FERC allows PJM to delay capacity auctions by six months
Policy and Regulation

FERC allows PJM to delay capacity auctions by six months

On Friday, the Federal Energy Regulatory Commission granted PJM Interconnection’s request for a waiver of section 5.4(a) of Attachment DD to its Open Access Transmission Tariff, delaying the commencement of the grid operator’s 2026/2027 Base Residual Auction (BRA) by approximately six months from December 2024 to June 2025 and pushing back subsequent auctions.

Here’s PJM’s revised, FERC-approved schedule:

FERC has approved PJM’s revised schedule for base capacity auctions through May 2027. Courtesy: FERC

As you may recall, PJM’s July 2024 auction fetched jaw-dropping prices and increased the total capacity bill for the region from $2.4 billion to about $14.7 billion. The results drew ire from politicians across the grid operator’s 13-state footprint, many demanding answers.

“It is unacceptable that Maryland households and businesses will have to pay more because of our grid operator’s failure to get energy projects connected to the power grid in a timely manner,” said Maryland State Senator Ron Watson and five state delegates in a joint statement condemning the corresponding electricity price hikes announced by PJM.

2025/26 prices from PJM’s base residual auction in July 2024. Prices are higher (at the zonal cap) in the BGE zone in Maryland and the Dominion zone in Virginia and North Carolina due to insufficient resources inside those regions and constraints on the transmission system that limit the ability to import capacity. Courtesy: PJM

A report analyzing the potential effects of the auction commissioned by the Maryland Office of People’s Council found the primary impetus for the rate increase in the BGE zone to be the Reliability Must Run (RMR) contracts for Talen Energy’s Brandon Shores and Wagner power plants. While PJM builds out more transmission, it is arranging for the continued operation of four units past their proposed retirement date in June 2025. The plants will continue to operate under an RMR arrangement and receive payments funded through customer rates outside of the competitive wholesale power markets. The report indicates residential electricity bills will go up by an average of 14% in that region to keep those plants online for resiliency.

In September, the Sierra Club, the Natural Resources Defense Council, Public Citizen, the Sustainable FERC Project, and the Union of Concerned Scientists filed a complaint against PJM related to specific aspects of PJM’s capacity market, namely the Reliability Pricing Model (RPM). PJM’s market monitor, the Organization of PJM States (OPSI) supported the complaint, which argued that PJM’s capacity market auction rules are unjust and unreasonable because they fail to account for the resource adequacy contributions of RMR units in the capacity auction, inflating costs that are passed on to ratepayers.

The Brandon Shores power plant outside Baltimore, MD is scheduled to retire on June 1, 2025, unless needed for reliability purposes under an approved reliability must-run contract. Courtesy: Talen Energy

PJM submitted a robust response to the market monitor’s report and asked FERC for a waiver that would give the grid operator more time to sort stuff out and “answer the complaint in defense of (its) existing market rules.”

“PJM does not take auction delay lightly, as the schedule for these auctions has already been compressed due to previous reform efforts,” the grid operator said in a statement, referencing its already scrunched timeline that would’ve crammed two capacity auctions into 2024 and another pair into 2025.

“However, this approach improves market certainty and provides a path for resolution before the next Base Residual Auction. This additional time will allow the Commission to deliberately consider the complex issues raised by the complaint,” PJM continued. “Further, this delay will allow PJM to discuss with its Members, stakeholders, and the PJM Board of Managers the possibility of other capacity market reforms that could occur through a Federal Power Act section 205 filing.”

FERC’s findings

FERC grants waivers of tariff provisions where the applicant acted in good faith and the waiver is of limited scope, addresses a concrete problem, and does not have undesirable consequences, such as harming third parties.

“We find that the circumstances of PJM’s waiver request satisfy these criteria,” wrote FERC in its decision to grant the request. “We find PJM acted in good faith to delay the BRA to provide time for PJM and stakeholders to evaluate potential market rule changes before the 2026/2027 BRA.”

FERC disagreed with a protest filed by American Municipal Power (and others) on multiple fronts; contending PJM acted responsibly to try to avoid disruption and ensure the orderly conduct of future RPM auctions.

“Although the auction delay will have an effect on other BRAs through the 2029/2030 delivery year and will require cancelling several Incremental Auctions, on balance we find that granting the waiver request provides the opportunity to address potential consequential changes in the market rules and provides the opportunity for market participants to respond to any changed rules by having additional time to prepare and submit requests and elections in advance of the next auction,” FERC said.

The merits of the Sierra Club et. al complaint will be addressed in a separate FERC order.

Originally published in Renewable Energy World.