[Editor’s Note: Click here for an updated and expanded version of this story.]

The 2017/2018 base residual auction cleared at $120/MW-day in most of PJM as restrictions on demand response and imports doubled prices in Virginia, West Virginia, North Carolina and much of Ohio.

Prices were essentially flat in the east, with the PSEG zone falling to $215/MW-day and MAAC up by less than $1. ATSI rose 5%.

Unlike last year’s auction, which saw the PSEG, ATSI and MAAC zones separate from the rest of the RTO, only the PSEG zone cleared separately.

The auction procured 167,004 MW for the delivery year beginning June 1, 2017, good for a 19.7% reserve margin.

Six new combined-cycle plants, totaling 4,800 MW, cleared for the first time, almost all of it located east of the west-to-east transmission constraints or in other areas with capacity needs. In total more than 5,900 MW of new entry cleared.

In a press conference late this afternoon, Executive Vice President for Markets Andy Ott said the increase in clearing prices resulted from the limits on imports, summer-only demand response and the costs of compliance with state environmental regulations.

“I think the changes that we have made … certainly had their intended effect,” Ott said. “Anytime you have an auction with competitive new entry with this kind of volume, we look at that as a success story.”

About 11,000 MW of demand response cleared, a drop of 1,433 MW from last year’s auction. Annual DR increased by 1,400 MW and extended summer by almost 4,700 MW, while limited summer-only resources dropped by more than 7,500 MW. Energy efficiency rose to a record 1,339 MW, up by more than 200 MW.

Ott touted the “dramatic shift” in DR. “All in all we saw it as a positive result that we got higher value DR,” he said.

Imports dropped to about 4,500 MW, down from 7,500 last year. Unlike last year, all of the imports came with firm transmission. All but about 500 MW cleared after winning exemptions from the import limits, which required them to also be pseudo-tied.

Rule Changes

In last year’s auction, RTO prices dropped 56% to $59.37/MW-day, while prices in ATSI dropped more than two-thirds (to $114/MW-day) and MAAC fell 29% ($119). Prices in the Public Service zone rose 31% to $219. Generation imports nearly doubled, leading some to question their deliverability. (See Capacity Auction: New Generation, Imports Up, Prices, DR Down.)

In April, the Federal Energy Regulatory Commission approved PJM’s plan to create five import zones with a combined limit of 6,499 MW for this year’s base auction (ER14-503). (See FERC Clears Capacity Import Limits.)

FERC also recently approved most of PJM’s proposal for making demand response an “operational resource.” However, the commission rejected a proposal requiring DR providers to respond to sub-zonal dispatch. The commission also rejected PJM’s proposals for eliminating financial speculation in the auction, instead scheduling a technical conference to develop a solution. (See PJM Wins on DR, Loses on Arbitrage Fix in Late FERC Rulings.)

FERC previously approved rules requiring DR providers to give more assurances in their offers (ER13-2108), as well as limits on the clearing of limited demand response (ER14-504).

In first-quarter earnings calls before the auction, executives of PJM companies said they didn’t expect a dramatic rise in prices following the rule changes.

[Editor’s Note: RTO Insider will have a full report on the auction results Tuesday.]