Assets Under Maryland RFP Expected to Clear RPM

Combined cycle gas turbine generation built pursuant to a Maryland RFP would be expected to clear the Reliability Pricing Model auction even under the Minimum Offer Price Rule, two analysts at UBS Securities said in a note to clients.

As first reported by Matters on Friday, the PSC is seeking up to 1,500 MW of new generation (9/30). As noted by Matters, clearing RPM is a condition for payments under the contract.

Julien Dumoulin-Smith and Jim von Riesemann, both analysts in UBS's Electric Utilities & IPPs Group, told clients that PJM has previously released a Net Cost of New Entry estimate of $91/MW-day for a CCGT in the PEPCO Zone for the 2014/15 auction, with the Minimum Offer Price equaling 90% of that value, or $81/MW-day.

The latest cleared MAAC price was $136.50/MW-day. Although Dumoulin-Smith and von Riesemann expect Net CONE to rise in the future, largely due to a smaller energy market offset used in the CONE calculation from weaker energy market pricing, they, "nonetheless would expect a CCGT to clear in the next auction should it bid in at the minimum offer price" -- meaning the Maryland RFP "conforms" to the Minimum Offer Price Rule.

Dumoulin-Smith and von Riesemann further cited Calpine and Constellation Energy as the "most credible" participants in the RFP.