By Suzanne Herel

Analysts are predicting lower clearing prices for PJM’s 2019/20 Base Residual Auction, which began Wednesday and concludes today. Results are to be published May 24.

Last year’s auction, held in August, saw prices of $164.77/MW-day for Capacity Performance in most of the RTO, with the ComEd zone at $215/MW-day and Eastern MAAC hitting $225.42. Base capacity priced about $15/MW-day lower. (See PJM Capacity Prices up 37% to $165/MW-day.)

Morningstar analyst Jordan Grimes forecasts a price of $160/MW-day for the Capacity Performance product in the RTO and MAAC regions and $180/MW-day in EMAAC and SWMAAC. He predicts base capacity will price at a discount of $10/MW-day.

Julien Dumoulin-Smith of UBS Securities reduced his forecast CP price from $140/MW-day to $125/MW-day for the RTO region, with prices higher in EMAAC, DPL-S, PS-N and PSEG ($200/MW-day) and ComEd ($225/MW-day).

Grimes took note of ISO-NE’s Forward Capacity Auction 10 in February, in which prices dropped by more than a quarter. (See Prices Down 26% in ISO-NE Capacity Auction.)

“PJM participants fear a similar fate,” Grimes wrote. “We believe this fear is unwarranted. PJM will have to clear a significant amount of coal and peaking gas capacity in the upcoming auction.”

In a note to investors last week, Dumoulin-Smith said new gas generators, a lower load forecast and the Supreme Court ruling upholding FERC jurisdiction over demand response compensation will likely keep prices from rising in most of the region.

Dumoulin-Smith also said he expects a larger differential between CP and base capacity than last year. “We believe we could well see a base print for the RTO region below $100/MW-day. This pricing pressure could help limit any increase in demand response product availability.”

The RTO plans to acquire 157,092 MW of capacity for delivery year 2019/20, 80% of it Capacity Performance. This year’s price cap is $448.95/MW-day, compared with $450.86/MW-day for the 2018/19 auction.

This is the second and last year that the auction will offer two products. The base product will be eliminated beginning in the 2020/21 delivery year.

UBS predicts “price compression” in EMAAC, with Talen Energy’s Sapphire portfolio clearing at least partially.

Morningstar’s model predicts Exelon’s Quad Cities nuclear plant will not clear. Exelon CEO Chris Crane said earlier this month that the company will close Quad Cities if it doesn’t clear the auction and Illinois legislators don’t approve measures to shore up the money-losing plant. (See Absent Legislation, Exelon to Close Clinton, Quad Cities Nukes.)

UBS predicted disappointment for “more RTO-exposed generators” such as Dynegy, NRG Energy and FirstEnergy. It said that although it expects new capacity resources to clear the auction, their ability to obtain financing is in question.

“We have noted a meaningful slowing in development activity in recent months. Banks appear to be increasingly cautious to lend against assets given the wider pullback in power valuations and cumulative exposures to merchant PJM increasing. We expect this slowing to principally impact the 2020/21 auction next May 2017.”