Analysts: Exelon, Dynegy to be biggest beneficiaries of new PJM market rules
- Exelon Corp. and Dynegy stand to be the big beneficiaries of new market rules in PJM Interconnection, bolstered by fuel security that should keep their plants running in the most adverse scenarios.
- PJM is instituting new capacity performance standards after poor generator performance during the polar vortex of the 2013-2014 winter, when fuel interruptions took more than 20% of generation offline.
- Dynegy's gas-fired facilities are located on major pipelines less prone to inturruption, Bloomberg notes, and Exelon's nuclear units are not vulnerable to fuel cutoffs from bad weather. AEP could be another big beneficiary, with its fleet of coal plants, although it increasingly moving to gas.
The stakes are higher than ever in PJM Interconnection, Bloomberg Business reports, with generators now facing enhanced penalties if they don't deliver on power. But with those higher penalties also comes the potential for millions in payouts if they meet the tougher reliability standards.
Originally slated to begin next week, FERC delayed the grid operator's capacity performance plan until August to implement new demand response rules. But observers say that generators with secure fuel supplies and lot of reliabile baseload generation are the likely beneficiaries under the new market.
“Dynegy would be a significant beneficiary,” UBS AG analyst Julien DuMoulin-Smith told Bloomberg. “Exelon certainly would be.” American Electric Power is another potential winner.
PJM worked through an expedited process last year to develop new market rules after cold weather in early 2014 took 22% of the operator's generation offline. The new performance plan aims to provide enhanced incentives for resources to be available when needed most, and to reduce price spikes during system emergencies.
FERC approved the new rules in June. According to Bloomberg, if a 500 MW facility is offline during an eight-hour emergency period, it could mean almost $15 million in fines. But the flip side may be higher capacity prices: Some analysts are expecting about $155/MWd, more than double the levels returned in a 2013 auction.
- Bloomberg Business Power Generators Face Big Payouts or Big Penalties in Reboot
Follow Robert Walton on Twitter