The PJM Interconnection will move to set a price cap and price floor for its next two capacity auctions under an agreement reached Tuesday with Pennsylvania Gov. Josh Shapiro, D.
PJM plans to set a $325/MW-day price cap and a $175/MW-day floor for its 2026/27 and 2027/28 delivery year capacity auctions, according to a notice PJM sent to its members. The next base capacity auction is set to be held in July.
“The governor worked with PJM to significantly lower the capacity auction price cap — from over $500/Megawatt-day to $325/MW-day — averting a runaway auction price that would have unnecessarily increased energy bills,” Shapiro said in a press release. The price cap could save PJM consumers $21 billion over two years, according to Shapiro.
If approved, the planned price cap/floor would settle a complaint Shapiro filed in December at the Federal Energy Regulatory Commission on behalf of Pennsylvania. In part, Shapiro argued there isn’t enough time for generators to respond to high capacity prices, so consumers wouldn’t benefit from the high prices.
The complaint was supported by governors from Delaware, Illinois, Maryland and New Jersey, nine state utility commissions, ratepayer advocates and others, according to filings at FERC. Constellation Energy Generation, the Electric Power Supply Association and the PJM Power Providers Group opposed it.
PJM’s last capacity auction, held in July, produced record high capacity prices that will cost ratepayers across the grid operator’s footprint $14.7 billion for the delivery year that begins in June, up from $2.2 billion in the previous auction.
Capacity prices for most of PJM soared to $269.92/MW-day, up from $28.92/MW-day in the previous auction. Prices hit zonal caps of $466.35/MW-day for the Baltimore Gas and Electric zone in Maryland, and $444.26/MW-day for the Dominion zone in Virginia and North Carolina.
Those results triggered a series of actions, including a complaint by ratepayer advocates and proposals from PJM to change elements of its capacity auction and measures to help bring power supplies online.
The price cap/floor agreement is subject to review by PJM stakeholders and its board. PJM plans to hold a Special Members Committee meeting on Feb. 7, where the grid operator’s staff can give guidance on how the proposed cap/floor mechanism could be implemented, according to the notice.
PJM said that in order to keep its “approximate” capacity auction schedule, the grid operator would propose the cap and floor mechanism through a Federal Power Act section 205 filing at FERC.
Evergreen Action, an advocacy group focused on climate policy, said the price cap/floor agreement was a boon for consumers, but PJM needs to do more.
“PJM needs to undertake major reforms to address its current interconnection crisis and get on with the important business of rapidly connecting cheaper, affordable clean energy to the grid so we actively address the energy cost and demand crisis,” Evergreen Action Deputy State Policy Director Julia Kortrey said in a press release.
PJM runs the grid and wholesale power markets in 13 Mid-Atlantic and Midwest states and the District of Columbia.