Low power generation capacity prices, declining supply point to reliability concerns for 65 million electricity customers
FOR IMMEDIATE RELEASE
February 27, 2023
CONTACT: Christina Nyquist | 603.930.8818 | cnyquist@epsa.org
WASHINGTON, D.C. – Today the PJM Interconnection released the results of the Base Residual Auction (BRA), for the 2024/2025 Delivery Year (DY) which point to an ongoing trend of declining prices for power generation capacity that could drive resource retirement and threaten system reliability. The auction procured 147,478.9 MW of capacity, representing a 20.4 % reserve margin, with the RTO’s Resource Clearing Prices (RCP) for the rest of RTO at $28.92/MW-day compared to $34.13/MW-day in the prior annual capacity auction. The BRA procured 328.5 MW of capacity from new generation and 173.8 MW from uprates to existing or planned generation. On the other side of the ledger, more than 2,000 MW of generation did not offer into this BRA compared to the prior auction, continuing a three-year trend of decreasing amounts of megawatts offered.
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:
“Despite our serious concern over the way this auction was conducted, with rules being changed after the process had begun, we are satisfied that PJM was able to secure sufficient resources to ensure adequate power for the 2024/2025 Delivery Year. However, while the auction’s low capacity clearing price represents savings for customers in the short term, we continue to sound the alarm when it comes to the reality that critical generation resources needed to secure reliable electricity for 65 million customers in 13 states and D.C. are at risk of retirement – as quantified in PJM’s new resource adequacy report. When working well, competitive electricity markets appropriately mitigate wholesale power costs, but adequate compensation is needed for the resources that keep the lights on to be available when they are needed. A healthy reserve margin and adequate compensation to justify continued operations is especially critical in these dynamic times, where extreme weather, new technologies, electrification, and other shifts impact demand and put pressure on the system.
Once again, the results of this BRA demonstrate the need for a clear price signal for capacity resources. The market must be designed properly and avoid rule changes intended to accommodate specific preferred resources or technologies. EPSA has long called on PJM leadership, policymakers, and regulators to address the serious foundational issues at hand, and we stand ready to continue to provide recommendations and work collaboratively to forge a solution. Americans depend on and expect reliable power. Competitive markets remain the best tool to serve that need, but continued erosion of these markets jeopardizes the reliable, affordable, and cleaner energy future that we all want to achieve.”
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The Electric Power Supply Association (EPSA) is the national trade association representing America’s competitive power suppliers. EPSA members provide about 150,000 MW of reliable and competitively priced electricity from environmentally responsible facilities using a diverse mix of fuels and technologies including natural gas, wind, solar, hydropower, geothermal, storage, biomass, and coal. EPSA seeks to bring the benefits of competition to all power customers. Learn more at www.epsa.org and connect with us on LinkedIn and Twitter @EPSAnews.
