Uncertainty in PJM Capacity Market "Scaring Away" Participation in Maryland SOS Auction, State Likely First to See Declining Competition for SOS Bids

At a hearing today reviewing SOS procurement results, the Maryland PSC will hear that uncertainty caused by potential changes to PJM's capacity market -- and the allocation of unknown transition costs to load serving entities -- has "scared away" bidders in Maryland's October SOS procurement for SOS electric supplies, Calvin Timmerman, the PSC's Assistant Executive Director, told the National Energy Marketers Association's Mid-Atlantic Energy Summit

"Pure uncertainty shock," led to a drastic decrease in bidder participation in the latest SOS procurement for full requirements supplies, Timmerman said, as load serving entities are facing unknown and unhedgeable transition costs from PJM's proposal to implement its new capacity performance requirements for delivery years for which a base residual auction has already occurred.

See Prior Story: Retail Suppliers Warn PJM Ignoring Transition Costs, Mechanism for New Capacity Performance Procurement

Timmerman noted that Maryland is the first state in the constrained portion of PJM to conduct an SOS procurement since the potential for the existence of unknown transition costs from PJM's capacity performance proposal has become evident. Timmerman predicted that neighboring states would see a similar decline in competition to supply SOS as a result of the uncertainty.

In a similar vein, New England utilities have recently seen a significant decrease in competition for full requirements default service contracts to serve load for this winter, due to concerns about the uplift of ISO-NE backstop reliability charges, and other pricing impacts from constrained natural gas pipeline capacity. The lack of bidding for SOS load prompted some utilities to propose alternative mechanisms of procuring SOS service in cases where the traditional full requirements procurements are no longer competitive