec. Order No. 92 at 3 (N.J. 2019), https://nj.gov/infobank/eo/056murphy/pdf/EO-92.pdf; New Jersey Board of Public Utilities Orders in Docket Nos. EO18121338, EO18121339, EO18121337 (Apr. 18, 2019); PIOs Comments at 63-64. The Virginia Clean Economy Act, passed in 2020, requires Dominion Energy Virginia (Dominion) and American Electric Power (AEP) to produce their electricity from 100% renewable resources by 2045 and 2050, respectively, and to comply with specific resource mix milestones, such as constructing or acquiring 2,700 MW and 400 MW, respectively, of energy storage capacity by 2035. It requires Dominion to develop 5,200 MW of offshore wind by 2034. See H.B. 1526, 2020 Sess. (VA 2020), https://lis.virginia.gov/cgi-bin/legp604.exe?201+sum+HB1526. In 2021, Delaware similarly increased the minimum percentage of electricity sales to Delaware end-use customers from renewable energy resources (i.e., offshore wind and solar) from 25% in 2025 to 40% in 2035. An Act to Amend Title 26 of the Delaware Code Relating to Renewable Energy Portfolio Standards, S.B. 33, 151st Gen. Assemb. (DE 2021), https://legis.delaware.gov/BillDetail?legislationId=48278. And Illinois also recently passed a law that requires a transition to 100% clean energy by 2050, provides $700 million in subsidies for nuclear resources, and provides $580 million in subsidies to encourage growth of renewable resources. Climate and Equitable Jobs Act, Ill. SB 2408 (Sept. 15, 2021), https://ilga.gov/legislation/102/SB/PDF/10200SB2408enr.pdf.
 PIOs Comments at 44-45 (citing Michael Goggin & Rob Gramlich, A Moving Target: An Update on the Consumer Impacts of FERC Interference with State Policies in the PJM Region, Grid Strategies, LLC, 2-3, 5-6, 8-9 (May 2020), https://gridprogress files.wordpress.com/2020/05/a-moving-target-paper.pdf; PIOs Comments, Ex. A, (Written Test. of Dr. Kathleen Spees and Dr. Samuel A. Newell), at 26, 28-29 (Aug. 20, 2021) (Brattle Aff.)).
 Even if the Expanded MOPR did not have an impact on capacity market prices, our analysis would remain unchanged. If that were the case, there would be no reason to implement the Expanded MOPR, as it would only create needless administrative burdens for PJM and capacity sellers alike. This would increase uncertainty and create delays for market participants without any tangible impact on the capacity market, and there would be no reason to keep such a pointless construct in place.
 For example, renewable resources that had previously cleared a PJM capacity auction were not subject to the Expanded MOPR.
 Regardless, the Commission has also previously explained that it is not required “to analyze the results of previous capacity auctions” to support its findings and instead may rely on economic theory. June 2018 Rehearing Order, 171 FERC ¶ 61,034 at PP 39-40; see also Cent. Hudson Gas & Elec. Corp. v. FERC, 783 F.3d 92, 109 (2d Cir. 2015); Sacramento Mun. Util. Dist. v. FERC, 616 F.3d 520, 531 (D.C. Cir. 2010) (stating that the Commission may make findings “based on ‘generic factual predictions’ derived from economic research and theory”).
 See PIOs Comments at 17-18 (citing Brattle Aff. at 26) (showing number of state-supported resources at risk of failing to clear PJM’s capacity market due to the Expanded MOPR growing from 3,500 MW in 2025 to 6,800 MW by 2030 as more state policies take effect). Moreover, agencies “do not need to conduct experiments in order to rely on the prediction that an unsupported stone will fall.” S.C. Pub. Serv. Auth. v. FERC, 762 F.3d 41, 65 (D.C. Cir. 2014) (upholding Commission order implementing transmission reforms where the Commission reasoned that the prior transmission planning practices were deficient and predicted that reforms would lead to better planning).
 For example, projects in New Jersey may be offered into the 2024/2025 Delivery Year auction, currently scheduled for June 2022, and Maryland projects may participate in the 2025/2026 Delivery Year auction, currently scheduled for January 2023. P3 Protest at 94. A Dominion project that will provide 2,600 MW of offshore wind is expected to come online in the second half of 2026. AEE Comments at 14 n.46. Accordingly, this resource may be available to offer into the 2026/2027 or 2027/2028 BRAs, which are currently scheduled to take place in 2023 and 2024, respectively.
 PIOs Comments at 18 (citing Brattle Aff. at 25).
 Exelon and PSEG Comments at 12.
 Id. (citing PJM Interconnection, L.L.C., Scenario Analysis for Base Residual Auction (July 6, 2021), https://www2.pjm.com/-/media/markets-ops/rpm/rpm-auction-info/2022-2023/2022-2023-bra-scenario-analysis.ashx).
 Transmittal at 15-16 (citing Crampton Aff. ¶¶ 11, 25).
 For this reason, we disagree with Calpine and LS Power that lower energy prices caused by redundant capacity are not problematic simply because the height of the VRR demand curve will reflect this change. If redundant capacity lowers energy prices, the VRR demand curve will shift upward because the energy and ancillary services revenue offset will fall, inefficiently signaling a need for even more capacity at a higher price, even as there is already redundant capacity on the system.
 See Transmittal at 11-12; PIOs Comments at 10 (quoting Brattle Aff. at 19).
 See Transmittal at 10 (citing PJM, Filing, Attach. D, Affidavit of Adam J. Keech (Keech Aff.) ¶ 11); see also Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Servs. by Public Utils.; Recovery of Stranded Costs by Public Utils. & Transmitting Utils., Order No. 888-A, FERC Stats. & Regs. ¶ 31,048, at 30,450 (cross-referenced at 78 FERC ¶ 61,220) (stating “a utility is entitled to a reasonable opportunity to recover its prudently incurred costs”), order on reh’g, Order No. 888-B, 81 FERC ¶ 61,248 (1997), order on reh’g, Order No. 888-C, 82 FERC ¶ 61,046 (1998), aff’d in relevant part sub nom. Transmission Access Pol’y Study Grp. v. FERC, 225 F.3d 667 (D.C. Cir. 2000), aff’d sub nom. New York. v. FERC, 535 U.S. 1 (2002); Transwestern Pipeline Co., 40 FERC ¶ 61,324, at 61,994 (1987) (explaining pipelines must be given “a reasonable opportunity to recover their prudently incurred costs”); Consol. Gas Supply Corp. v. Fed. Power Comm’n, 520 F.2d 1176, 1188 (D.C. Cir. 1975) (concluding the Commission’s allocation method did not deprive the pipeline of “a reasonable opportunity to recover fixed costs”).
 See Zibelman, 906 F.3d at 56-57.
 For similar reasons, we disagree with arguments that this supposed “artificial price suppression” leads to undue discrimination against unsubsidized resources. All resources receiving a capacity supply obligation generally receive the same capacity market clearing price. To the extent that certain resources may receive more or less total compensation due to payments from states, they would not be similarly situated for the purposes of the FPA.
 See Keech Aff. ¶ 11; Brattle Aff. at 18-19.
 Cf. EPSA, 577 U.S. at 281 (explaining that areas of federal and state regulation are not “hermetically sealed” from each other).
