Auction Clearing Prices Are Significantly Lower Following Implementation of the Focused MOPR and Revised Offer Cap
FOR IMMEDIATE RELEASE | June 22, 2022
CONTACT: Todd Snitchler 330.316.7492 | tsnitchler@epsa.org
WASHINGTON – The PJM Interconnection released the 2023/2024 results of the Base Residual Auction (BRA), which cleared 144,870.6 MW of unforced capacity, representing a 21.6% reserve margin, with the RTO’s Resource Clearing Prices (RCP) for the rest of RTO at $34.13/MW-day compared to $50.00/MW-day a year ago. The BRA procured 3,329.7 MW of capacity from new generation and 404.8 MW from uprates to existing or planned generation. On the other side of the ledger, more than 11,000 MW of generation did not offer into this BRA compared to the prior auction.
The BRA is conducted to allow for the procurement of resource commitments to satisfy the PJM region’s unforced capacity obligation for the Delivery Year and allocates the cost of those commitments to Load Serving Entities (LSEs) through a Locational Reliability Charge. In response to the release of PJM BRA results, EPSA President and CEO Todd Snitchler issued the following statement:
“We are pleased that PJM was able to secure sufficient resources to ensure adequate power for the 2023/24 delivery year in this auction. However, while the auction’s low capacity clearing price represents a savings for customers in the short term, these results portend real concerns over adequate compensation for resources needed to support reliability in all conditions and looking forward.
What appears to be developing is a trend where the addition of new supply resources is far outpaced by the retirement of resources that can deliver reliable power in the PJM BRA. Oversimplifying the results of the auction by cheering the lower price for capacity fails to recognize that there is a cost to ensuring the delivery of reliable power, and the most cost-effective way to deliver it is through well-functioning markets not from picking winners and losers among the resources that participate. The results of this BRA underscore the importance of establishing a clear and useful price signal for capacity resources. To achieve this, the market must be designed properly and avoid rule changes intended to accommodate specific preferred resources or technologies. The desire by some to defer to the policy choices of 13 states and DC to dictate the regional resource mix may seem sound, but in reality, threatens the reliability framework to which consumers of all types have become accustomed and expect as a part of their daily lives.”
