Pennsylvania Gov. Josh Shapiro on Jan. 13 urged PJM Board of Managers Chair Mark Takahashi to “intervene with” RTO leadership to revise the design of the capacity market before conducting the 2026/27 Base Residual Auction (BRA) to avoid an “unacceptable” increase in capacity market prices.

The letter follows a complaint the governor filed with FERC in December seeking to revise the auction’s price cap by setting it at 1.5 times the net cost of new entry (CONE); the status quo is the greater of gross CONE or 1.75 times net CONE. Arguing that 1.5 times net CONE is the highest price necessary to ensure that the reference resource is profitable, Shapiro said the existing price cap could cause consumers to overpay by as much as $20 billion, a claim he repeated in the letter (EL25-46). (See Pennsylvania Seeks Lower PJM Capacity Price Cap in FERC Complaint.)

“As I have directly related to PJM’s leadership team in multiple conversations, I find the specter of such a vast wealth transfer to be unacceptable,” Shapiro wrote. “In light of this prospect, it is irresponsible for PJM to push to conduct the next auction without directly addressing widespread concerns over the price cap.”

If capacity prices continue to “spiral needlessly upwards,” it “will prompt me to call for more sweeping changes, including a reevaluation of the responsibilities that states have entrusted to PJM,” Shapiro warned.

Shapiro noted that a lower price cap has been advocated for by the Independent Market Monitor, Organization of PJM States Inc. (OPSI) and the governors of Illinois, Maryland, Delaware and New Jersey.

“The PJM board could choose to resolve the ‘cloud of uncertainty’ that recent statements describe by instructing PJM staff to support these common-sense measures on an expedited basis at FERC,” Shapiro wrote, appearing to refer to the RTO’s response to a complaint about reliability-must-run agreements that public interest organizations filed in September. (See FERC Approves PJM Capacity Auction Delay.)

“A failure to hear the voices of Pennsylvania consumers speaking against this market failure will cause me to question whether Pennsylvania should remain within a construct that inflicts such unjust outcomes on our consumers.”

PJM spokesperson Jeff Shields said the RTO is taking actions that will address the issues raised in Shapiro’s letter, pointing to an announcement of initiatives to speed generation interconnections and changes to the capacity market that have been filed at FERC.

“We appreciate the governor’s letter and have reached out to his office to discuss next steps,” he said in an email.

Shapiro requested that Takahashi respond to his letter by Jan. 16.

Gregory Poulos, executive director of the Consumer Advocates of the PJM States, told RTO Insider that advocates are concerned about rising capacity and transmission costs and he is glad to see state leaders taking action.

Move to Consolidate

Since filing his complaint last month, Shapiro has motioned to have it consolidated with two dockets for proposals PJM has made seeking to revise elements of its capacity market, arguing that they are insufficient so long as the price cap remains unchanged (ER25-682, ER25-785).

One proposal includes reverting the reference resource to a combustion turbine, modeling the output of some generators operating on reliability-must-run agreements and adding tariff language that resources categorically exempt from the requirement that they offer into the capacity market do not hold “safe harbor against allegations of the exercise of market power that benefits an affiliated portfolio of market manipulation power.”

The second would extend the must-offer requirement to apply to intermittent and storage resources. (See PJM Capacity Market in Flux Going into 2025.)

Shapiro urged FERC to accept PJM’s changes “as well as [emphasis added] the reform proposed by the commonwealth in its Section 206 complaint. Adopting the reform proposed in the commonwealth’s complaint before the next auction is necessary to protect consumers across the PJM footprint.”

PJM opposed the motion to consolidate, stating the governor’s complaint is outside the scope of the RTO’s filings and combining them could impair the ability to resolve the dockets in time for the 2026/27 BRA, which is scheduled for July. Given the shorter timeline for the commission to act on the complaint, PJM said consolidating the dockets would leave it with less time to decide on matters unrelated to Shapiro’s complaint, such as the must-offer requirement.

The PJM Power Providers and Electric Power Supply Association also jointly opposed the motion, stating that PJM’s proposed revisions would have substantial impacts on capacity market prices that should be considered separately from Shapiro’s complaint. It also argued that complaints under Federal Power Act Section 206 cannot be used to “shoehorn its preferred rate into a utility’s pending [Section] 205 proposal changing its own rate.”

The groups also requested that FERC extend the comment period on the Pennsylvania complaint to after Feb. 7, the deadline for FERC to act on PJM’s first filing.

Shapiro responded that his $20.4 billion estimate already assumes that PJM’s proposals are approved, underlining the need for more thorough changes.

The Monitor commented that the complaint addresses issues with PJM’s capacity market that would not be resolved by approving the two proposals and that it should be considered as expeditiously as possible without a lengthening of the comment period.

“Complaints have made proposals to address identified issues that PJM omitted and made constructive proposals to address PJM’s flawed proposals. The complaint of the commonwealth of Pennsylvania has raised a critical issue related to the maximum price in the auction that it is essential to address prior to the auction and that PJM failed to address,” the Monitor wrote.

OPSI commented that the governor’s complaint mirrors one of the requests the organization made in two letters sent to the PJM board in September and November requesting that it lower the price cap. It supported the motion to consolidate, saying that the commission must act quickly if changes are to be implemented for the 2026/27 auction, noting that PJM has stated that it would need an answer on its capacity market filing by Feb. 21.