Federal agency should reject PJM’s proposed ‘price floor’ for capacity market, OPC filing says
BALTIMORE – The Federal Energy Regulatory Commission should deny PJM’s proposal to establish a guaranteed minimum price for the two upcoming generation capacity market auctions, the Office of People’s Counsel said in comments filed with the agency this week. The proposed price floor either won’t matter because flaws in the capacity market will drive prices above the floor or it will needlessly bind customers to paying excessive costs, OPC’s filing said.
OPC’s filing addresses PJM’s proposal for a price ceiling and price floor for the next two capacity market auctions. The price ceiling is warranted to prevent an unjustified windfall for generation companies—paid for by utility customers—that result from PJM market rule flaws and barriers to new supply entering the market, OPC’s filing said. But PJM failed to justify its price floor with any analysis showing how market defects could result in prices that are too low.
PJM’s price floor is higher than the PJM-wide clearing price of any capacity market auction prior to 2024, OPC’s filing pointed out. It is many times higher than the pre-2024 auction clearing price of $27/MW-day.
“PJM’s price floor will artificially increase prices if suppliers are willing and able to sell sufficient capacity to meet the region’s needs at prices below the floor,” Maryland People’s Counsel David S. Lapp said. “That would mean higher costs for customers and violate the key purpose of the auction—to secure system reliability at the lowest cost.”
Specifically, PJM’s so-called “price collar” proposal would establish a maximum price of $325/MW-day and a $175/MW-day price floor for its capacity market auctions for the next two auctions covering the 2026-27 delivery year starting June 1, 2026, and 2027-28 delivery year starting June 1, 2027. PJM acknowledged in its filing that the maximum price cap may be necessary because recently proposed reforms may not be sufficient “to fully mitigate” excessive prices due to delays in connecting new generation to the system and other barriers to increasing supply.
But PJM’s proposal fails to identify any market flaws that require a minimum price floor that would potentially increase prices above what the auction clearing price would otherwise be, OPC’s filing highlights. Rather, PJM’s proposal is arbitrary and could cause customers to pay an artificially inflated price for capacity, OPC said, while also causing customers to buy more capacity than needed to ensure reliability when adequate supply is available at lower prices.
OPC’s filing was joined by other consumer advocate offices, including the Illinois Attorney General’s Office, 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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