 See, e.g., December 2019 Rehearing Order I, 171 FERC ¶ 61,035 at PP 36, 55, 224.
 December 2019 Order, 169 FERC ¶ 61,239 at P 68 (stating that the definition of State Subsidies “is not intended to cover every form of state financial assistance that might indirectly affect FERC-jurisdictional rates or transactions”); December 2019 Rehearing Order I, 171 FERC ¶ 61,035 at P 39 (clarifying that the Regional Greenhouse Gas Initiative is not a State Subsidy subject to mitigation under the Expanded MOPR); Hollow Rd. Solar LLC, 174 FERC ¶ 61,200 at P 20 (finding that a Virginia pollution control statute was not a State Subsidy); see Joshua C. Macey & Jackson Salovaara, Rate Regulation Redux, 168 U. Pa. L. Rev. 1181, 1191 (2020) (“Subsidies pervade the electricity sector. It is inexplicable that FERC and certain grid operators regard some state programs as posing a unique threat to the power grid when the energy sector has always been heavily subsidized and when, by one count, sixty-five percent of the one trillion dollars the United States has spent supporting the energy sector since 1950 have gone to fossil fuels.”).
 December 2019 Order, 169 FERC ¶ 61,239 at P 89.
 Since 1950 the federal government has provided roughly a trillion dollars in energy subsidies, of which 65% has gone to fossil fuel technologies. See Nancy Pfund and Ben Healey, DBL Investors, What Would Jefferson Do? The Historical Role of Federal Subsidies in Shaping America's Energy Future (Sept. 2011), http://www.dblpartners.vc/wp-content/uploads/2012/09/What-Would-Jefferson-Do-2.4.pdf; New analysis: Wind energy less than 3 percent of all federal incentives, Into the Wind: The AWEA Blog (July 19, 2016), https://cleanpower.org/blog/14419-2/.
 Transmittal at 13 (citing In the Matter of BPU Investigation of Resource Adequacy Alternatives, Docket No. EO20030203 (N.J. Mar. 27, 2020); Clean Energy Jobs Act, Ill. SB2248, 102nd Gen. Assembly, State of Ill. (Feb. 26, 2021); Kathleen Spees, et al., Alternative Resource Adequacy Structures for Maryland, Maryland Energy Administration (Mar. 2021), https://energy.maryland.gov/Reports/Alternative%20Resource%20Adequacy%20Structures%20for%20Maryland%20Final%20Brattle%20Study%20March%202021.pdf).
 We acknowledge that some protesters have suggested that there are states that may consider leaving PJM’s capacity market under the Focused MOPR, which also presents a risk to the market. While it is theoretically possible that some states will reject the lower price impact of the Focused MOPR, the ubiquity of state actions to support their preferred resources, and the resulting harms that would inevitably follow from any attempt to mitigate that support, presents an even greater risk.
 See 2006 RPM Settlement Order, 117 FERC ¶ 61,331 at P 77 (“[T]he Variable Resource Requirement construct alone is not sufficient to provide appropriate incentives for efficient investment decisions - whether new entry or a retirement decision is at stake. However, revenues from a well-designed and reliable capacity market are one important element supporting efficient private investment.”); PJM Interconnection, L.L.C., 119 FERC ¶ 61,318, at P 172 (2007) (“The issue here is to ensure that the capacity market works efficiently and produces just and reasonable prices that will reliably guide private investment in electric infrastructure—generating capacity, transmission, and demand response.”); June 2018 Order, 163 FERC ¶ 61,236 at P 156.
 NJBPU¸ 744 F.3d at 109; Wis. Pub. Power, Inc. v. FERC, 493 F.3d 239, 262 (D.C. Cir. 2007) (“As FERC recognized in this case, ‘[t]he potential for over-mitigation would increase as BCA thresholds are tightened,’ and petitioners have failed to show that FERC acted unreasonably in choosing precisely what degree of over-mitigation risk was appropriate.”); NextEra Energy Res. v. FERC, 898 F.3d 14, 23 (D.C. Cir. 2018) (NextEra) (“We see no reason to disturb the Commission’s balancing just because it came out in favor of the renewable exemption despite the potential for price suppression.”).
 See, e.g., Calpine-LS Power Protest at 21-25.
 See, e.g., Policy Integrity Comments at 19 (“The capacity market is designed to achieve resource adequacy and reliability regardless of the resource mix. . . . With properly specified demand and supply parameters, scarce capacity will cause capacity prices to increase, incentivizing entry.”); see also Sylwia Bialek, Ph.D., and Burcin Unel, Ph.D., Capacity Markets and Externalities: Avoiding Unnecessary and Problematic Reforms 20 (2018) (Institute for Policy Integrity of N.Y.U. Law School), https://policyintegrity.org/files/publications/Capacity_Markets_and_Externalities_Report.pdf (https://perma.cc/HRQ6-5LUP) (“[E]ven if externality payments reduce capacity prices in the short term, capacity markets are designed to adjust to that change and keep prices at a level necessary to ensure resource adequacy.”); Joshua C. Macey & Jackson Salovaara, Rate Regulation Redux, 168 U. Pa. L. Rev. 1181, 1250 (2020), available at https://scholarship.law.upenn.edu/penn_law_review/vol168/iss5/1/ (“There is no reason that capacity markets are unable to accommodate state subsidies. If state subsidized resources participated in capacity markets and suppressed prices, they might drive some incumbent suppliers out of the market. In the event that the participation of these subsidized resources led to an inadequate supply of resources, capacity prices would rise to incentivize new entry.”).
 El Paso Elec. Co. v. Sw. Pub. Serv. Co., 68 FERC ¶ 61,182, at 61,939 n.41 (1994) (explaining that the role of the “Commission is to protect competition in the bulk power markets, not individual competitors in those markets”) (citing Envtl. Action, Inc. v. FERC, 939 F.2d 1057, 1061 (D.C. Cir. 1991)). See generally Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962).
 We are also unpersuaded by arguments that the Commission must mitigate revenues associated with state programs to prevent an exercise of buyer-side market power by the states. As noted, supra PP 20-21, states acting in a policymaking capacity are not themselves direct consumers of electricity. While states must consider the interests of consumers within their borders when crafting policy, they also consider a diverse range of goals and interests when regulating. Assuming that any such regulation is inherently an exercise of buyer-side market power runs contrary to the role that Congress reserved for the states under section 201(b) of the FPA.
 See P3 Protest at 50; EPSA Protest at 17; OCC Comments at 4.
 See supra P 57.
 Graf Aff. ¶ 17 n.3.
 EPSA Protest at 27-28 (citing NJBPU, 744 F.3d at 97; Connecticut DPUC, 569 F.3d 477).
 NJBPU, 744 F.3d at 102.
 See, e.g., id. (“Our power to rein in bureaucratic behavior like this is, however, constrained. The ‘arbitrary and capricious’ standard of the APA is a high bar indeed, and many agency actions worthy of condemnation are not so deficient that they can be said to cross it. Such is the case here.”).
 EPSA Protest at 62-63 (citing NJBPU, 744 F.3d at 97); P3 Protest at 12-13.
 NJBPU, 744 F.3d at 100, 102.
