Dive Brief:
- American Electric Power officials last week said a recent decision by federal officials to alter auction rules for PJM Interconnection is “troubling,” because markets should be consistent and predictable.
- Last week FERC directed PJM to include demand response and efficiency providers in its upcoming auctions, and delayed the auction until next month.
- Despite that decision, AEP Chairman, President and CEO Nicholas Akins said he believes capacity prices will rise because of the large amounts of generation that has been retired.
Dive Insight:
With more than 30,000 MW of generation, recent changes to market rules in PJM are "troubling" for AEP but the generator remains upbeat. "We believe that capacity prices will improve," CEO Akins told analysts during the company's second quarter earnings call last week. He cited the "substantial amount of generation" that has been retired
But the company sees changes to market rules as an issue because they come so late in the game -- FERC decided last week to delay PJM's interim auction until next month as the operator integrates energy efficiency and demand response.
CFO Brian Tierney lamented "markets moving toward a certain set of conditions for the auction and it gets changed at the 11th hour." He said "that is a concern because you never know what the rules of the game are, and they can change at the last minute or change afterwards. And that is troubling."
Akins also said regulators in Ohio appear to just be delaying on a decision regarding power purchase agreements for its coal fleet, which is complicating the company's decision on whether or not to sell midwest assets.
"It's one thing to have one delay," he said. "But to have delays of several cases occurring, that's really not a good message. ... You've got to have the courage to step up and make a decision."
The company reported earnings of $430 million for the second quarter, and said there was load growth a cross all of the major retail classes. Supplying power to the oil and gas industry in the Marcellus and Utica shales has also helped boost demand.
Full-year 2015 earnings are expected to be between $3.50 and $3.65 per share.
