FERC Directs PJM Not To Run 2022-23 BRA Capacity Auction In August

Retail Supplier Had Warned Of Negative Impacts From Not Holding Auction In August, Inability To Forecast Future Capacity Prices In Retail Contracts

July 26, 2019

Email This Story
Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The following story is brought free of charge to readers by EC Infosystems, the exclusive EDI provider of EnergyChoiceMatters.com

FERC has directed PJM to not run in August 2019 the Base Residual Auction (BRA) under its RPM capacity market for the 2022-2023 delivery year under its existing tariff

FERC's order comes as the Commission has previously declared the current capacity market tariff to be unjust and unreasonable, but has yet to adopt a replacement. Chief among changes to be addressed in the ongoing RPM proceeding is a process for LSEs to remove load associated with state-subsidized resources from the RPM auction (see background on the issue here)

PJM had planned to conduct the 2022-23 auction in August 2019 under the existing tariff, given the lack of a replacement rate from FERC

FERC said of its directive: "In rendering this determination, we take into account considerations such as the magnitude of the tariff process at issue -- the BRA, a major feature of the PJM market -- and the corresponding interest of market participants who make resource investment and retirement decisions based on price signals. We recognize the importance of sending price signals sufficiently in advance of delivery to allow for resource investment decisions. However, we believe that in the circumstances presented here, on balance, delaying the auction until the Commission establishes a replacement rate will provide greater certainty to the market than conducting the auction under the existing rules."

As summarized by FERC, Direct Energy had supported conducting the auction in August 2019.

As summarized by FERC, "It [Direct Energy] asserts that the forward capacity auction was designed to provide market participants with important price signals that are necessary for resource investment and retirement decisions and for load serving entities that procure capacity on behalf of customers. Direct Energy states that further delaying the August 2019 BRA would negatively impact the market by providing no indication of the capacity price for the relevant delivery year, thus requiring retail suppliers to forecast prices without a cleared market, and also could impact the 2020 BRA, eroding market confidence. Direct Energy states that, while further delaying the auction may be beneficial to some entities impacted by the replacement rate, such as PJM Entities, that is not the case for all resources in PJM. Direct Energy explains that load serving entities that do not own generation and are serving customers outside of state sponsored wholesale procurements rely on the forward capacity auction price signals to index electricity offers to customers. According to Direct Energy, other mechanisms are not available to protect default service customers from capacity market outcomes, given that the Commission has not yet set a replacement rate. Direct Energy states that running the August 2019 BRA under the current rules will have little impact on clearing prices."

In light of FERC's order, PJM said in a market notice that it is suspending all auction activities related to that auction, including deadlines and data submittals.

"The order recognized that confidence in the auction and its results is vitally important to all of our stakeholders and the integrity of the market. We look forward to additional guidance from FERC on the design of PJM’s capacity market," PJM said in the market notice

Docket Nos. EL16-49-000 and EL18-178-000

ADVERTISEMENT
NEW Jobs on RetailEnergyJobs.com:
• NEW! -- Senior Counsel - Regulatory - Retail Supplier
• NEW! -- Sales Representative -- Retail Supplier
• NEW! -- Energy Contracts Counsel -- Retail Supplier
• NEW! -- Senior Natural Gas Energy Trader -- Retail Supplier
• Operations Manager -- Retail Supplier
• Quality Assurance and Customer Service Manager -- Retail Supplier