 In any case, the MOPR under review in NJBPU, applicable only to new natural gas-fired resources, was much more limited than the Expanded MOPR and the Commission’s weighing of the benefits and adverse impacts in 2011 from that MOPR does not dictate how the Commission can or should weigh those impacts now, a decade later. Nor does NJBPU foreclose PJM from seeking changes to the Expanded MOPR, a much different and broader MOPR than the 2011 MOPR under review in NJBPU.
 Commissioner Danly also suggests that, in seeking to alleviate the federal-state tensions created by the Expanded MOPR, PJM has lost sight of the FPA’s purpose, which he describes generally as preventing states from injuring one another by enforcing self-serving policies that unfairly shift costs and other burdens on other states. As an initial matter, this interpretation comes from a protester’s rather liberal reformulation of Supreme Court precedent. As the cases cited in that protest explain, the FPA was enacted to fill the void created by the Supreme Court’s Attleboro decision, which applied the Dormant Commerce Clause to hold that states could not regulate interstate sales of electricity, leaving a regulatory “gap,” which Congress filled with Title II of the FPA. See EPSA, 577 U.S. at 266-67; New York v. FERC, 535 U.S. at 20-23. At no point, however, do those cases describe the FPA’s purpose as being primarily about second guessing state policy choices—even “self-serving” ones—or limiting the effects of state policy choices to instate transactions. And that is how it should be. The Commission’s role is to regulate rates and the penumbra of practices that directly affect those rates, not to act as a federal check on the inevitable effects that come when a state in a multi-state market, like PJM, exercises its reserved authority under the FPA. Those interstate effects are part and parcel with the scale, diversity, and other benefits that come with participation in the larger interstate market.
 See Congentrix Protest at 4 (quoting Tejas Power Corp. v. FERC, 908 F.2d 998, 1004 (D.C. Cir. 1990) (Tejas Power)); P3 Protest at 7, 35-36.
 FPC v. Texaco, 417 U.S. 380, 382-83 (1974) (Texaco).
 Id. at 395-96.
 Id. at 397-99.
 Id. In addition to being unnecessary to the holding, this portion of the opinion is superseded by subsequent jurisprudence. See Morgan Stanley Cap. Grp. Inc. v. Pub. Util. Dist. No. 1 of Snohomish Cty., 554 U.S. 527, 546-47 (2008) (rejecting the Ninth Circuit’s reading of Texaco to require an inquiry into “whether a contract was formed in an environment of market ‘dysfunction’” before applying the presumption that its terms are just and reasonable).
 Texaco, 417 U.S. at 387-88 (“It has repeatedly been stated that no single method need be followed by the Commission in considering the justness and reasonableness of rates.”).
 Tejas Power, 908 F.2d at 1003-04.
 Id. at 1004 (finding that the Commission failed to determine whether charges are in the public interest); id. (stating that the Commission’s attempts to justify the decision were “not entirely logical”); id. at 1005 (stating that it was unclear if even the Commission believed it had substantial evidence to back the relevant findings).
 Id. at 1006 (“We do not hold that the Commission cannot approve any of the terms of this settlement, only that it has so far failed adequately to justify its doing so . . . [and] reliance upon the LDCs’ agreement is misplaced in the absence of a showing that their markets are so structured that they have adequate incentives to keep costs down.”).
 At the time of issuance of this statement, Commissioner Danly cites Mont. Consumer Counsel v. FERC, 659 F.3d 910, 916 (9th Cir. 2011); Blumenthal v. FERC, 552 F.3d 875, 882 (D.C. Cir. 2009); Cal. ex rel. Lockyer v. FERC, 383 F.3d 1006, 1013 (9th Cir. 2004); and Elizabethtown Gas Co. v. FERC, 10 F.3d 866, 870 (D.C. Cir. 1993) (Elizabethtown).
 Mont. Consumer Counsel, 659 F.3d at 914-915 (discussing only seller-side market power provisions); Blumenthal, 552 F.3d at 882 (same); Cal. ex rel. Lockyer, 383 F.3d at 1013 (same); Elizabethtown, 10 F.3d at 95-96 (accepting Commission determination that market conditions are sufficient to preclude the seller from exercising market power).
 NEPGA, 757 F.3d at 283.
 See id. at 293 (upholding Commission determination to mitigate capacity offers that suppress price because the court deferred to the Commission’s determination that such measures were necessary to its objective “to ensure that the prices in capacity markets reflect the market cost of new entry when new entry is needed,” and that determination was based on substantial evidence).
 See, e.g., NJBPU, 744 F.3d at 74 (upholding Commission approval of the elimination of an exemption to buyer-side market power mitigation provision that had previously been accepted).
 See, e.g., NextEra, 898 F.3d at 14 (upholding Commission approval of a new exemption to buyer-side market power mitigation provisions that had previously been rejected).
 NEPGA, 757 F.3d at 293 (deferring “to the Commission’s decision to mitigate buyer-side power because its determination was not arbitrary or capricious, but instead a proper exercise of its role in balancing competing interests. FERC evaluated the relative importance of several parameters . . . and reasonably determined that it was more important to prevent price distortion and excess capacity purchase than it was to allow out-of-market resources to clear.”); NextEra, 898 F.3d at 21 (“In this case, the Commission reasonably balanced the potential for limited price suppression against competing interests in concluding that the renewable exemption to the minimum offer price rule is consistent with the purpose of the forward capacity market.”); NJBPU, 744 F.3d at 109 (“Surely FERC is permitted to weigh the danger of price suppression against the counter-danger of over-mitigation, and determine where it wishes to strike the balance.”).
 NJBPU, 744 F.3d at 109 (rejecting petitioner’s argument that “erring on the side of allowing more resources to avoid mitigation is not a permissible policy”).
 NEPGA, 757 F.3d at 296 (deferring to FERC’s determination that inability to deter their entry justified decision not to mitigate certain resources); NJBPU, 744 F.3d at 106-07 (stating that FERC adequately explained application of MOPR to only natural gas-fired resources based on their particular impacts on the market); NextEra, 898 F.3d at 21 (deferring to FERC’s determination that an exemption from mitigation effectuates the primary purpose of the market).
 NextEra, 898 F.3d at 21 (“Although we deferred to FERC’s decision to decline a categorical mitigation exemption . . . we never held that the Commission must always weigh encouraging renewable energies as less important than preventing price suppression.”); see also NEPGA, 757 F.3d at 295 (explaining that “[i]n this instance, the Commission chose to value most strongly the concept of preventing price distortion” (emphasis added)).
 NJBPU, 744 F.3d at 102 (explaining that Commission finding that a speculative harm had become a reality was a sufficient basis for FERC’s “about-face”); NextEra, 898 F.3d at 22 (finding change in the market demand curve a sufficient basis for change in position).
 See generally 2006 RPM Settlement Order, 117 FERC ¶ 61,331 (establishing MOPR provisions that did not treat state support as an exercise of buyer-side market power).
 2011 MOPR Order, 135 FERC ¶ 61,022 at P 153 (eliminating the state policy exception for only one resource type).
 N.Y. Pub. Serv. Comm’n v. N.Y. Indep. Sys. Operator, Inc., 158 FERC ¶ 61,137 at P 30 (finding application of buyer-side market power mitigation rules to a specific type of resource based on receipt of state support unjust and unreasonable).
 Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 226 (1993) (Brooke Grp.) (“The mechanism by which a firm engages in predatory pricing—lowering prices—is the same mechanism by which a firm stimulates competition; because cutting prices in order to increase business often is the very essence of competition . . . mistaken inferences . . . are especially costly, because they chill the very conduct the antitrust laws are designed to protect.”) (internal quotation and citation omitted); Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 549 U.S. 312, 325-26 (2007) (requiring a predatory-bidding plaintiff prove defendant has a dangerous probability of recouping losses incurred through exercise of monopsony power because “the risk of chilling procompetitive behavior with too lax a liability standard is as serious here as it was in Brooke Group”); Cascade Health Sols. v. PeaceHealth, 515 F.3d 883, 902-03 (9th Cir. 2008) (explaining that one challenge to implementing antitrust laws is to ensure that they “do not punish economic behavior that benefits consumers and will not cause long-run injury to the competitive process”).
 Commissioner Danly appears to regard state energy policy as an unjustified interference in “the market,” i.e., PJM’s capacity market, as if a century of state energy regulation and the directive of FPA section 201(b) were a vestige of an ancient regulatory regime. According to Commissioner Danly, “[b]efore the establishment of Independent System Operators (ISO) and Regional Transmission Organizations (RTO), planning to ensure resource adequacy was the responsibility of local utilities overseen by the states. However, a number of our ISOs and RTOs have assumed that responsibility from the states and have been designed to encourage resource adequacy through market mechanisms.” Written Testimony of James P. Danly, Commissioner, Federal Energy Regulatory Commission, Before the Committee on Energy & Natural Resources, U.S. Senate (Sept. 28, 2021), https://www.energy.senate.gov/services/files/A43B611B-28EF-4FEB-AD37-3A2A752EB59B. RTOs/ISOs have no authority to “assume that responsibility [for resource decisions] from the states,” nor has the Commission ever suggested that they do.
 Northwest Central, 489 U.S. at 512-13.
 Id. at 513; see also Hughes, 136 S. Ct. at 1300 (Sotomayor, J., concurring) (“recogniz[ing] the importance of protecting the States’ ability to contribute, within their regulatory domain, to the [FPA]’s goal of ensuring a sustainable supply of efficient and price-effective energy”).
 Supra n.124 (discussing extensive influence of federal policy on the resource mix).
 See supra P 57 & nn.121-124.
 Commissioner Danly asserts that costs induced by states are actual whereas revenues are distortionary. But he fails to explain why revenues associated with state-created property rights, such as renewable energy credits, are any less valid than costs associated with state-created obligations such as pollution control limits, or why it is up to the Commission to pick and choose which state property rights to respect.
 See, e.g., Indep. Mkt. Monitor for PJM v. PJM Interconnection, L.L.C., 176 FERC ¶ 61,137 (2021) (Danly, Comm’r, dissenting at P 1).
 This figure sums the incremental nameplate capacity that would be required by 2035 to meet state policy requirements enacted since 2018. See supra note 103.
 PIOs Comments at 44-45.
 See supra P 52.
 S.C. Pub. Serv. Auth., 762 F.3d at 76.
 See supra PP 51-52.
 See supra P 80.
 Commissioner Danly further points to statements from PJM that it “should evaluate the need for procurement of additional reliability attributes, such as ramping, flexibility and inertia that may be required for a system with increased intermittent and distributed energy resources” and that “[r]esource adequacy in the future should no longer be measured based solely on the characteristics of the peak day; it must evolve to include the ability to serve load in all hours of the year.” See Manu Asthana, Statement of PJM Interconnection, L.L.C., Technical Conference on Resource Adequacy in the Evolving Electricity Sector, Docket No. AD21-10-000, at 8 (Mar. 23, 2021). Again, we agree. But the need for new services is not an issue addressed in the capacity market and the MOPR has never been justified as a means for ensuring the availability of those services. In any case, the best way to address concerns about those services is to procure them in the relevant markets—an issue that the Commission is examining in its inquiry into potential energy and ancillary services markets reforms in Docket No. AD21-10-000. With respect to considering the ability to serve load in all hours of the year rather than solely at peak, as noted, that is precisely what PJM’s ELCC methodology was developed to do.
 Transmittal at 32 (citing Graf Aff. ¶ 9). Commissioner Danly, by contrast, treats the terms “exercise of buyer-side market power” and “state support” as synonymous. By this sleight of hand, Commissioner Danly turns states into buyers (they are not), deems all state support for in-state resources to be anticompetitive (which it almost never is), and turns capacity market sellers into puppets of the state seeking to suppress capacity prices (which is directly counter to their interests as sellers). In any case, as noted above, see supra P 74, Commissioner Danly never adequately explains why it is appropriate to equate all state support with the exercise of buyer-side market power.
 PJM, Intra-PJM Tariffs, OATT, Definitions – A-B (16.0.0).
 PJM, Intra-PJM Tariffs, OATT, Definitions – E-F (31.0.0). PJM proposed to define “Load Interest” as the “responsibility for serving load within the PJM Region, whether by the Capacity Market Seller, an affiliate of the Capacity Market Seller, or by an entity with which the Capacity Market Seller is in contractual privity with respect to the subject Generation Capacity Resource.” PJM, Intra-PJM Tariffs, OATT, Definitions – L-M-N (30.0.0).
 Transmittal at 27.
 PJM stated that prior to initiating an inquiry, PJM and/or the IMM will provide the capacity market seller a written notification, at least 135 days prior to conducting the capacity market auction, stating the basis for PJM’s and/or the IMM’s inquiry. PJM stated that providing such written notification at least 135 days prior to the capacity market auction will provide sellers with sufficient time (15 days) to submit a request for unit-specific exception in case PJM determines to apply the MOPR. Transmittal at 33 .
 Id. (citing Graf Aff. ¶ 20).
 Id. at 34 (citing PJM, Intra-PJM Tariffs, OATT, Attach. DD, § 5.14(h-2)(2)(B)(i) (32.0.0)).
 Id. at 35-37; PJM, Intra-PJM Tariffs, OATT, Attach. DD, § 5.14(h-2)(2)(B)(i)(a) (32.0.0) (“To the extent the foregoing analyses show that the Generation Capacity Resource would have a material effect on RPM Auction clearing prices, the Capacity Market Seller shall be deemed to have the ability to exercise Buyer-Side Market Power.”).
 Transmittal at 37-39 (citing PJM, Intra-PJM Tariffs, OATT, Attach. DD, § 5.14(h-2)(2)(B)(ii) (32.0.0); Graf Aff. ¶ 24).
 Id. at 34 (citing PJM, Intra-PJM Tariffs, OATT, Attach. DD, § 5.14(h-2)(2)(B)(i) (32.0.0)).
 Id. at 40 (citing PJM, Intra-PJM Tariffs, OATT, Attach. DD, § 5.14(h-2)(2)(B)(i)(b) (32.0.0)).
 Id. (citing PJM, Intra-PJM Tariffs, OATT, Attach. DD, §5.14(h-2)(2)(B)(i)(b) (32.0.0)).
 Id. at 32.
 Id. at 35 (citing PJM, Intra-PJM Tariffs, OATT, Attach. DD, § 5.14(h-2)(2)(B)(iii) (32.0.0)).
