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AG, DOEE: Current Practice of "Exposing" SOS Customers To Capacity Prices Warrants Inquiry, Seek Long-Term Hedging Analysis
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"[T]he issue of exposing SOS customers to PJM capacity prices -- without hedging at least part of that exposure -- warrants further inquiry," the District of Columbia Government (DCG or the District), through the Office of the Attorney General and Department of Energy and Environment (DOEE), said in comments to the D.C. PSC (FC 1017)
DCG was, in late-filed comments, commenting on a proposed RFP from Pepco to source an additional 20% of SOS energy via long-term renewable energy contracts. See prior story for details
The long-term SOS energy RFPs have not included capacity
DCG said, "In the wake of rising capacity market prices, a number of experts have highlighted the missed opportunities that Load Serving Entities (LSEs) such as Pepco forewent when they did not hedge against future capacity price increases during the period of favorably low capacity prices that the PJM region saw prior to 2024."
DCG represented that, "In a recent data request, DCG asked Pepco why it omitted capacity from its recent Renewable PPA and whether it intended to do so again in the future. Pepco responded that 'Decisions concerning whether or not to include capacity in the negotiated agreement were part of a holistic assessment but were largely focused on potential negative impacts to SOS customers. No future decisions have been made as to whether or not future PPAs will procure capacity.'"
DCG said, "It may be that a Renewable PPA is not the optimal vehicle for hedging against capacity price increases. It may also be true that given how high current PJM capacity prices are, long-term contracting around capacity may not be advantageous at this time, though DCG notes that other regions and utilities do have higher capacity prices and PJM capacity prices may yet climb higher. Long-term contracting can also provide value through hedging part but not all of the SOS load, smoothing out risk profiles given uncertainties for whether capacity prices will rise or fall."
DCG recommended that the PSC should direct Pepco to prepare an analysis of long-term contracting and hedging opportunities associated with the PJM capacity market, and convene a technical conference to discuss the results of its analysis.
DCG also said that there may be value in the Department of Energy and Environment and the PSC collaborating on a study to update DOEE’s 2018 analysis of the value of Renewable PPAs.
DCG said, "Much has changed since DOEE’s 2018 study came out. Within the PJM region, interconnection and transmission planning challenges have grown in importance as a major barrier for new generation in general, and renewable energy in particular. At the same time, wholesale electricity prices and the prices for regional renewable energy credits (RECs) have climbed substantially, and may continue to rise. These factors indicate that there may still be substantial value for SOS customers in continuing to pursue long-term PPAs. An updated analysis by DOEE and the PSC of the value of Renewable PPAs and key elements of their design and execution would be beneficial. DOEE welcomes the opportunity to partner with the PSC on this analysis."
DCG said, "DCG looks forward to partnering with Pepco and the Commission on any
next steps that would be beneficial to advance understandings of opportunities to improve
SOS procurement through use of long-term contracting and hedging, including through
the use of Renewable PPAs."
In a reply, Pepco noted that DCG, in DCG's comments, stated that DCG does not at this time have specific,
detailed comments on the terms of the RFP and Draft PPA for long-term renewable energy. Pepco said that the PSC should approve Pepco’s filed draft PPA and RFP for long-term renewable energy for SOS
Pepco said that DCG’s
comments, "discuss and opine on a number of issues, including many that are far outside the
scope of the Notice [concerning the RFP]."
Pepco noted that issues related to the PJM capacity market have
been and are currently being discussed in Formal Case No. 1183.
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October 16, 2025
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Copyright 2025 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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