Immediate reforms needed to protect customers from next generation capacity market auction, consumer advocates tell PJM
BALTIMORE – PJM Interconnection, LLC must move quickly to correct flaws in the capacity market to prevent electric customers across 13 states and the District of Columbia, including Maryland, from paying unjust and unreasonable prices resulting from upcoming capacity auctions, the Maryland Office of People’s Counsel and several other state consumer advocate offices told the PJM board in a letter today.
The most recent capacity market auction, which occurred in July, resulted in an 800 percent regionwide price increase over the previous auction, an increase that will raise many customers’ annual electricity bills by hundreds of dollars starting next June. The extraordinary price spike resulted in part because two Maryland coal plants—Brandon Shores and Wagner—did not participate in the auction even though customers are paying those plants to be available for reliability purposes.
“Customers are paying hundreds of millions for Brandon Shores and Wagner to be available for reliability reasons and then are paying billions more in market prices that result from ignoring the reliability benefit of those plants,” said Maryland People’s Counsel David Lapp. “PJM must correct this situation before the next auction. It is unfair to force customers to pay twice for reliability.”
PJM has entered into “reliability must run,” or RMR, arrangements with Talen, which owns the Brandon Shores and Wagner power plants near Baltimore, to maintain reliability by keeping them from retiring before transmission facilities are completed, at a proposed cost of $215 million per year. In other regions, the consumer advocates’ letter points out, RMR units participate in capacity markets, but PJM has no such requirement, making it an outlier.
According to an OPC report attached to the letter, if the RMR plants had participated in this most recent capacity auction, the resulting prices would have been far lower under certain assumptions regarding bids and clearing prices, lowering region-wide capacity market cost for consumers by roughly $5 billion. By not offering these plants in the capacity market, the report shows, Talen will pocket about $360 million more than it would have from the capacity market.
PJM’s next capacity market auctions are scheduled for this December and next June, for delivery years 2026-27 and 2027-28. The consumer advocates’ letter points out the significant risks to customers of continuing high prices—or even much higher costs—from these upcoming auctions without PJM reforms. The letter asks that PJM immediately engage to revise its capacity market rules to require the capacity market to reflect the continued operation of RMR units, as supply, decreased capacity need, or other equivalent means.
Other consumer advocate offices joining the letter include Delaware Division of the Public Advocate, Office of the People’s Counsel for the District of Columbia, Citizens Utility Board of Illinois, New Jersey Division of Rate Counsel, and Office of the Ohio Consumers' Counsel.
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers of electric, natural gas, telecommunications, private water and certain transportation matters before the Public Service Commission, federal regulatory agencies and the courts.
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