Constellation Energy, the PJM Power Providers Group, known as P3, and the Electric Power Supply Association are urging the Federal Energy Regulatory Commission to approve the PJM Interconnection’s plan to revert to the original results of its last base capacity auction — a move that would more than double capacity costs for one of its zones compared to revised results.
The Maryland Public Service Commission and — in a joint filing on Thursday — American Municipal Power, the Delaware Division of the Public Advocate, the Delaware Energy Users Group, Delaware Municipal Electric, the Delaware Public Service Commission, the Maryland Office of People’s Counsel and Old Dominion Electric Cooperative asked FERC to stick with the revised auction results for the Delmarva Power South zone.
If FERC allows PJM to revert to the original auction results, capacity costs for the DPL South zone, which covers parts of Delaware, Maryland and Virginia, would jump to $288.4 million from $110.7 million for the 2024/2025 capacity year that starts June 1, the coalition said.
After PJM ran a base capacity auction in December 2022, the grid operator found that the original results for the DPL South zone were “anomalous” and failed to match actual supply and demand conditions. FERC approved PJM’s plan to revise its rules before the results were released, leading to lower capacity prices in the zone compared to the original results. But a federal appeals court in mid-March overturned the commission’s decision.
In response to the court decision, PJM on March 29 asked FERC to confirm that its rules for the 2024/25 auction were those that were in effect before it was run, and that the results using the original rules are binding and effective.
PJM also wants to re-run a recently completed “incremental” auction. The grid operator asked FERC to make a decision by May 6.
Granting PJM’s petition would increase capacity prices in DPL South to $426.17/MW-day from $90.64/MW-day, with the results being based on flawed assumptions, according to the coalition that includes the Delaware PSC.
“This unjust and unreasonable consequence of utilizing the artificially high reliability requirement is contrary to the commission’s statutory obligation to ensure just and reasonable rates and … is contrary to the commission’s policy against rerunning auctions even in the face of legal error,” the coalition said.
FERC’s decision could have ripple effects on power prices, according to the Maryland PSC.
“The implications of re-running the [base residual auction], with the clear prospect of unjustifiably inflating clearing prices, on the stability of Maryland’s [standard offer service] program results to date — not to mention the upcoming SOS auctions that may reflect those inflated capacity prices for years to come — are both profound and troubling,” the PSC told FERC.
FERC has leeway in how it responds to the appeals court decision, according to the PSC. FERC should reinstate a Federal Power Act section 206 filing from PJM, which would give the commission a pathway to setting a proper rate for the DPL South zone, the PSC said.
However, power plant owners and their trade groups support PJM’s petition.
Normally, rerunning auctions would undermine market confidence but in this case it would bolster it, according to Constellation.
“The legal violation to be remedied here is a violation of the filed rate doctrine, which is itself intended to protect expectations that the rules in place will not change after they are applied,” the independent power producer said, noting that FERC’s “broad remedial discretion” could permit the agency to leave the original 2024/25 auction results unchanged.
Given the rapidly approaching delivery year, the need for clarity about capacity commitments and prices, and the unique events that led to PJM’s petition, FERC should approve it, according to P3 and EPSA.
“While other commenters may offer other approaches (some of which could have merit under other circumstances), the commission cannot ignore the reality of the June 1 start of the delivery year and should have a high bar for making any changes to the PJM approach that could impact the ability to start the delivery year with legal prices and well-understood capacity commitments,” P3 and EPSA said.
