PJM’s proposed price cap for future capacity market auctions should be rejected as unlawful, OPC tells federal regulators
BALTIMORE – PJM’s proposed price cap for future capacity market auctions is too high given the inability of new generation to enter the market and compete, OPC said in a protest filed today with the Federal Energy Regulatory Commission (FERC). PJM’s proposed cap would likely force customers to pay nearly double what they would pay if the market was competitive, making it unlawful, OPC said.
OPC’s protest addresses PJM’s Sixth Quadrennial Review, which changes the criteria for four upcoming capacity market auctions and was submitted for FERC approval last month. PJM’s proposed changes would raise the regionwide capacity price cap starting in June 2028 to about $550 per megawatt-day—an approximate 1,800 percent increase from the price PJM customers were paying prior to June 2025. Capacity prices already increased significantly starting in June 2025. Those increases, which recently began impacting customer bills, resulted in prices about 800 percent higher than those for the delivery year that ended in May of this year.
OPC’s filing explains that new resources will not be able to enter the market in sufficient quantity to meet PJM’s reliability requirement in the time frame that the rules proposed in the Sixth Quadrennial Review will be in place, especially given the projected huge increases in new power demand from data centers. That inability precludes a meaningful competitive response in the future auctions governed by PJM’s proposal, according to an economist’s affidavit attached to OPC’s protest.
“PJM’s auctions are premised on the ability of new generators to enter the market, but the evidence shows that supply shortages will continue, leaving generation companies to demand whatever price they wish,” Maryland People’s Counsel David S. Lapp said. “Under those circumstances, the law doesn’t permit relying on market forces to produce just and reasonable rates.”
Several factors are impacting the market, OPC’s protest explains, including the backlogged line for interconnecting new facilities, projections of massive data center load growth, and retirements in the region. Further, the auction was originally designed to run three years in advance of the delivery year, but three years is insufficient under current conditions, OPC’s filing says, and two of the four auctions impacted by PJM’s proposed rules have an even shorter timeline.
Well-documented supply chain delays are a major factor inhibiting new competitors, according to OPC’s filing. Even PJM’s own initiative to add generation confirms that most lead times for new resources are at least five to six years, with many likely to experience delays.
The modeling that PJM relied on to support its proposed price cap fails to incorporate forecasts of supply or demand, OPC’s filing explains. Rather, PJM’s modeling uses values from the last capacity market auction that do not account for expected market conditions, OPC said.
Following the price spike in PJM’s capacity market auction held in July 2024, OPC issued a report demonstrating how PJM’s market rules—not reliability issues—drove the results. The report projected utility bill impacts of as much as $200 a year for an average Maryland customer. OPC subsequently filed a complaint at FERC challenging those rules. OPC has a separate complaint pending at FERC seeking refunds for the exorbitant capacity market prices currently in customer bills.
Last spring, FERC approved a price cap that settled a complaint filed by the Pennsylvania governor. The settlement imposed a negotiated price cap for two delivery years, through May 2028. OPC’s protest filed today argues that the same circumstances make it appropriate to keep the negotiated price cap in place until FERC completes an investigation to determine when capacity markets will be sufficiently competitive to protect customers.
“We are calling on FERC to initiate an investigation and, in the meantime, reject PJM’s proposal and adopt the negotiated price cap until enough new generation can enter the market and actually limit the exercise of market power,” Lapp said.
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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