We had to chuckle at PJM's rationale for opposing certain proposals for alternative procurements related to a transition period for its capacity performance product.

The transition coalition, made up of load interests, have recommended targeted procurements, to the extent resources are needed ahead of a full implementation of new capacity performance requirements. The transition coalition's procurements would target those resources that actually need to improve their performance and have realistic opportunities to do so by the 2016/2017 and 2017/2018 Delivery Years, "saving billions of dollars for consumers," over the PJM proposal which the transition coalition said would direct billions to a block of already highly available resources.

PJM has called such proposals out-of-market solutions.

In an answer, the transition coalition said that its procurements could be conducted through a market-based auction mechanism.

In a March 6 filing at FERC, PJM scoffed at this notion.

"[T]he Transition Coalition suggests targeting revenue to BRA-cleared capacity for specific investments. Although they say this could be accomplished through an auction-based mechanism, for instance, to incent gas-only generators to install dual fuel capability, simply calling it an auction cannot turn an out-of-market solution into a market-based solution," PJM crowed

We couldn't agree more. That's why farces such as mandatory capacity purchases through administratively run "auctions" should cease being called market-based solutions.

For we see no difference between the transition coalition's proposals, and PJM's proposal from a "market" perspective. Both are defining what the customer purchases, and for how much (via administratively determined rules and inputs). The transition coalition is simply more prescriptive in the types of products purchased.

Real markets rely on a double coincident of wants, and actual demand from purchasers. Forcing load to purchase capacity, and merely running an auction to price such capacity, is no more of a market than administrative backstop procurements.

The flaw of calling RPM a market is no more evident than in the capacity performance debacle. No rational customer freely purchasing capacity would do so without requiring such capacity to perform when needed. But for seven years, FERC and PJM have compelled load to pay for capacity to be available, without any real performance requirements. That does not reflect rational market behavior, and reflects the transfers of wealth you only get from non-market solutions