VALLEY FORGE, Pa. — The future of the 2024/25 Base Residual Auction (BRA) results is uncertain following a ruling from the 3rd U.S. Circuit Court of Appeals partly vacating a FERC order authorizing PJM to change an auction parameter after bids had been received (ER23-729).
The court’s March 12 ruling found the commission violated the filed rate doctrine in accepting a PJM proposal to revise the locational deliverability area (LDA) reliability requirement for the DPL South zone, which covers much of the Delmarva peninsula.
PJM sought the change after identifying a nearly fivefold increase in capacity prices due to the interaction between a “misalignment” in resources that offered into the auction and the expected resource pool with the determination of the reliability requirement. (See 3rd Circuit Rejects PJM’s Post-auction Change as Retroactive Ratemaking.)
Speaking during the March 20 meeting of the Markets and Reliability Committee, Senior Counsel Chen Lu said the RTO anticipates court approval for a new course of action about early May, following a 45-day deadline for FERC to propose a new directive for PJM and about seven days for the court to review. He added PJM is not planning to request a rehearing or appeal of the ruling to the Supreme Court. That option is open to FERC and intervenors in the case.
PJM Vice President of Federal Government Policy Craig Glazer said if rehearing or an appeal is sought, that could delay PJM knowing how to proceed with the capacity results. He added that the courts don’t have hard timelines on which they must act, raising the possibility that uncertainty around capacity prices could extend into the delivery year, which starts in June.
“If rehearing is sought, it kind of freeze-frames everything,” he said.
Lu said PJM is assessing the feasibility of rerunning the auction with the original LDA reliability requirement parameter for DPL South with the existing offers submitted in December 2022.
PJM Senior Vice President of Market Services Stu Bresler said the RTO is in contact with FERC staff to provide perspectives on possible next steps. But he told the MRC he could not speculate about what those steps might be. If the auction did have to be run, he said the impact would likely spread outside the DPL South zone.
Paul Sotkiewicz, president of E-Cubed Policy Associates, encouraged PJM to remain in communication with FERC to encourage it to come to a resolution the court could accept as quickly as possible, noting that using the full 45 days it has to respond could put resolution of the dispute within a month of the start of the delivery year.
“We’re right before the delivery year at this point; it’s really cutting this close, so I’m wondering if there’s a way to accelerate that time frame,” he said.
