Today the Federal Energy Regulatory Commission (FERC) changed the way power plants are compensated in the largest US electricity market, the PJM Interconnection. This new rule will result in consumers paying more on electric bills for electricity generated from fossil fuel plants and will make it difficult and more expensive for the 13 states in PJM’s electric grid territory—all of which have established robust clean energy policies—to meet their clean energy goals.
Chicago and other parts of northern Illinois are under PJM’s territory, and unfortunately today’s rule change by federal regulators will make it very challenging for Illinois to meet the state’s current Renewable Portfolio Standards (RPS) and nearly impossible to meet proposed 100% clean energy goals at the lowest possible cost to consumers. Illinois’s former Attorney General Lisa Madigan has spoken up against this plan for how much it’ll undercut our state’s policies.
But there’s good news for Illinois even after this anti-renewables ruling by FERC. The Illinois Clean Jobs Coalition has a plan on hand to protect Illinoisans from the economic impacts of this new rule: the Clean Energy Jobs Act (CEJA).
Background
All states in PJM have state policies in place that incentivize carbon free energy resources such as wind, solar, nuclear, demand response and energy efficiency. Each state has set decarbonization goals through either a Renewable Electricity Standard, Energy Efficiency Resource Standard, or Zero Emission Credit program.
Today’s FERC decision penalizes those resources by creating a Minimum Offer Price Rule (MOPR), where new renewable resources and existing nuclear plants will now be forced to offer into the PJM capacity market at an artificially inflated cost, reducing their competitiveness. As a result, the scales are tipped so that power capacity in PJM will be purchased from more expensive fossil fuel power plants.
Bearing the brunt of this artificially inflated clean energy cost is consumers. This decision is expected to cost consumers within the 13 state PJM territory upwards of $2.5 billion per year. The impact on northern Illinois consumers (who are in PJM) is expected to total $864 million a year in higher electricity bills.
Owners of coal-fired power plants pushed for these changes to the PJM capacity market —a system that pays generating resources to be available in the future in sufficient quantities—to prop up power plants that are too expensive to compete effectively with clean energy resources.
Under current rules, states are free to opt-out of the PJM capacity market and instead choose to procure their own capacity. States need to act to preserve their ability to purchase clean energy resources at the lowest cost to consumers, and this FERC ruling highlights how important this move is for reaching a decarbonized grid. The Illinois Clean Jobs Coalition is pursuing this route, to ensure Illinois consumers aren’t paying for unnecessary fossil-fuel generation, through CEJA.
The Illinois State Legislature needs to make passing CEJA a priority when session begins in January 2020. By passing CEJA , policymakers will give Illinois back control of its energy future and avoid the $864 million annually in higher bills for our state’s consumers.
Map of PJM service territory. Credit: PJM
CEJA would take the capacity market under state control to reduce payments to dirty, expensive coal plants by instead directing those investments from consumer bills into cheaper and cleaner renewable energy resources such as wind and solar.
Specifically, CEJA would task the Illinois Power Agency with procuring capacity for Northern Illinois and prioritizing carbon-free generation in accordance with state established goals. The bill would create several successive procurement auctions designed to secure long-term capacity contracts from carbon-free resources, such as nuclear and renewables, and ensure the state meets its obligations for resource adequacy. CEJA would prevent the costly over-procurement of capacity that exists today, and it would tap into the declining costs of solar and wind power to further lower the cost of having power on reserve to meet Illinois’s electricity demands.
Even better for Illinois is that CEJA implements a consumer savings mechanism to ensure a 5% guaranteed savings for consumers. If passed, it would create needed opportunities for demand response and energy storage through multi-year contracts. CEJA allows resources to pool to increase their performance, reduce risk, and save consumers money.
Pass CEJA Now
By passing CEJA, Illinois can protect consumers from higher electricity bills and from supporting expensive and dirty fossil fuel plants. We have big goals in Illinois of achieving 100% carbon-free electricity by 2030, and 100% renewable energy by 2050. To prevent this FERC decision from stifling our clean energy progress in the state, we need to pass CEJA now.
CEJA has over 30 sponsors in the Senate, and close to 60 in the House. Contact Governor Pritzker and your state legislators and ask them to pass CEJA.