 Id. at 18 (“Unlike a vertical demand curve, which ‘creates incentives for the buyer to expand supply to push the capacity price to the price floor,’ a ‘sloped demand curve mitigates both incentives,’ because supply changes along a downward-sloping demand curve ‘have a more modest impact on the capacity price’ relative to a vertical curve.”) (citing Cramton Aff. ¶ 30).
 Id. at 22-23 (citing Graf Aff. ¶ 10).
 Id. at 27 (citing Graf Aff. ¶ 15).
 AEBG Comments at 3-5; AEE Comments at 3-8; AMP Comments at 7, 10-11; CET Comments at 4-5; DCPSC Comments at 1-2, 5; Exelon and PSEG Comments at 3-9; JCA Comments at 8; Joint PJM Cooperatives Comments at 14-18; J-POWER Comments at 2-4; Maryland PSC Comments at 1-3; NCEMC Comments at 3-5 (conditioning support on revisions being made to the proposed Self-Supply provisions); NEI Comments at 2; NJBPU Comments at 2-3; OPSI Comments at 2; Pine Gate Comments at 1-6; PIOs Comments at 23-46; Policy Integrity Comments at 1-3.
 AEE Comments at 6; CET Comments at 1 (citing Keech Aff. ¶¶ 7-21).
 Pine Gate Comments at 3.
 AEE Comments at 5-6.
 See Pine Gate Comments at 6 (arguing that the definition of State Subsidy under the Expanded MOPR was confusing to market participants).
 IMM Protest at 8; NGSA Protest at 7; P3 Protest at 87-88.
 Id. at 88 (citing Quinn Aff. ¶¶ 41-42).
 Id. (citing Quinn Aff. ¶ 45).
 PJM Answer at 23-24. PJM also noted that a seller exercising supply-side market power would also face regulatory risks, and possible fines, for violating the Commission’s Anti-Manipulation Rule. Id. at 23 n.90.
 See, e.g., PAPUC and PUCO Protest at 13; Cogentrix Protest at 21; P3 Protest at 68-69.
 PJM Answer at 19.
 P3 Protest at 60-61 (citing Transmittal at 31) (asserting that PJM states it “may” initiate an inquiry, but that PJM should be required to initiate an inquiry if it suspects a market power violation); id. at 69, 71, 78-79 (taking issue with provision stating that an offer can be justified economically or otherwise because “otherwise” is open ended); id. at 73 (alleging that the Tariff does not indicate how authentic consumer preferences will be distinguished from uneconomic offers in the provision providing that compensation in the form of well demonstrated customer preferences shall not, in and of itself, be a basis for the determination of buyer-side market power); Vistra Protest at 19-21 (agreeing that the receipt of compensation related to a resource’s characteristics alone does not mean that a seller is exercising buyer-side market power, but that a resource’s receipt of such compensation must not be used to insulate that resource from the application of the ability and incentive tests); IMM Protest at 13-14 (stating that material is not defined so it is unclear what will be deemed a material impact in terms of buyer-side market power).
 P3 Protest at 78 (citing Cal. Indep. Sys. Operator Corp., 147 FERC ¶ 61,231, at P 220 (2014); Astoria Generating Co., L.P. v. N.Y. Indep. Sys. Operator, Inc., 139 FERC ¶ 61,244, at P 44 (2012); PJM Interconnection, L.L.C., 126 FERC ¶ 61,275, at P 190 (2009); PJM Interconnection, L.L.C., 119 FERC ¶ 61,318 at PP 180-81).
 PJM Answer at 28-29 (citing Graff Reply Aff. ¶ 3). As an example, PJM stated that a generator that supplies its customers exclusively with wind energy is responding to those customers’ well demonstrated preference for wind over any other generation source.
 IMM Protest at 12. PAPUC and PUCO similarly argued that PJM’s proposed 15-day window to review certifications is insufficient time. PAPUC and PUCO Protest at 12-13.
 PJM Answer at 33-34.
 Calpine-LS Power Protest at 15; Cogentrix Protest at 17-20; EPSA Protest at 40; P3 Protest at 76 (citing 2011 MOPR Order, 135 FERC ¶ 61,022 at PP 101, 105-106).
 P3 Protest at 76-77 (citing NYPSC v. NYISO, 170 FERC ¶ 61,119 at P 39, 110).
 Id. at 77 (citing 2011 MOPR Order, 135 FERC ¶ 61,022 at PP 84, 86); see also EPSA Protest at 42.
 PJM Answer at 30-31 (citing 2011 MOPR Order, 135 FERC ¶ 61,022 at PP 76, 87).
 Id. at 32-33 (citing 2011 MOPR Order, 135 FERC ¶ 61,022 at P 108); Graf Aff. ¶ 22.
 Id. at 33 (citing Graf Aff. ¶ 22).
 IMM Protest at 9.
 Transmittal at 32 (citing Graf Aff. ¶ 9).
 See, e.g., Mas-Colell, A., Whinston M., & Green, J., Microeconomic Theory 383 (1995) (defining market power as “the ability to profitably alter prices away from competitive levels”); see also U.S. Steel Corp. v. Fortner Enters., Inc., 429 U.S. 610, 612 n.1 (1977) (stating that “‘increasing sales’ and ‘increasing market share’ are normal business goals, not forbidden by [section 2 of the Sherman Act] without other evidence of an intent to monopolize”); United States v. Paramount Pictures, 334 U.S. 131, 173 (1948) (explaining that “‘specific intent’ is not necessary to establish a ‘purpose or intent’ to create a monopoly but that the requisite ‘purpose or intent’ is present if monopoly results as a necessary consequence of what was done”) (quoting United States v. Griffith, 334 U.S. 100 (1948)).
 PJM, Intra-PJM Tariffs, OATT, Definitions – E-F (31.0.0) (Exercise of Buyer-Side Market Power “shall mean an anti-competitive behavior” of a seller with a load interest, or directed by an entity with a load interest, to uneconomically lower capacity offers in order to suppress capacity prices for the overall benefit of the seller’s and/or an affiliate of the seller’s portfolio of generation and load.).
 Graf Aff. ¶¶ 6-7.
 Id. ¶ 10.
 Id. ¶ 11.
 Id. ¶ 12.
 Id. ¶¶ 7, 11-12.
 See PIOs Comments at 26 (citing Jay Morrison, Capacity Markets: A Path Back to Resource Adequacy, 37 Energy L.J. 1, 32 (2016), https://www.eba-net.org/assets/1/6/18-1-60-Morrison_FINAL.pdf.; Joshua Macey & Robert Ward, MOPR Madness, 42 Energy L.J. 67, 107 (Oct. 18, 2020), https://www.eba-net.org/assets/1/6/6_-_%5bMacey___Ward%5d%5b67-122%5d.pdf); see also infra PP 157-159 (discussing PJM’s proposed self-supply exemption).
 In states with competition between LSEs, an LSE, even one with a significant load, has little incentive to use out of market support to reduce price as its competitors would be able to free-ride off of those lower prices.
