The PJM Interconnection has announced a significant delay to its impending base residual capacity auction, pushing it back by approximately six months. This strategic postponement aims to facilitate essential reforms within its capacity market framework, as articulated in a notice released on Thursday.
"PJM does not take the decision to delay an auction lightly,” the grid operator emphasized, acknowledging the already compressed schedule stemming from prior reform initiatives. “However, this approach enhances market certainty and opens a pathway for resolution prior to the next Base Residual Auction.”
This delay has implications that stretch beyond just one event; it will impact at least three scheduled auctions that are to occur within six-month intervals. The imminent capacity auction, slated for early December, is intended to secure capacity for the 2026/27 delivery year. Following that, additional auctions are planned for June and December 2025, targeting capacity for the 2027/28 and 2028/29 delivery years, respectively. The capacity market serves as a cornerstone for ensuring adequate power supplies across the grid.
Just last month, a coalition—including the Sierra Club, Natural Resources Defense Council, Public Citizen, Sustainable FERC Project, and Union of Concerned Scientists—submitted a formal complaint to the Federal Energy Regulatory Commission (FERC). This complaint challenges PJM’s omission of reliability must-run (RMR) power plants from its capacity auction calculations, urging FERC to mandate a revision of PJM’s rules ahead of the forthcoming auction.
Support for this complaint comes from PJM’s market monitor, the Organization of PJM States, Inc. (OPSI), and the Maryland Public Service Commission. They estimate that excluding two Talen Energy power plants with pending RMR contracts could result in a staggering increase in capacity costs—projected at about $14.5 billion—compared to the last auction’s total cost of $14.7 billion. Such fluctuations could lead to electricity bills in Maryland surging by an estimated 2% to 24%, contingent upon location, according to the state’s ratepayer advocate.
In a push for accountability, OPSI reached out to PJM last month, flagging perceived deficiencies in the capacity market rules, notably the exclusion of RMR resources. Simultaneously, the PJM Power Providers Group—representing independent power producers—echoed these calls for reform, pointing out that adjustments made to the demand curve for capacity prices could exacerbate the volatility of auction outcomes.
Responding to the Sierra Club’s allegations, PJM intends to defend its current market rules by an October 17 deadline. However, PJM has acknowledged the complexity of the issues at hand, noting that they intertwine with multiple facets of capacity market design. The grid operator expressed apprehension that FERC could intervene regarding RMR concerns without fully comprehending the broader implications.
This auction delay, approximately six months, is seen as an opportunity for FERC to delve into these intricate matters, while also allowing PJM to engage in discussions with its members, stakeholders, and board about potential other reforms within the capacity market.
For this postponement to be realized, PJM will need to seek FERC’s approval for the delay and the establishment of new auction dates, planning to consult its members prior to making any formal requests. Nevertheless, PJM is committed to preparing for the December auction in the event that FERC denies the request for a postponement.
PJM Contests Market Monitor Findings
In a concurrent turn of events, PJM pushed back against certain assertions made by its market monitor, disputing claims that the operator’s capacity market contributed to inflated prices during its last auction. The market monitor suggested that power plant owners exploited market power by withholding resources, a claim PJM refuted as lacking substantial evidence and rigorous analysis.
Moreover, PJM criticized the market monitor’s recommendation to incorporate RMR resources in the capacity supply curve, deeming it inconsistent with previous positions. The grid operator expressed concern that mandating RMR units into the supply stack could inadvertently depress capacity price signals, especially at a juncture when new capacity is critically needed.
In a statement of intent, PJM reaffirmed its commitment to collaborate with the market monitor and stakeholders in refining the capacity market. “Looking forward to future auctions, PJM will persist in its efforts to elevate transparency, enhance risk modeling, and resource accreditation processes, all while ensuring competitive outcomes that uphold long-term resource stability,” the grid operator declared.