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Retail Suppliers Facing Near Doubling of Unhedgeable Capacity Costs For Next Year Under PJM Transitional Auction

September 1, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

While retail suppliers have more lead time to account for the higher capacity performance prices under the initial base residual auction featuring the new performance product for the 2018/19 delivery year (click here for recent results), retail suppliers are facing a near doubling of capacity prices for the 2016/17 delivery year (a time period for which many have already entered fixed price retail contracts), as a result of transitional auctions PJM is using to phase-in capacity performance requirements

Specifically, PJM said that the first capacity performance transitional auction, for 2016-17, resulted in a capacity performance clearing price of $134 per megawatt-day for all areas in the PJM footprint.

More instructive is the Adjusted Zonal Net Load Price ($/MW-day), which are shown below from the original 2016-17 base residual auction (which did not feature capacity performance), and the first capacity performance transitional auction

    2016-17 Zonal Net Load Price ($/MW-day)
Zone       2016-17 BRA      CP Transitional
                              Auction
AE           $118.89         $158.68
AEP           $59.37          $98.29
APS           $59.37          $98.29
ATSI          $90.54         $129.25
BGE          $118.89         $158.68
COMED         $59.37          $98.29
DAYTON        $59.37          $98.29
DEOK          $59.37          $98.29
DLCO          $59.37          $98.29
DOM           $59.37          $98.29
DPL          $118.89         $158.68
EKPC          $59.37          $98.29
JCPL         $118.89         $158.68
METED        $118.89         $158.68
PECO         $118.89         $158.68
PENLC        $118.89         $158.68
PEPCO        $118.89         $158.68
PL           $118.89         $158.68
PS           $177.61         $218.65
RECO         $118.89         $158.68

Note that the Zonal Net Load Price resulting from the transitional auction reflects a CP Transition IA Cost Component of $38.17/MW-day. PJM noted that this CP Transition IA Cost Component is as of 8/31/2015, and that the CP Transition IA Cost Component is subject to change since the Total RTO Obligation is not finalized until after the final Incremental Auction for the Delivery Year.

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