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PJM Won't Run Base Residual Capacity Auctions Until FERC Approves Price Floors, Could Delay BRAs Beyond 2020

Vistra Energy Reports Negative Impact On Retail Contract From Delay

January 9, 2020

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Copyright 2010-20
Reporting by Paul Ring •

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At a Market Implementation Committee yesterday, PJM said that it will not conduct a Base Residual Auction for capacity until FERC rules on new price floors to be developed as a result of FERC's recent order expanding the minimum offer price rule (MOPR)

The May 2019 BRA, for the 2022/2023 delivery year, was already delayed. The next scheduled BRA would normally be held in May 2020 for the 2023/2024 delivery year, although such auction is likely to be delayed

PJM said that it has not determined a proposed schedule for the 2022/2023 and 2023/2024 Base Residual Auctions

In a presentation, PJM said that PJM must develop MOPR floor prices for all resource classes and PJM must update ACR [Avoidable Cost Rate] values

PJM will not run a BRA until new MOPR floors are approved by FERC, PJM said in the presentation

PJM's compliance filing is due March 18. If FERC rules on the compliance filing 60 days after submission, a ruling would be issued in late May (the otherwise normal time for the 2023/2024 BRA)

PJM said that its forthcoming compliance filing with FERC will establish updated auction timelines for the 2022/2023 and 2023/2024 Delivery Years

The proposal will also need to include modified schedules for implicated Incremental Auctions, PJM noted

Exelon said that the BRAs should be further delayed to accommodate state actions to elect the fixed resource requirement (FRR) alternative. Exelon said PJM should set the 2022/23 BRA for ~12 months after the compliance order to provide ample time for states to undertake legislative and regulatory reforms to develop FRRs

In contrast, Vistra Energy said that PJM should establish a timeline to hold the next capacity auction soon

Vistra Energy detailed the impact of delays on its retail contracts

"We compete to serve retail electricity needs, from individual residential and business retail choice to municipal aggregations and default service customers. Frequently buyers want multi-year terms for those contracts. As of June 1, 2020, we will not know capacity costs 2 years from now, meaning that those customers may pay more for electricity because we and other bidders will have to make our best guesses and build in a risk premium," Vistra said in a presentation

Vistra also said in a presentation that, "There is some ambiguity in the order regarding the application of MOPR for voluntary REC purchases but not voluntary bilateral transactions."

Vistra believes PJM should not interpret the order to impede market-driven behavior.

"For example, we offer various 'green' retail products to our customers, which we back with more RECs than needed to comply with state mandates. MOPRing these purchases will mean that: it is more expensive to offer these 'green' products to our customers; there will be fewer low-carbon resources to source from than robust market dynamics alone would support; and there is an efficiency loss," Vistra said

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