Dive Brief:

• Dynegy Inc., the second biggest power generator in Illinois, wants its downstate power plants to move from the Midwest Independent System Operator (MISO) grid to the PJM Interconnection’s grid.
• Dynegy wants the move because PJM’s capacity market, which pays power plants for keeping generation available during peak demand periods, provides higher payments that would increase Dynegy’s revenues and make its Illinois coal fleet more economically viable.
• The move, however, could increase by 9% to 10% the average residential ratepayer’s bill.

Dive Insight:

Much of southern Illinois power generation is part of MISO, which operates an electricity market and transmission system in 15 states across the Midwest and Plains, while northern Illinois generation is largely in PJM, which operates an electricity market and transmission system that runs from Chicago up into lower New England and many Mid-Atlantic states.

Capacity payments, which are additional to the basic electricity payment, are set by auctions. PJM’s is for three years ahead while MISO’s is for a year ahead. Commonwealth Edison’s switch to PJM from MISO ten years ago provided significantly increased returns for its parent Exelon’s nuclear plants.

Although margins are tightening, MISO's vertical demand curve caused prices to clear near the floor because supply is above the reserve margin, Katy Sullivan, director of public relations and internal communications for Dynegy, told Utility Dive. PJM's sloped demand curve allows the market to respond to tightening supply, resulting in recent capacity prices that were seven times higher than MISO's.

Dynegy’s concern with boosting coal revenues came with its 2013 acquisition of five Ameren Illinois coal plants, bringing its total Illinois coal ownership to nine plants and 7,042 megawatts.

ComEd is the dominant northern Illinois electric utility. If Ameren Illinois, the dominant southern Illinois electric utility, was in PJM it would earn $0.008 per kilowatt-hour more than it does now, making the average Ameren Illinois residential customer bill 18% higher.

An alternative for Dynegy would be if MISO changed its capacity market auction to the three years ahead model used by PJM.