FERC on Nov. 8 approved a PJM waiver request to offset the RTO’s capacity auction schedule by six months starting with the 2026/27 Base Residual Auction (BRA). 

PJM sought the waiver in anticipation of its Federal Power Act (FPA) Section 205 filing to make several changes to its capacity market (ER25-118). (See “OPSI Speakers Discuss Future Auction Design,” Panels Debate PJM Capacity Market Design at OPSI Annual Meeting.) 

The order shifts the 2026/27 auction from December 2024 to June 2025 and schedules the three subsequent three auctions for December 2025, May 2026 and December 2026. It also cancels the second Incremental Auction (IA) for the 2027/28 delivery year and first IA for the 2029/30 delivery year. 

The commission said the delay would allow PJM to address a complaint filed by several environmental and public interest organizations regarding how generators operating on reliability must-run (RMR) agreements are reflected in PJM’s capacity market.  

Filed by the Sierra Club, NRDC, Public Citizen, Sustainable FERC Project and Union of Concerned Scientists, the complaint argues those units should be required to offer into the capacity market or should be administratively counted in the supply stack by PJM. They contend the status quo requires consumers to pay repeatedly for the same reliability contribution in the form of the RMR agreement, transmission upgrades to mitigate violations caused by the generator’s deactivation, and higher capacity prices when a unit leaves the market to operate on the RMR agreement (EL24-148). 

“PJM explains that the complaint has generated significant market uncertainty and that, to address this uncertainty, it plans to file a FPA Section 205 filing that will propose several capacity market rule changes. PJM’s waiver will provide the time to address potential consequential changes in the market rules by delaying the 2026/2027 BRA and compressing the timelines for subsequent auctions to facilitate the return to a three-year forward schedule,” the order states. 

Insight into Upcoming Filing

PJM presented an overview of its expected filing during a Nov. 7 special Markets and Reliability Committee meeting, in which Vice President of Market Design and Economics Adam Keech said the filing likely will include changing the reference resource back to a combustion turbine (CT) and setting criteria for counting the expected output of the Brandon Shores and Wagner units operating on RMR agreements toward meeting RTO and locational deliverability area (LDA) reliability requirements. 

The change would include sunset provisions with the aim of being applicable to only those two units while broader changes to the RMR rules are worked out through the stakeholder process. 

Those stipulations mandate that units be reasonably expected to operate throughout the delivery year, have a minimum number of available run hours to be available for transmission support, be available to PJM for all emergencies unless on outage and have deliverable capacity interconnection rights (CIRs).  

Keech said PJM has determined that Wagner Unit 3 meets those requirements and it is working to determine whether Unit 4 would as well. Due to an agreement between the Sierra Club and Talen Energy to cease coal combustion at Brandon Shores by the end of 2025, it is not clear that generator could be relied upon. 

While not addressed in the complaint regarding RMR resources, PJM also seeks to revert the reference resource to a CT, undoing a change made in the 2022 Quadrennial Review to shift to a combined cycle generator. Due to the higher energy and ancillary service (EAS) revenues, the net cost of new entry (CONE) value fell to $0/MWh in some LDAs, resulting in a capacity performance penalty rate of zero as well. That could occur in situations where generators face no non-performance charges during emergencies but still could receive overperformance bonuses. The diminished net CONE values also produce a significantly steeper variable resource rate (VRR) curve, creating price volatility in the capacity market. 

The commission’s order says the harms of changing the auction schedule are outweighed by the benefits of addressing the possible consequences of the market rules and allowing market participants to react to any rule changes. 

“Although the auction delay will have an effect on other BRAs through the 2029/2030 delivery year and will require canceling several Incremental Auctions, on balance we find that granting the waiver request provides the opportunity to address potential consequential changes in the market rules and provides the opportunity for market participants to respond to any changed rules by having additional time to prepare and submit requests and elections in advance of the next auction,” the order says. 

FERC disagreed with American Municipal Power’s protest arguing that the waiver request was deficient without a stronger outline of what would be included in the 205 filing, countering that it is reasonable to request a delay to allow for consideration of changes still being drafted. 

The commission dismissed as moot a parallel request to delay the auction that PJM made in its comments on the RMR complaint, saying the approval of the waiver request does not prejudice its consideration of that complaint.