Independent power producers and the PJM Interconnection’s market monitor are urging the Federal Energy Regulatory Commission to reject a waiver request from American Electric Power utilities that would allow them to sell up to 750 MW in an upcoming “incremental” capacity auction.
It appears the utilities — Appalachian Power, Indiana Michigan Power, Kentucky Power and Wheeling Power — want to offload capacity they acquired to serve data centers that didn’t materialize, said Monitoring Analytics, PJM’s market monitor, and the PJM Power Providers Group, a trade organization, in separate filings at FERC.
The utilities are Fixed Resource Requirement entities that supply their own capacity and don’t participate in PJM’s capacity market.
Early last month, the AEP utilities asked FERC for a waiver from FRR rules so they can sell up to 750 MW in an incremental auction set to begin on Feb. 24 for the 2026/2027 delivery year. Typically, PJM holds annual base capacity auctions three years in advance of a delivery year. It then holds incremental auctions for that delivery year to reflect any changes in supply and demand forecasts.
The AEP utilities said PJM needs more capacity and its offer in the incremental auction would help lower capacity prices to the benefit of ratepayers. Also, it is unlikely that offering 750 MW into the auction would hurt third parties because the upcoming capacity year, which begins June 1, is subject to a price cap and floor, the utilities said.
PJM supports the waiver request, saying it will ease resource adequacy concerns for the upcoming capacity year.
FERC in 2015 ruled that rigid enforcement of the FRR sales cap was not “necessary to protect competitive investment,” PJM said in a Nov. 21 filing.
However, Monitoring Analytics and P3 contend the AEP request fails to meet FERC’s standard for issuing waivers to rules it has approved.
“The waiver would allow generators with fully guaranteed cost recovery paid for by their customers to undercut the capacity market in which investors take the risks,” Monitoring Analytics said in a Nov. 26 filing. “The primary result of the proposed waiver would be that the AEP FRR entities would be able to take advantage of the high PJM capacity market prices.”
The AEP request fails to meet FERC’s requirement that a waiver be limited in scope, partly by setting a precedent that would undermine the PJM market design, according to the market monitor.
“If the cap can be waived whenever it proves inconvenient, it ceases to serve its market discipline function, undermines incentives for market based generators, and creates uncertainty for all participants in the PJM capacity market,” Monitoring Analytics said.
Further, the request doesn’t meet FERC’s requirement that a waiver address a concrete problem, saying neither PJM nor AEP has shown the grid operator will be short of supply for the incremental capacity auction, according to P3.
“Given recent downward adjustments for the 2026 load forecast, there is reason to believe that PJM may have over procured capacity for the 2026/2027 delivery year,” P3 said in a Friday filing at FERC.
Also, the waiver would harm market participants, the trade group said.
“Claiming that flooding the market with previously unavailable capacity will not harm other parties flies in the face of logic,” P3 said. “Of course, such an action will. This is Economics 101.”
