Policy & Regulation

Ratepayer organizations: PJM should include reliability must-run plants in future capacity auctions

The advocates say not considering the value of RMR units in PJM’s capacity auctions creates “unjust and unreasonable” prices.
Ratepayer organizations: PJM should include reliability must-run plants in future capacity auctions

PJM Interconnection should include power plants with reliability must-run (RMR) contracts in future capacity auctions, several ratepayer advocate organizations said in a letter to the grid operator.

Resources with RMR contracts are able to continue operating past their planned retirements. Unlike other RTOS and ISOs, PJM does not require the capacity value of RMR units to be considered in its capacity market. This causes “unjust and unreasonable prices” and “inaccurate price signals,” the organizations said.

Prices in PJM’s latest capacity auction increased more than 800%. The 2025/2026 auction produced a price of $269.92/MW-day for most of the PJM footprint, compared to $28.92/MW-day for the 2024/2025 auction.

The organizations urged the PJM Board to begin the process of developing rules requiring the capacity value of RMR units to be considered in the market, effective for the next auction. PJM may need to delay the auction currently scheduled for December 2024, the organizations said.

“While several of our organizations have stressed the importance of returning to three-year-forward auctions as soon as possible, we agree that it is critical to revise these rules before another auction commits consumers to paying yet another year of excessive and unreasonable capacity prices,” the organizations said.

The organizations cited a study suggesting that two RMR resources’ non-participation in the recent PJM auction could have caused excessive capacity costs of roughly $5 billion.

If the 1,282 MW Brandon Shores plant and the 841 MW Wagner plant had participated in this most recent capacity auction, the BGE Load Deliverability Area (LDA) would not have reached its price cap and would instead have cleared along with the rest of the RTO at a price of $163.46/MW-day, according to the report from Synapse Energy Economics on behalf of the Maryland Office of People’s Counsel.

“The absence of any requirement for RMR units to participate in the capacity market, or for PJM to consider RMRs in determining capacity needs, unreasonably forces consumers to pay twice for reliability—once to keep RMR units online and again in a capacity market that ignores these units’ continued operations,” the ratepayer advocates said in their letter.

If PJM does not address the issue, the organizations said the problem will likely become increasingly severe. The grid operator anticipates roughly 40 GW of retirements by 2030.

Without significant reforms, the organizations said RMR generators may look to exploit gaps in the capacity market rules by not bidding into the market, bringing about costly results for customers.

The organizations represented in the letter included the Maryland Office of People’s Counsel, Delaware Division of the Public Advocate, Office of the People’s Counsel for the District of Columbia and the Citizens Utility Board of Illinois. They urged the PJM Board to take action on the issue by no later than September 20, 2024.

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