Groups representing gas- and coal-fired generators said Wednesday that the sharp price drop in PJM’s 2023/24 capacity auction is a continuation of trends that threaten the RTO’s long-term reliability.

PJM reported Tuesday that its capacity bill for the year will be $2.2 billion, down from about $4 billion for the 2022/23 delivery year. It was the second year in a row that capacity prices have fallen, with Rest of RTO clearing at $34.13/MW-day, the third-lowest in the history of the Base Residual Auction. PJM said the results were likely depressed by the effective elimination of the minimum offer price rule (MOPR), a tougher cap on generator prices and robust forward energy prices. (See related story, PJM Capacity Prices Crater.)

“While the auction’s low capacity clearing price represents a savings for customers in the short term, these results portend real concerns over adequate compensation for resources needed to support reliability in all conditions and looking forward,” the Electric Power Supply Association said in a statement. “What appears to be developing is a trend where the addition of new supply resources is far outpaced by the retirement of resources that can deliver reliable power in the PJM BRA. Oversimplifying the results of the auction by cheering the lower price for capacity fails to recognize that there is a cost to ensuring the delivery of reliable power, and the most cost-effective way to deliver it is through well functioning markets, not from picking winners and losers among the resources that participate.”

EPSA said PJM’s market rules are undermining capacity price signals, calling on the RTO to “avoid rule changes intended to accommodate specific preferred resources or technologies.”

“The desire by some to defer to the policy choices of 13 states and D.C. to dictate the regional resource mix may seem sound but, in reality, threatens the reliability framework to which consumers of all types have become accustomed and expect as a part of their daily lives,” EPSA said.

The PJM Power Providers (P3) Group, which represents more than a dozen merchant generators in the RTO, was similarly critical.

“The auction-clearing prices are among the lowest they’ve ever been, so the compensation that generators will receive to commit to serving PJM’s region next year is greatly reduced,” P3 President Glen Thomas said in a statement. “However, the requirements they will commit to are more rigorous than ever. Increased obligations for decreased compensation is an incentive to leave the market rather than retain existing resources or attract new ones that will help maintain reliability going forward.”

EPSA and P3 members hold large portfolios of natural gas-fired generation.

Nuclear in the Money

Nuclear plants were big winners in the auction, clearing 5,315 MW more than last year. Solar resources increased 25% to 1,868 MW, while wind resources dropped by 434 MW. Natural gas resources cleared an additional 1,685 MW, while cleared capacity of steam units (primarily coal) dropped by 7,186 MW to 27,682 MW, reflecting a decrease of 7,813 MW offered into the auction because of plant retirements.

Coal trade group America’s Power said the auction will likely cause more coal retirements.

“PJM’s coal fleet was already expected to decline by half (more than 24,000 MW of announced coal retirements by 2030) even before the auction,” CEO Michelle Bloodworth said in a statement. “In addition, EPA regulations are expected to cause even more coal retirements, especially during the 2026-2028 time frame.”

Bloodworth reiterated the group’s request that PJM study how its reliability would be affected if half or more of its coal fleet retires by 2030, saying more coal retirements could also cost ratepayers when gas prices spike.

“We continue to urge PJM and other grid operators to value the reliability, resilience and affordability attributes of coal,” Bloodworth said. “Doing so would help put coal on a more level playing field with other resources that are receiving federal and state subsidies.”

Impacts Debated

At a press conference announcing the results Tuesday, PJM Senior Vice President of Market Services Stu Bresler noted several rule and timing changes that may have impacted the results, including the effective elimination of the MOPR, the use of a lower unit-specific market seller offer cap (MSOC) to counter market power and a historical, rather than a forward-looking, energy and ancillary services revenue offset. Bresler cautioned that because the RTO had not done any modeling, “we don’t know the magnitude of any [price] impacts.”

The less restrictive MOPR was applied to only seven resources totaling 76 MW that had failed to file for exemptions in time, Bresler said.

“Revisions demanded by FERC have virtually eliminated the MOPR, and it now fails in its purpose to prohibit subsidized resources from both suppressing the clearing price for resources who do not enjoy the benefit of a subsidy and preventing those otherwise economic resources from clearing,” P3 said.

The group said the elimination of the default MSOCs “promoted by proponents as necessary to protect against the potential to inappropriately influence prices, instead … forced suppliers to use unit-specific calculations of anticipated revenues from the energy and ancillary services markets to determine their necessary capacity market revenues while also prohibiting those calculations from accounting for the costs and risks of accepting a capacity obligation to operate when so directed by PJM.”

Jeff Dennis, managing director and general counsel of Advanced Energy Economy (AEE), offered a different take.

“There will be unfounded speculation that removal of the expanded MOPR caused the low prices; but past auctions run without an expanded MOPR produced even lower prices,” he tweeted. “PJM has been oversupplied for years; oversupplied markets produce low prices.”

He also expressed dismay at the increase in natural gas clearing the market, saying gas capacity is overvalued because of PJM’s use of an “outdated methodology” compared with the effective load-carrying capability (ELCC) used to value renewables.

P3, however, contended that the capacity capability provided by wind and solar is “overstated” even with ELCC.

“PJM’s proposed solution to rectify this issue is under dispute because it assumes utilization of extra room on the transmission system that should be available to all system users,” P3 said.

Constellation and Vistra Report on Auction Results

All of Constellation Energy’s (NASDAQ GS:CEG) nuclear-, natural gas- and oil-fired generation in PJM (18,775 MW) cleared in the auction, the company said in a filing with the U.S. Securities and Exchange Commission.

That included all 16,175 MW of its nuclear capacity, up from 9,900 MW last year, when the Byron, Dresden and Quad Cities plants in Illinois were left out of the money.

Exelon (NASDAQ:EXC) spun Constellation — including its generation and competitive energy operations — off as a standalone company in February to focus on its regulated utilities.

Vistra (NYSE:VST) reported it cleared 6,868 MW at a weighted average clearing price of $37.20/MW-day, a total of $94 million.

It said it also expects incremental revenue of $70 million to $75 million from existing retail and other third-party bilateral sales above the auction clearing price, for total estimated revenues of $164 million to $169 million.

Public Service Enterprise Group (NYSE:PEG), owner of the Salem and Hope Creek nuclear plants in New Jersey, and Energy Harbor, which operates nuclear plants formerly owned by FirstEnergy Solutions, did not respond to requests for comment. Talen Energy declined to comment on whether its Susquehanna nuclear plant cleared.