 See, e.g., Brooke Grp., 509 U.S. at 226 (“[T]he mechanism by which a firm engages in predatory pricing—lowering prices—is the same mechanism by which a firm stimulates competition[.]”) (internal quotations and citations omitted); Nat’l Collegiate Athletic Ass’n v. Alston, 141 S. Ct. 2141, 2161 (2021) (stating that “mistaken condemnations of legitimate business arrangements ‘are especially costly, because they chill the very procompetitive conduct’ the antitrust laws are designed to protect”) (citing Verizon Commc’ns Inc. v. Trinko, 540 U.S. 398, 414 (2004)); W. Penn Allegheny Health Sys., Inc. v. UPMC, 627 F.3d 85, 103 (3d Cir. 2010) (describing the “general hesitance of courts to condemn unilateral behavior [of firms with monopsony power], lest vigorous competition be chilled”) (citing Am. Needle, Inc. v. NFL, 560 U.S. 183, 190 (2010); Goldwasser v. Ameritech Corp., 222 F.3d 390, 397 (7th Cir. 2000))); see also Town of Concord v. Bos. Edison Co., 915 F.2d 17, 21 (1st Cir. 1990) (“[A] practice is not anticompetitive simply because it harms competitors. After all, almost all business activity, desirable and undesirable alike, seeks to advance a firm’s fortunes at the expense of its competitors.”).
 Nat’l Collegiate Athletic Ass’n, 141 S. Ct. at 2155 (“Most restraints challenged under the Sherman Act—including most joint venture restrictions—are subject to the rule of reason, which (again) we have described as ‘a fact-specific assessment of market power and market structure’ aimed at assessing the challenged restraint’s ‘actual effect on competition’—especially its capacity to reduce output and increase price.”).
 Weyerhaeuser, 549 U.S. at 325 (“A predatory-bidding plaintiff also must prove that the defendant has a dangerous probability of recouping the losses incurred in bidding up input prices through the exercise of monopsony power.”).
 See NJBPU, 744 F.3d at 97 (“FERC is permitted to weigh the danger of price suppression against the counter-danger of over-mitigation, and determine where it wishes to strike the balance.”). Although the Commission has conducted the balancing with varying results, the Commission may, as discussed elsewhere in this order, alter its policies even without a change in circumstances. See Motor Vehicle Mfrs. Ass’n, 463 U.S. at 57.
 E.g., N.Y. Pub. Serv. Comm’n v. N.Y. Indep. Sys. Operator, Inc., 154 FERC ¶ 61,088 at P 31.
 See Transmittal at 27 (describing why risks of an exercise of buyer side market power are relatively low); Graf Aff. ¶¶ 11-12.
 IMM Protest at 9-10.
 See Graf Aff. ¶¶ 7, 11-12.
 See December 2019 Order, 169 FERC ¶ 61,239 at P 204; June 2018 Order, 163 FERC ¶ 61,236 at PP 155-156 (finding that resources receiving out-of-market state support affect capacity prices regardless of the intent motivating the support); ISO New England Inc., 135 FERC ¶ 61,029 at P 170 (stating that out-of-market support “suppresses prices regardless of intent”).
 See supra PP 49-58.
 NYISO, for example, also employs different mitigation measures for seller-side and buyer-side market power. See NYISO, NYISO Tariffs, NYISO MST, Attach. H, §§ 188.8.131.52 (2.0.0) (Audit, Review, and Penalties for Physical Withholding to Increase Market-Clearing Prices; Alignment with Short-Term Reliability Process), 184.108.40.206 (5.0.0) (Buyer-Side Market Power Mitigation Measures for Installed Capacity).
 See Transmittal at 22-23 (citing Graf Aff. ¶ 10) (explaining that seller-side and buyer-side market power are exercised in different ways).
 Transmittal at 27; Graf Aff. ¶ 15; see supra P 101.
 Commissioner Christie relies on the IMM’s contention that the Focused MOPR creates “a confusing and inefficient administrative process that effectively makes it unnecessary and impossible to prove buyer side market power.” Comm’r Christie Statement at P 9. However, Commissioner Christie fails to acknowledge any of the arguments that PJM made in its Answer, which responded to many of the IMM’s concerns with the process, see PJM Answer at 19-21, 25-29, 33-35, or the fact that, by the IMM’s own estimate, the IMM’s proposal would “likely have the same outcome as . . . PJM[’s],” IMM Protest at 17.
 PJM, Intra-PJM Tariffs, OATT, Attach. M, § IV(I) (5.0.0).
 IMM Protest at 14; P3 Protest at 71-72; Vistra Protest at 19 (citing PJM, Intra-PJM Tariffs, OATT, Attach. DD, § 5.14(h-2)(2)(B)(i)(b) (32.0.0)).
 On the issue of discretion afforded to an RTO, the Commission previously stated, in the context of a credit policy issue, that “it is impractical to enumerate all of the examples that constitute an unreasonable credit risk, as doing so may unnecessarily limit when an RTO can act to protect its wholesale markets and market participants to only those specified instances enumerated in the tariff.” PJM Interconnection, L.L.C., 171 FERC ¶ 61,173, at P 36 (2020). The Commission acknowledged PJM’s proposal as providing it an appropriate amount of flexibility.
 PJM, Intra-PJM Tariffs, OATT, Attach. DD, § 5.14(h-2)(B)(i) (32.0.0).
 PJM Answer at 31 (stating that, while the 2011 test allegedly allowed buyers to evade the MOPR by contracting with third-party sellers, PJM’s proposed incentive test now precludes such third-party gaming by considering the load-serving responsibility of any entity the seller “is in contractual privity with respect to the subject Generation Capacity Resource”). PJM further stated that the Tariff makes clear that a bilateral contract between the seller and an entity with a load interest with the express purpose of lowering capacity market clearing prices is evidence of the Exercise of Buyer-Side Market Power. Id. (citing PJM, Intra-PJM Tariffs, OATT, Definitions – E-F (31.0.0) (Exercise of Buyer-Side Market Power).
 Id. We also note that although the Commission accepted the 2011 filing that eliminated the net-short test, the Commission subsequently approved a filing in 2013, which also included a net-short test. 2013 MOPR Order, 143 FERC ¶ 61,090 at P 107. As PJM explains, it modeled its net-short analysis on the one the Commission subsequently approved in 2013. Transmittal at 39 n.130.
 PJM, Intra-PJM Tariffs, OATT, Attach. DD, § 5.14(h-2)(2)(B)(i) (32.0.0).
 See PJM, Intra-PJM Tariffs, OATT, Attach. M, § V (5.0.0).
 PJM Answer at 34.
 See PJM, Intra-PJM Tariffs, OATT, Attach. DD, § 5.14(h-2)(1) (32.0.0).
 Transmittal at 27.
 See, e.g., Cal. Indep. Sys. Operator Corp., 168 FERC ¶ 61,199, at P 55 (2019) (finding attestation requirement that resource will retire or mothball coupled with Commission’s rules prohibiting false or misleading information deters resource toggling); Preventing Undue Discrimination & Preference in Transmission Serv., Order No. 890-A, 121 FERC ¶ 61,297, at P 920 (2007) (attestation regarding network resources coupled with civil penalties provide effective incentives for network customers to not designate ineligible network resources), order on reh’g, Order No. 890-B, 123 FERC ¶ 61,299 (2008), order on reh’g, Order No. 890-C, 126 FERC ¶ 61,228, order on clarification, Order No. 890-D, 129 FERC ¶ 61,126 (2009).
 PJM, Intra-PJM Tariffs, OATT, Definitions – C-D (30.0.0).
