Docket Nos. ER23-729-000, EL23-19-000
In no universe would the results of PJM’s most recent capacity auction applicable to the Delmarva Power & Light South (DPL-S) Local Delivery Area (LDA) be considered just and reasonable.[1] Nor is this outcome merely a topic for academic debate. Real people — the consumers in the Delmarva zone — may pay in excess of $100 million more than necessary because of this operational outcome.[2]
To illustrate further, in its section 205 filing, PJM stated:
Based on preliminary auction data, as a result of the confluence of events in this small LDA, should PJM complete the auction and award capacity commitments, PJM estimates that the clearing price for the DPL-S LDA (and the revenues received by the Capacity Market Sellers in this small LDA) would be more than four times what the clearing price should be. . . . To put that into perspective, the clearing price for the DLP-S LDA from the 2023/2024 BRA was $69.95/MW-day. . . . Such an aberrant auction outcome must be avoided for the 2024/2025 BRA to ensure that the final auction results are just and reasonable rates and reflective of the actual reliability requirements in the affected LDA.[3]
Using the “four-times” PJM estimate, Old Dominion Electric Cooperative (ODEC) noted:
To provide additional context with respect to the economic impact associated with PJM’s estimated four-fold increase in clearing price, ODEC calculated that, unless corrected, the excessive clearing price would result in cost increases to Delmarva Zone load of either $85 million or $144 million under two possible scenarios.[4]
Using the same “four-times” estimate, the Maryland Office of People’s Counsel (Maryland OPC) notes that without approval of PJM’s proposed remedy, electric consumers in this LDA would experience “a major increase in power costs.”[5] Specifically, Maryland OPC calculates the average electric consumer of 1000 kilowatt-hours a month in the DLP-S LDA would experience an extraordinary electric bill increase of an average of $24 a month.[6]
So what to do? PJM knows that the costs that will occur as a result of the confluence of events in this LDA are unjust and unreasonable and — to its credit — has stepped up and forthrightly proposed two controversial solutions: (i) an FPA section 205 filing or (ii) an FPA section 206 filing. The section 205 tariff revisions will apply to the 2024/2025 auction results and to auctions going forward; generally, the section 206 filing raises the question of whether the LDA Reliability Requirement is unjust and unreasonable without the same tariff revisions that the section 205 filing proposes be made.[7]
In addition to the reasoning articulated at length in the order, I support approving PJM’s section 205 filing because the auction results are so blatantly unjust and unreasonable that voting to allow those results to stand is unacceptable to me.[8] But I think we need to do more. As I wrote in my concurrence just last week to PJM’s Quadrennial Review filing,[9] the elephant in the room must be addressed: Whether PJM’s capacity market construct can still ensure sufficient power supplies to deliver reliability at just and reasonable rates. I further said in that concurrence that:
[T]his proceeding is not the proper proceeding for the Commission to undertake a review of the entire PJM capacity market construct in order to ask whether it is still fit for purpose, and, just as importantly, to consider alternatives to the entire construct. I believe, however, that such a review is both timely and compelling.[10]
While this proceeding is also not the proper one for such a comprehensive review, I am pleased that this order does announce that the Commission will conduct a forum on the PJM capacity market at a date, time and location to be announced soon.[11] This is a welcome step forward and will provide a forum to begin these unavoidable discussions on the future of the PJM capacity market construct.
For these reasons, I respectfully concur.
[1] The procedural posture of these results is described at length in the order.
[2] PJM EL23-19 Transmittal at 34 (“The effect of the auction results would require the load in the particular LDA at issue to be responsible for paying over one hundred million dollars in excess of what is necessary for capacity associated with the 2024/2025 Delivery Year.”).
[3] PJM ER23-729-000 Transmittal at 2-3 (emphasis added) (footnote omitted).
[4] ODEC February 6, 2023 Answer at 3 (emphasis in original); see also id. at 3-4 (explaining that ODEC performed these calculations using two scenarios: (i) ODEC assumed that the clearing price in DPL-S is four times the value for DPL-S from the 2023/2024 BRA results (i.e., $280/MW-day) and (ii) ODEC assumed the clearing price in DPL-S is the Point (a) UCAP Price on the Variable Resource Requirement curve from the 2024/2025 Reliability Pricing Model BRA Planning Parameters maximum allowable value of $426/MW-day.).
[5] Maryland OPC January 20, 2023 Comments at 3.
[6] Id. at n.1 (“[Maryland] OPC’s rough calculation of the cost impact of this change, absent PJM’s proposed remedy, is an incremental average increase of the electric bill of approximately $24/MWh for the 24/25 Delivery Year, or $24/month, for the average customer consuming 1,000 kilowatt-hours in a month and resident in the DPL South LDA (including Maryland’s eastern shore area). This increase (to occur for the period June 1, 2024 to May 31, 2025 (the 24/25 BRA Delivery Year)) is about 25% of PJM’s reported average all-in wholesale power cost reported for 2022.”).
[7] However, the section 206 filing gives the Commission the ability to direct different Tariff reforms.
[8] Because we are approving the section 205 filing, I agree we should dismiss PJM’s concurrent section 206 filing.
[9] PJM Interconnection, L.L.C., 182 FERC ¶ 61,073 (2023) (Christie, Comm’r, concurring at P 2) (available at https://www.ferc.gov/news-events/news/commissioner-christies-concurrence-pjms-quadrennial-review-er22-2984).
[10] Id. at P 4.
[11] PJM Interconnection, L.L.C., 182 FERC ¶ 61,109, at P 180 (2023).