Market Won't Have Prices From Recently Closed 2024/25 PJM Capacity Auction For Some As PJM Seeks Rule Change Due To Offer Behavior

PJM did not publish prices from the 2024-25 base residual auction for its capacity market, due to concerns about offer behavior in the DPL South LDA

The auction closed on Dec. 13 with prices scheduled to be posted on Dec. 20

PJM said that, "while conducting the auction, PJM found a narrow set of circumstances that impacted a small Locational Deliverability Area (LDA), Delmarva South (DPL South)."

"Specifically, the Reliability Requirement, which determines how much supply an LDA will require, increased in DPL South due to several factors, including planned generation with signed interconnection service agreements that did not offer into the auction. Without the planned units offering in the auction, the increased Reliability Requirement artificially inflated the price in a manner that is not reflective of supply and demand fundamentals," PJM said

When the units are modeled in the reliability analysis but do not offer into the auction, the LDA is short and the market clears, "at an unjustly high price because of the increased reliability requirement," a presentation from PJM staff stated

"In consultation with the Independent Market Monitor, PJM determined that this potential outcome was not just and reasonable for residents in that region," PJM said

PJM proposes to add language to the Tariff under a FERC 205 filing that would prospectively allow PJM, during the auction clearing process, to exclude resources from the LDA Reliability Requirement if those resources do not participate in the auctions where the reliability requirement materially increases (more than 1%).

"PJM will ask FERC to allow PJM, in the case where the Reliability Requirement has increased by more than 1% due to the addition of new resources in the LDA, to exclude planned and intermittent resources that did not offer into the capacity market," PJM said

"In such cases PJM would recalculate the reliability requirement during the auction clearing process without the planned resources that did not offer included in the model," a presentation from PJM Staff said

Furthermore, PJM also noted that it may file a 206 filing with FERC, which, "would establish a refund date and preserve options for FERC."

Stu Bresler, Sr. Vice President – Market Services for PJM said preliminary outcomes from the auction will likely be released Jan. 3, 2023, but that PJM will wait for FERC approval before clearing the auction.

FERC approval could take up to 60 days (at which point the tariff is approved by operation of law)

Bresler said that while the issue concerns DPL South, the resolution would have minor impacts on the parents of the LDA.

PJM said that, "Joseph Bowring, President of Monitoring Analytics, PJM’s Independent Market Monitor, expressed his support for PJM’s analysis of the problem and the solution."