 Transmittal at 25 (citing Hughes, 136 S. Ct. at 1299).
 Id. at 44.
 Id. at 45-46 (citing PJM, Intra-PJM Tariffs, OATT, Attach. DD, § 5.14(h-2)(2)(A)(i) (32.0.0)).
 PJM, Intra-PJM Tariffs, OATT, Attach. DD, § 5.14(h-2)(2)(A)(i) (32.0.0).
 Transmittal at 46.
 Id. at 28-29 (quoting PJM, Intra-PJM Tariffs, OATT, Attach. DD, § 5.14(h-2)(1)(C) (32.0.0)).
 Id. at 29 (quoting PJM, Intra-PJM Tariffs, OATT, Attach. DD, § 5.14(h-2)(1)(C) (32.0.0)).
 Id. at 31. PJM stated that depending on the outcome of an inquiry, PJM may request a seller to change its certification and/or apply the MOPR if PJM determines that the subject resource will receive Conditioned State Support and the Commission has accepted that the state program provides Conditioned State Support.
 Id. at 26 (citing December 2019 Rehearing Order II, 173 FERC ¶ 61,061 at P 323).
 Id. at 27.
 Id. at 46-47. PJM proposed to define “Legacy Policy” as “any legislative, executive, or regulatory action that specifically directs a payment outside of PJM Markets to a designated or prospective Generation Capacity Resource and the enactment of such action predates October 1, 2021, regardless of when any implementing governmental action is enacted or promulgated to specifically effectuate the action to direct payment outside of PJM Markets.” PJM, Intra-PJM Tariffs, OATT, Definitions – L-M-N (30.0.0).
 Transmittal at 46-47.
 AMP Comments at 12-13; CET Comments at 1, 4, 6; Exelon and PSEG Comments at 4, 8; JCA Comments at 2, 9; NJBPU Comments at 3; Pine Gate Comments at 5-6.
 JCA Comments at 9; PSEG Supplemental Comments at 2-6.
 PSEG Supplemental Comments at 2-6.
 JCA Comments at 11-12; PIOs Comments at 52-56; IMM Protest at 5-6.
 Cogentrix Protest at 24; NGSA Protest at 6; P3 Protest at 58; EPSA Protest at 44; Vistra Protest at 9-11.
 PIOs Comments at 51-52; Vistra Protest at 13-15.
 P3 Protest at 65; Cogentrix Protest at 24-25 (arguing that PJM provides no rationale to exclude Legacy Policies); NGSA Protest at 6-7 (arguing that PJM provided “woefully inadequate” justification for a blanket exemption for Legacy Policies); PAPUC and PUCO Protest at 15-16 (claiming that the Legacy Policies exemption violates Hughes).
 Cogentrix Protest at 24; NGSA Protest at 6; P3 Protest at 58; EPSA Protest at 44; Vistra Protest at 9-11.
 PIOs Comments at 53-54; IMM Protest at 4-5.
 PIOs Comments at 51-52 (arguing that “courts, and not the Commission or PJM, are the final arbiter of the meaning of the FPA”); see also Vistra Protest at 13-15.
 PIOs Comments at 51.
 PJM Answer at 35 (citing JCA Comments at 10).
 Id. at 35-36 (citing PJM, Intra-PJM Tariffs, OATT, Definitions – C-D (30.0.0); PJM, Filing, Attach. F, Affidavit of Lisa Morelli (Morelli Aff.) ¶ 12).
 Id. at 36 (citing Morelli Aff. ¶ 14).
 See New England Ratepayers Ass’n, 168 FERC ¶ 61,169, at P 44 (2019) (applying the Hughes criteria to a New Hampshire statute mandating a purchase price for wholesale sales by certain generators in the state, and finding that the law “does explicitly what the Maryland program in Hughes did implicitly” by “establish[ing] a predetermined rate and requir[ing] utilities within the state to offer to purchase electricity at that specific state-established rate”).
 We also note that PJM’s proposed definition of “Conditioned State Support” is in accord with the Hughes decision itself, which, while holding that the specific Maryland state policy under consideration in the case was preempted, took pains to clarify that “[o]ur holding is limited,” and did not limit “the permissibility of various other measures States might employ to encourage development of new or clean generation, including tax incentives, land grants, direct subsidies, construction of state-owned generation facilities, or re-regulation of the energy sector.” Hughes, 136 S. Ct. at 1299.
 New England Ratepayers Ass’n, 168 FERC ¶ 61,169 at PP 42-44.
 Hughes, 136 S. Ct. at 1300 (Sotomayor, J., concurring).
 See, e.g., New England Ratepayers Ass’n, 168 FERC ¶ 61,169; Cal. Pub. Util. Comm., 132 FERC ¶ 61,047, at PP 64-72 (2010) (finding that California Public Utilities Commission (CPUC) orders directing California utilities to purchase capacity and energy from certain resources are preempted to the extent that the CPUC is setting wholesale rates for such transactions).
 The Hughes case is a prime example: approximately five years elapsed between its initial filing in federal district court and the Supreme Court decision.
 PJM Answer at 35 (emphasis added by PJM).
 Transmittal at 46.
 See, e.g., NYISO, NYISO Tariffs, NYISO MST, Attach. H, § 220.127.116.11.9.2 (3.0.0) (requiring units subject to NYISO’s MOPR who wish to claim the competitive entry exemption to certify and acknowledge that they are eligible for the exemption through attestations); ISO-NE, Transmission, Markets and Services Tariff, §§ III.18.104.22.168.2.1 (requiring an affidavit of a corporate officer attesting to the accuracy of the delist bid content), III.22.214.171.124.1.3 (67.0.0) (requiring that project sponsors for on-peak demand resources and seasonal peak demand resources certify yearly that the demand capacity resource continues to perform in accordance with the submitted measurement and verification documents reviewed by ISO-NE); ISO-NE, Transmission, Markets and Services Tariff, § III.126.96.36.199.1 (64.0.0) (requiring the project sponsor seeking to participate in the substitution auction to certify that the new capacity resource is a Sponsored Policy Resource as part of the submission of the new capacity qualification package).
 See, e.g., 18 C.F.R. § 35.13(d)(6) (2020) (requiring entities making cost of service filings to include “an attestation by its chief accounting officer or another of its officers that, to the best of that officer’s knowledge, information, and belief, the cost of service statements . . . are true, accurate, and current representations of the utility’s books”); Midcontinent Independent System Operator, FERC Electric Tariff, Attach. FF, § VIII.D.5.12 (85.0.0) (requiring attestation related to Order No. 1000-compliant regional transmission planning processes); Southwest Power Pool, Inc., OATT, § 29.2 (1.0.0) (requiring a statement signed by an authorized officer attesting that all of the listed network resources satisfy certain conditions); California Independent System Operator Corp., CAISO eTariff, § 41.2.1 (1.0.0) (requiring submission of a notice indicating retirement/mothball must be accompanied by a notarized attestation stating the reason for the retirement/mothball, and attesting that the decision to retire or mothball the resource is definite).
 PJM, Intra-PJM Tariffs, OATT, Attach. DD, §§ 5.14(h-1)(1)(C)(i), 5.14(h-2)(1)(A) (32.0.0).
 PJM, Intra-PJM Tariffs, OATT, Attach. DD, §§ 5.14(h-1)(1)(C)(i), 5.14(h-2)(2)(C) (32.0.0).
