Dive Brief:
- Power plant owners generally support the PJM Interconnection’s proposal to delay its upcoming capacity auctions by six months while it crafts new capacity market rules, but warn that auction delays erode investor confidence in the market, according to Tuesday filings at the Federal Energy Regulatory Commission.
- “A limited auction delay is appropriate to address the various shortcomings of the current market design that are nearly certain to reveal themselves should the auction run under current rules,” the PJM Power Providers Group, called P3, and the Electric Power Supply Association said in joint comments.
- American Municipal Power, however, opposes PJM’s requested delay, saying it appears to be an effort by the grid operator to make market changes with little stakeholder scrutiny. “Using the delay to hastily develop and propose yet another round of changes to the [capacity market] construct, moreover, is a recipe for undermining, not promoting, market certainty,” Columbus, Ohio-based AMP said in its protest at FERC.
Dive Insight:
Typically, PJM holds annual capacity auctions to secure power supplies three years ahead of time. But starting five years ago, PJM paused its auction schedule several times to make changes to its market rules.
In July, PJM held a delayed auction as part of a compressed auction schedule that aims to return the auctions to a three-year forward process. The auction produced record-setting capacity prices, with electricity customers in PJM’s Mid-Atlantic and Midwest footprint set to pay $14.7 billion for capacity in the 2025/26 delivery year, up from $2.2 billion in the previous auction.
As a result, electric bills for customers of FirstEnergy’s utilities will jump 11% to 20% from June through May 2026, the utility company told FERC on Tuesday in support of the grid operator’s proposed delay.
PJM proposed delaying its upcoming capacity auctions and crafting new market rules in response to a complaint filed in September that challenged the grid operator’s failure to reflect reliability must-run power plants in its capacity auctions.
PJM on Oct. 15 asked FERC for a waiver so it could delay its next three base capacity auctions by about six months each through the 2029/30 delivery year. The first one is set to begin Dec. 4. It also plans to cancel two “incremental” capacity auctions. PJM asked FERC to make a decision by Nov. 8.
PJM said it intends to file proposed market rule changes “in the coming weeks” to address the RMR complaint as well as issues raised by the Organization of PJM States and P3. The proposed six-month auction delay assumes FERC approves new market rules by mid-January.
“PJM does not request auction delays lightly, as the schedule for these auctions [has] already been compressed several times due to various reform efforts,” the grid operator said. “However, PJM believes this delay is necessary given the significant market uncertainty that now clouds the 2026/2027 Base Residual Auction as a result of the complaint.”
In support of delaying the auctions, P3 and EPSA said if the market rules aren’t changed, the upcoming auction will be run with an elevated offer cap — set at $695/MW-day — and a steep demand curve that will create volatility and eliminate the risk of penalties for power plants failing to perform across most of the grid operator’s footprint.
The trade groups for power plant owners doubt there will be stakeholder consensus on the RMR issue. However, there are reforms PJM can quickly propose, and FERC can easily approve, such as switching PJM’s “reference unit” back to a combustion turbine from a combined cycle, according to P3 and EPSA. “The CT reference unit will lower the offer cap significantly, add much needed slope to the demand curve, and most likely result in a Net Cost of New Entry … above zero. This is critical in calculating performance assessment penalties,” P3 and EPSA said.
With elevated capacity prices failing to spur power plant development amid tight reserve margins and sharp demand growth, “new solutions” may be needed, according to FirstEnergy.
“It may be time not only to ensure that just and reasonable rates are paid to keep existing generating resources committed to PJM, but also to adopt and implement policies that drive responsibility for development of new dispatchable generation resources back to the states,” the utility company said.
PJM’s waiver request was supported by the New Jersey Board of Public Utilities, Public Service Enterprise Group companies, the Sierra Club and other advocay groups behind the RMR complaint, Constellation Energy Generation and the Public Utilities Commission of Ohio’s Office of the Federal Energy Advocate.
Talen Energy urged FERC to limit the auction delay to four months. “PJM has fallen into an untenable pattern of delay after delay after delay. Further delays will chill investment when the markets are sending clear signals that new generation is needed,” Talen said. “The best way to ensure such auctions are conducted in the future is to return to the three-year forward period as soon as possible and to refrain from watering the seeds of confusion sowed by non-market participants.”
