- State utility regulators, American Municipal Power, or AMP, and Old Dominion Electric Cooperative, called ODEC, oppose the PJM Interconnection’s proposal to delay four base capacity auctions, they said Tuesday in filings at the Federal Energy Regulatory Commission.
- The proposed delays, including for an auction set to begin June 14, will undermine price signals that could spur new generation to be built, the Organization of PJM States Inc., known as OPSI, said.
- Power plant owners, such as Vistra and Constellation Energy Generation, support the proposed delay. It is “an unfortunate, but necessary action” that will give PJM time to reform its capacity market, the PJM Power Providers Group, or P3, said.
PJM in February started a fast-track stakeholder process to reform its capacity market following widespread power plant outages during Winter Storm Elliott. The grid operator aims to propose a reform package by Oct. 1 at FERC.
In April, it asked FERC to approve delays to capacity auctions to apply rules to them that emerge from the reform process. Under an “illustrative” schedule for the delayed auctions, the next one would be in June 2024, followed by three more at six-month intervals. PJM said it was leaving the schedule open-ended because it didn’t know when FERC would approve any proposed capacity market changes.
Normally, PJM holds annual capacity auctions to make sure it has enough generating and other resources to meet its power needs three years in the future. Action at FERC around “minimum offer price rules” and court decisions has led to delays in recent years.
PJM failed to show the proposed delays are beneficial, according to OPSI, which represents utility commissions in the grid operator’s footprint.
“Halting the markets before the commission has all of the facts before it may actually serve to delay the energy market transition that PJM’s filing suggests is forthcoming — and raise prices for consumers,” OPSI said.
Also, PJM’s filing fails to meet FERC’s criteria for a waiver request, according to OPSI. It is not limited in scope because it would delay four years of auctions; it does not address a concrete problem because it relies on a single study and assumes FERC will approve the upcoming reform proposal; and it will very likely have undesirable consequences, such as the region losing forward price signals, OPSI said.
The New Jersey Bureau of Public Utilities said the proposed delay is based on “speculative” market reforms.
“Stability in a forward-price signal and revenue stream to lock in resources will be crucial to PJM and its members during the clean-energy transition,” the BPU said. “This filing has the potential to set damaging precedent, allowing PJM to self-adjust its market rules, restarting auction activity to create some alternative clearing outcome without clear and concise need.”
PJM should conduct its June capacity auction as planned and be required to establish firm dates for the following three auctions, AMP and ODEC said in a joint filing.
The proposal would deprive market participants of knowing in advance the auction schedule and would deny them the benefit of FERC’s review of that schedule, according to AMP and ODEC.
“This is significant because it provides absolutely no certainty for stakeholders or investors,” they said.
Monitoring Analytics, PJM’s market monitor, said a delay to the next auction may make sense, but the grid operator should establish a Dec. 1 date to start it. The schedule for the next three auctions should be set after any market reforms are approved by FERC, the market monitor said.
Power plant owners supported the proposed delays.
“Conducting more auctions under flawed rules will only serve to exacerbate PJM’s reliability challenges,” P3 said.
PJM’s next capacity auction – for the 2025/2026 delivery year – could send retirement signals for 2026 when the grid operator has warned reserve margins could fall below 10% in 2028, the trade group said.
According to P3, the signs of weakness in PJM’s capacity market include: historically low prices, shrinking market participation, a scant 328 MW of new generation clearing the last auction and a growing number of constrained zones.
“Resources needed for reliability are not receiving sufficient compensation to remain viable and asset owners are no longer able to exercise independent judgment about the resources they own,” P3 said.
PJM operates the electric grid in 13 Mid-Atlantic and Midwest states and in Washington, D.C.