 PJM, Intra-PJM Tariffs, OATT, Attach. DD, §§ 5.14(h-1)(1)(C)(iii), 5.14(h-2)(1)(C) (32.0.0).
 Transmittal at 27.
 Cf. December 2019 Order, 169 FERC ¶ 61,239 at P 14 (finding just and reasonable an exemption from the Expanded MOPR for certain existing resources “because the Commission has expressly exempted those resources in the past based on the assessment that such resources had little impact on clearing prices, and the initial investments in those resources—unlike certain existing resources that new State Subsidies are designed to retain—were made in reliance on earlier Commission determinations”).
 PJM proposed to define “Self-Supply Sellers” as: (1) vertically integrated utilities that include their generation assets “in [their] regulated rates, and earn a regulated return on [their] investment in such generation;” and (2) public power entities, i.e., “electric cooperatives that are either rate regulated by the state or have their long-term resource plan approved or otherwise reviewed and accepted by a [RERRA] and municipal utilities or joint action agencies that are subject to regulation by a [RERRA].” Transmittal at 41 (quoting PJM, Intra-PJM Tariffs, OATT, Definitions – R-S (26.0.0)).
 PJM defines “Relevant Electric Retail Regulatory Authority” (i.e., RERRA) as “an entity that has jurisdiction over and establishes prices and policies for competition for providers of retail electric service to end-customers, such as the city council for a municipal utility, the governing board of a cooperative utility, the state public utility commission or any other such entity.” PJM, Intra-PJM Tariffs, OATT, Definitions – R-S (26.0.0).
 Transmittal at 40-41 (quoting PJM, Intra-PJM Tariffs, OATT, Attach. DD, § 5.14(h-2)(2)(B)(ii) (32.0.0)).
 Id. at 41 (citing Graf Aff. ¶ 25).
 Id. at 41-42 (citing Graf Aff. ¶ 25).
 See PJM, Intra-PJM Tariffs, OATT, Definitions – C-D (30.0.0) (defining “Demand Resource”).
 See PJM, Intra-PJM Tariffs, Reliability Assurance Agreement, Article 1 – Definitions (36.0.0) (defining “Energy Efficiency Resource”); see also PJM, Intra-PJM Tariffs, OATT, Definitions – E-F (31.0.0) (referencing PJM Reliability Assurance Agreement).
 Transmittal at 25-26.
 E.g., OCC Comments at 13-14; Vistra Protest at 21-22; P3 Protest at 69.
 Vistra Protest at 21-22; P3 Protest at 69.
 E.g., AMP Comments at 1-2, 5-6, 13-15; NRECA Comments at 4; Joint PJM Cooperatives Comments at 9-10; Indicated Cooperatives Protest at 4-5.
 AMP Comments at 14-19; Joint PJM Cooperatives Comments at 16-17; OCC Comments at 13.
 IMM Protest at 6-7; see also Calpine-LS Power Protest at 15-16 (arguing that large buyers, like self-supply entities, have an interest in reducing prices).
 AEE Comments at 7-8; Maryland PSC Comments at 3; Exelon and PSEG Comments at 13.
 IMM Protest at 7-8.
 PJM Answer at 17-18.
 Graf Aff. ¶ 25; see also ConEd v. NYISO, 150 FERC ¶ 61,139 at P 46 (finding that subjecting competitive unsubsidized merchant resources to NYISO’s MOPR serves “no competitive objective or market efficiency . . . because customers do not bear the risk or costs of uneconomic entry of such resources” and that the “competitive market process alone is sufficient to discipline competitive unsubsidized merchant entry”).
 Graf Aff. ¶ 25.
 See 2011 MOPR Order, 135 FERC ¶ 61,022 at P 118 (rejecting PJM’s proposal to require parties to make a section 206 filing with the Commission to demonstrate that a sell offer is consistent with the project’s costs and with expected revenues because of potentially complex and lengthy litigation that could be avoided if PJM and the IMM made such determinations first).
 Transmittal at 41.
 E.g., id. at 41-42 (citing Graf Aff. ¶ 25); AMP Comments at 16-19; Joint PJM Cooperatives Comments at 17 (citing Montalvo Aff. ¶ 16); OCC Comments at 13.
 Joint PJM Cooperatives Comments at 16-17 (citing Montalvo Aff. ¶¶ 7, 16); see also AMP Comments at 16-19 (asserting that self-supply entities have limited opportunities to build generation for market manipulation reasons due to such constraints as federal tax requirements on tax-advantaged obligations and that the public power business model itself contains disincentives to Exercise Buyer-Side Market Power).
 PJM, Intra-PJM Tariffs, OATT, Definitions – R-S (26.0.0).
 Transmittal at 41. The IMM even acknowledged that self-supply entities have always passed the previously existing net-short/net-long test, IMM Protest at 7, which implies that state regulatory review of these entities’ long-range resource plans has been effective.
 2011 MOPR Rehearing Order, 137 FERC ¶ 61,145 at P 208; see also AMP Comments at 13, 15.
 See December 2019 Order, 169 FERC ¶ 61,239 at P 204 (“Since these resources may receive State Subsidies permitting uneconomic entry into PJM’s capacity market, regardless of intent, we find that it is not just and reasonable to exempt new self-supply from application of the applicable default offer price floor.”); December 2019 Rehearing Order I, 171 FERC ¶ 61,035 at PP 220, 225 (same).
 IMM Protest at 6-7.
 Greater Bos. Television Corp. v. FCC, 444 F.2d 841, 852 (D.C. Cir. 1970) (finding that an agency may change its course as long as it “suppl[ies] a reasoned analysis indicating that prior policies and standards are being deliberately changed, not casually ignored”).
 Application of the MOPR to Demand Resources is arguably inconsistent with Congress’s declaration in the Energy Policy Act of 2005 that “demand response ‘shall be encouraged’” and that “‘unnecessary barriers to demand response participation in energy . . . markets shall be eliminated.’” EPSA, 577 U.S. at 271-72 (citations omitted).
 See, e.g., Wholesale Competition in Regions with Organized Electric Mkts., Order No. 719, 125 FERC ¶ 61,071, at P 16 (2008) (“Demand response can provide competitive pressure to reduce wholesale power prices; increases awareness of energy usage; provides for more efficient operation of markets; mitigates market power; enhances reliability; and in combination with certain new technologies, can support the use of renewable energy resources, distributed generation, and advanced metering. Thus, enabling demand-side resources . . . improves the economic operation of electric power markets by aligning prices more closely with the value customers place on electric power.”), order on reh’g, Order No. 719-A, 128 FERC ¶ 61,059 (2009), order on reh’g, Order No. 719-B, 129 FERC ¶ 61,252 (2009).
 PJM Answer at 19.
 Of the required two-thirds sector weighted endorsement required for approval, the Focused MOPR received an affirmative sector vote of 4.175 out of 5 from PJM stakeholders. Transmittal at 3-4. It received at least a majority vote from every sector, including generation owners. See PJM Members Committee, Supplemental Voting Results (June 30, 2021), https://www.pjm.com/-/media/committees-groups/cifp-mopr/2021/20210630/20210630-mc-voting-report-cifp-mopr-pjm-proposal.ashx.