STIS Seminar - Daniel Breslau
Join us for our second seminar of Semester 2!
Daniel Breslau (Virginia Tech) will be examining the use of public policies to promote non-carbon emitting energy sources in the US and the markets they create.
Fighting the Contagion of Subsidies: The MOPR Saga and the PJM Capacity Market
When the large regional power system PJM, designed its capacity market, it included a small provision known as the Minimum Offer Pricing Rule, or MOPR (pronounced “moper”). The rule was intended to mitigate buyer-side market power, the ability of large organized buyers of capacity to suppress prices by offering their own capacity into the market below cost. It required that certain participants, with the ability and intention to engage in such manipulation, offer their capacity at a calculated minimum offer. While the drafters of the market rules added the MOPR in anticipation of a very small range of possible exercises of this type of market manipulation, the MOPR became the object of a 15-year legal and regulatory struggle that to this day has not been permanently resolved. Over that period, adversaries in the struggle explored and debated fundamental premises of markets, their boundaries, what constitutes a “natural” or “distorted” price, the nature and legitimacy of state action and subsidies. Ultimately, the struggle, and its outcome, was driven by material interests, but through the mediation of economic and engineering experts who articulated those interests in terms of the efficient functioning of the market to a reliable power supply at the lowest cost. This paper reconstructs the course of the struggle over the MOPR, based on hundreds of filings with the federal regulator, documents tracing the deliberations internal to PJM, and interviews with some of the experts involved. In the broadest terms, the paper shows how the political efficiency of markets, their ability to convert distributional questions over resources to peaceful exchange relations, is itself subject to political struggle. More narrowly, the paper shows that the push to use state policy to promote non-carbon emitting energy sources has required a reconceptualization of the market and its scope.