Dive Brief:
- Six ratepayer advocates on Monday filed a complaint at the Federal Energy Regulatory Commission seeking changes to the PJM Interconnection’s capacity market design, which they said is causing “crushing” capacity prices.
- FERC should direct PJM to: give priority to shovel-ready projects in constrained areas in its interconnection queue; require that all eligible resources participate in its capacity auctions; mandate that generators give the grid operator more notice when they want to retire their units and give PJM the ability to delay retirements; change its effective load carrying capability calculations for gas-fired power plants; and change its rules for demand response, the complaint said.
- “PJM acts as if load increases, supply decreases, and slow entry of new resources are facts of nature when, in fact, PJM has or should have tools to manage all three without sending prices to the roof,” the ratepayer advocates from the District of Columbia, Illinois, Maryland, New Jersey and Ohio said in the complaint.
Dive Insight:
The complaint comes after capacity costs to consumers jumped to $14.7 billion in PJM’s last capacity auction in July from $2.2 billion in the previous base residual auction, or BRA. The results are expected to cause electricity bill increases in the 10% to 20% range for some utilities when the 2025/26 capacity year starts on June 1.
The auction results triggered calls for market reforms from state regulators, PJM’s market monitor, ratepayer advocates and power plant owners. Amid concerns that generators cannot respond in a timely manner to the high prices with additional power supplies — partly because of PJM’s interconnection queue process — utility companies like FirstEnergy and PPL Electric contend deregulated utilities should be given a role in spurring new generation.
Also, the Sierra Club and other groups on Sept. 27 filed a complaint at FERC seeking to include reliability must-run, or RMR, units in capacity auctions. Partly in response to the complaint, PJM asked FERC to let it delay upcoming capacity auctions by about six months so it could craft market reforms and propose them next month at FERC. The agency on Nov. 8 approved PJM’s request for a delay.
PJM expects it will propose a process for reflecting the resource adequacy contributions of RMR units in its next two capacity auctions where the contributions are “reasonably comparable to a capacity commitment,” the grid operator said in a presentation set to be discussed with stakeholders Thursday. That pending proposal could begin to address the ratepayer advocates’ concerns about RMR units.
PJM also plans on using a combustion turbine instead of a combined cycle turbine for its reference technology to help set the capacity auction’s demand curve and adopting uniform non-performance charges across its footprint, according to the presentation. It plans to propose conducting its capacity auction for the 2026/27 delivery year in July followed by one in December 2025 for the next delivery year.
The complaint from the consumer advocates adds to the capacity market action. It was filed by the Illinois Attorney General’s Office; Illinois Citizens Utility Board; Maryland Office of People’s Counsel; New Jersey Division of Rate Counsel; Office of the Ohio Consumers’ Counsel; and the Office of the People’s Counsel for the District of Columbia.
“Significant aspects of the BRA design are unjust and unreasonable because they subject consumers to crushing capacity clearing prices that serve little purpose while incumbent generators reap enormous windfall revenues,” the ratepayer advocates said.
PJM’s market rules have flaws that enable capacity suppliers to exert market power to raise prices, including exemptions from must-offer requirements and the lack of a DR offer price cap, the ratepayer advocates said.
“The combination of the compressed period between the conduct of the 2025/2026 auction and the start of the delivery period, the backlog of projects stuck in the interconnection queue, and the impediments to development of the relatively few resources that have cleared the queue, have dramatically reduced the potential for new entry to discipline the market power of existing resources,” the ratepayer advocates said.
FERC should order PJM to make the ratepayer advocates’ proposed market changes before the next capacity auction, according to the complaint. The agency should also order PJM to hold a stakeholder process to address long-term capacity market issues, the ratepayer advocates said.
PJM is reviewing the complaint and will file a formal response later, Jeff Shields, a spokesman for the grid operator, said in an email Tuesday.
