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Requiring All Retail Suppliers To Enter Into Bilateral Contracts Among Recommendations In Regulator's PJM Report
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The New Jersey BPU released a report on reforms to PJM's market that, among other policies, recommends that, "states should direct long-term procurements," which "may" include bilateral contract obligations for all LSEs including retail suppliers
"The State may require all in-state LSEs, or LSEs that serve load through the BGS, to ensure that a portion of their supply is obtained through supply ownership of long-term bilateral contracts. Long-term supply arrangements can provide a hedging mechanism for ratepayers and minimize retail price spikes associated with wholesale rates," the report said
"The state has many tools to incent long-term contracting for new resource development. Other tools, such as mandated bilateral contracts, warrant consideration as well," the report states
The report notes risks from long-term bilateral contracts as well
"The economic risk is that long-term procurements – ones that are not made with and on behalf of new large loads -- will shift risk away from investors and toward ratepayers and may expose ratepayers to market power concerns or locked-in prices made during a high-priced market. While a more balanced approach toward risk sharing can be explored, decision makers must be careful to not overcorrect either. On the legal front, state-directed long-term procurements under the LCAPP were deemed illegal under Solomon and Hughes. To avoid a legal defect, a state-directed program (1) cannot set capacity prices and (2) cannot require load to participate and clear in the capacity market. To mitigate the legal risk, an LSE serving BGS load must be allowed to procure long-term supply arrangements through their own efforts and negotiations. The state should not require any resource procured this way to participate in the capacity market. However, a competitive LSE will still be incented to participate in it to ensure they obtain the self-supply offsets available to it through PJM’s FERC-approved governing documents. Still, the lack of a requirement for the LSE bilaterally contracted capacity to clear the capacity market presents a theoretical risk that New Jersey customers may end up having to pay for both bilaterally procured capacity that does not clear the market and duplicate replacement capacity that managed to clear the market," the report states
Other recommendations from the report include a recommendation that data centers, or their LSEs, should be required to bear the costs and risks associated with their new load, including a state bring-your-own-new-capacity (BYONC) mandate
The report favors PJM capacity market reforms such as a seasonal market construct, a prompt auction, and "PJM directed and centralized long-term procurements".
The report may be found at this link
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August 14, 2026
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Copyright 2026 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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