The U.S. Court of Appeals for the D.C. Circuit vacated an order from FERC which expanded the avenues for generators in PJM to bid below the price floor, or minimum offer price, in the capacity auction, as the Court found FERC, in adopting a revised minimum offer price rule, exceed its authority under Section 205 of the FPA.

Notably, PJM had filed proposed changes to the MOPR under Section 205. Under PJM's proposal, PJM would replace the then-current unit-specific review process for the MOPR with two exemptions: a competitive entry exemption for non-subsidized resources, and a self-supply exemption for LSEs building their own generation.

FERC rejected PJM's proposal as filed, fearing that units which formerly could show that offers below the price floor were legitimate would now be mitigated

FERC conditioned approval of the MOPR changes on PJM retaining the unit-specific review process, as well as rejecting PJM's proposal to extend mitigation from one to three years. PJM agreed to FERC's changes

Several generators challenged FERC's order as exceeding its Section 205 authority. The Court agreed.

Section 205 puts FERC in a "passive and reactive role," the Court said in citing precedent, with FERC charged with reviewing the proposed rate scheme filed by a utility or Regional Transmission Organization and determining whether the proposal is just and reasonable

While FERC, with approval of the filing utility (or RTO) may make "minor" changes to a Section 205 filing, such changes cannot result in an, "entirely new rate scheme," the Court said

"Section 205 does not allow FERC to make modifications to a proposal that transform the proposal into an entirely new rate of FERC’s own making," the Court said

The Court found that FERC's changes amounted to an entirely new rate

"FERC’s proposed modifications went in the opposite direction [of the proposal]. FERC’s modifications expanded the exemptions by layering the two new exemptions on top of unit-specific review, and by exempting certain new generators from the price floor after one year instead of after three years. Indeed, FERC’s modifications expanded the scope of the exemptions not just beyond PJM’s original filing, but beyond the scope of the exemptions as they had stood before PJM’s filing. FERC’s modifications therefore followed a 'completely different strategy' than PJM’s proposal," the Court said

PJM's consent to the changes do not save the changes, the Court said. "[T]he utility’s consent is inadequate because consent does not cure the harms to the utility’s customers," the Court said [in this case, generators]

The Court vacated FERC’s orders with respect to several aspects of PJM’s proposed rate structure – the self-supply exemption, the competitive entry exemption, unit-specific review, and the mitigation period. The Court remanded the matter to FERC

See the opinion here