On February 20, 2014, in New Jersey Board of Public Utilities v. FERC, the United States Court of Appeals for the Third Circuit affirmed FERC’s orders approving a revised tariff submitted by PJM Interconnection, LLC (PJM), which, among other things, eliminated a prior exemption from mitigation for resources built pursuant to a state mandate. New Jersey and Maryland, who are among the petitioners in this case, had launched state initiatives to develop new generation resources in an effort to invoke the prior exemption from the Minimum Offer Price Rule (MOPR) for state-mandated resources. The Court held that FERC acted within its jurisdiction under the Federal Power Act in eliminating the exemption, given that New Jersey and Maryland’s plans to introduce new capacity into the Base Residual Auction would have had an effect on the prices of wholesale electric capacity in interstate commerce. In addition, FERC’s decision had rested on sufficient “mounting evidence of risk” that the state-mandated exemption could permit uneconomic entry into the capacity market. This decision has significant implications for state efforts to contract for new capacity and to provide incentives for existing capacity to repower to the extent that those efforts affect FERC regulated capacity prices.
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