PJM wants a delay in the auction of capacity after an environmentalist's complaint
PJM Interconnection will delay its next annual auction of capacity by six months, while the largest U.S. Grid Operator addresses a complaint made by environmental groups. The biggest U.S. Grid Operator said this in a letter sent on Thursday.
PJM’s latest auction, which resulted to payments to power plants within its system that were 833% more than the previous years, raised concerns about a spike in power bills.
The Sierra Club, Earthjustice, and other environmental groups filed a complaint with the Federal Energy Regulatory Commission last month, alleging that PJM increased capacity prices in part by excluding certain power stations without justification.
Grid operators pay power generators for running during high demand periods. The payouts are determined annually and depend largely on PJM’s estimation of the available supply and demand.
These plants are excluded from the auction because they have RMR agreements that allow them to continue operating beyond their retirement dates. The complaint of environmental groups claims that including these plants would have decreased capacity costs by about $5 billion annually for the next three year.
In a complaint and a second letter, the Organization of PJM States called for RMR contracts to be included in next auction.
PJM plans to ask FERC to delay its upcoming auction once it responds to the complaint.
The letter stated that "PJM takes auction delays very seriously." This approach, however, improves market confidence and provides a resolution path.
PJM stated that if FERC rejects the request the auction will take place in December.
Analysts at Barclays and Jefferies warned that changes in the market structure may negatively affect Independent Power Producers (IPPs) operating under PJM.
IPPs Talen Energy Constellation Energy and Public Service Enterprise all saw their stock prices drop between 0.5% to 5% on a Friday.
Barclays said that this could be beneficial to transmission and distribution utilities, and reduce the tightness of the auction.
(source: Reuters)
