The PJM Markets and Reliability Committee discussed a problem statement and issue charge brought by Pennsylvania Gov. Josh Shapiro (D) to open a discussion on establishing a sub-annual capacity market design.

Presenting the proposal to the committee on June 18, Deputy Secretary of Policy Jacob Finkel said the issue charge calls for a senior task force to be established to work toward a seasonal design with the aim of PJM filing a proposal at FERC in the first quarter of 2026. That timeline targets implementation in the 2029/30 Base Residual Auction (BRA), which Finkel said is a tight timeline but an important goal for fixing an annual capacity market design that overcharges ratepayers and blunts market signals.

Christian McDewell, of the Pennsylvania Public Utilities Commission, said the commonwealth supported a seasonal design during the 2023 Critical Issue Fast Path (CIFP) process focused on long-term resource adequacy. He recognized, though, that more work was needed to arrive at a workable proposal. (See PJM Stakeholders Vote Against All CIFP Proposals.)

“I think that it’s a good thing to look at this. We’ve been moving in fits and starts … toward what looks like a sub-annual market,” he said.

Several stakeholders expressed skepticism that such a major market overhaul can be completed in six months.

Paul Sotkiewicz, president of E-Cubed Policy Associates, said past CIFP processes and the implementation of effective load-carrying capability for resource accreditation have shown what happens when stakeholder deliberations are accelerated. While developing a seasonal market design is a great idea, he said it likely would take at least two years to get right.

PJM Vice President of Market Design and Economics Adam Keech said February is the latest PJM could make a filing with the expectation that FERC could issue a favorable order in time for the 2029/30 BRA pre-auction. That assumes there are no deficiency notices. There also would be a non-trivial amount of time needed for software development and testing to effectively split the capacity market in half.

Asked if the implementation could be done in a phased approach, Keech said that would need to be done logically to not have a “Frankenstein” transition period.

Middle River Power’s Sophia Dossin said MISO moved recently to a four-season auction after a considerably longer stakeholder process and still had a rocky implementation. She questioned whether the governor’s office is open to making sure the timeline does not supersede the quality of the product.

Finkel responded that the commonwealth sees implementation in the 2029/30 auction as an important goal but does not want to put the timeline over all else. Getting started is what’s most important, he added.

He said a seasonal market was discussed in 2006 and 2018, as well as during the 2023 CIFP process, making it frustrating that it’s viewed as something that will take an extended period of time.

NRDC Senior Advocate Tom Rutigliano said the energy landscape is changing rapidly, but PJM has difficulty adjusting its capacity market on an agile timeline. It takes time for processes to work their way through the stakeholder process, the commission and then be implemented in a forward auction. If PJM does not become more responsive, he said, it will continue to operate between crises.

Susan Bruce, representing the PJM Industrial Customer Coalition, said consumers are concerned about many of the same issues as the commonwealth. Implementing a seasonal market could affect other market components in ways that are difficult to predict at the onset, she said. She compared the capacity market to a tapestry in which pulling on one thread affects the larger design.

While there have been a lot of studies on how a sub-annual market could function in PJM, Bruce said much of that work was done at a time when PJM had excess capacity.

“What does a seasonal construct look like in a world where we are tight all four seasons?” she asked.

Vitol’s Jason Barker said he’s worried about the implications of a problem statement that includes value statements about the potential cost impact of shifting to a seasonal auction when it is not known how such a change would affect pricing.

Finkel said the commonwealth is less concerned about the dollar amount than it is about ensuring the market accurately reflects what is happening in the real world.

Representing the PJM Public Power Coalition, Customized Energy Solutions’ Carl Johnson said PJM presented a capacity market design road map in July 2024 showing concurrent work on a more granular market and possible rethinking of the forward auction. He said it would make sense for the two issues to be discussed together to arrive at a holistic solution.

Finkel responded that both are important issues, but the Reliability Pricing Model is not as effective as it could be with an annual design, which is a discrete topic he said other RTOs have managed to address.

Exelon’s Alex Stern lauded the governor’s office for bringing the proposal, saying everyone benefits when the member states are involved in the stakeholder process. Throughout his time participating in PJM, he said this is the first time he can recall a state bringing its own issue charge and being involved in this manner. While it may not be possible to arrive at a proposal in time for the 2029/30 auction, he said it’s worthwhile to try.

“Even if it’s not all four seasons … a seasonal market design, in my mind, can better reflect the actual seasonal variations in supply,” Stern said.

Rory Sweeney, of the Northern Virginia Electric Cooperative, questioned whether the governor’s office would be satisfied if the stakeholder process resulted in support for the status quo. Finkel responded that it’s important to let that process play out and see where the membership lands. The outcome could be viewed differently if there is broad support across all sectors or a divided stakeholder body.