FERC Makes Capacity Commitments Meaningless, Says PJM Offer Cap Unjust And Unreasonable For "Winter Months" in Adopting Higher Cap

Ignoring capacity owners' forward commitments to provide energy under the current $1,000 offer cap, FERC has ruled that PJM's current offer cap is unjust and unreasonable for the, "winter months."

FERC accepted PJM's proposed $1,800/MWh offer cap for the winter 2014/15, with the higher cap to terminate on April 1, 2015. Offers above $1,000/MWh must be "justified" based on costs.

"[F]uel costs during winter periods may increase to the point that the current $1,000 offer cap no longer adequately compensates generators for their costs and prevent energy and ancillary services prices from reflecting the marginal cost of serving load," FERC claimed.

"In particular, natural gas prices in parts of the PJM region reached an average on some days of $120/dth," FERC said, ignoring that any generation with a capacity supply obligation has no one to blame but itself for being exposed to such natural gas prices if the supplier chooses to imprudently hedge, knowing it has an obligation to offer into the energy market.

FERC accepted the use of make-whole payments for generators whose costs exceed $1,800/MWh.

Docket EL15-31