Power producers across 13 states will receive an additional $3.4 billion in 2018-19, according to results announced Friday of an auction aimed at securing more reliable electricity supplies during emergencies.
The auction by PJM Interconnection, the Valley Forge operator of the power grid stretching from the mid-Atlantic to Illinois, was revised after many power generators failed to produce during cold snaps because of frozen equipment or curtailed fuel supplies.
The grid operator "had to act decisively" to change its auction rules to give producers incentive to make improvements, and to penalize those that fail to produce as promised, PJM chief executive Terry Boston said in a statement. "Two consecutive cold winters with natural-gas interruptions and the rapid pace of coal retirements have put considerable pressure on the system," Boston said.
The PJM capacity market aims to procure enough power to meet predicted energy demand three years in the future. Capacity payments, which at this auction differed by region within PJM, are separate from revenue producers receive for actual electricity they generate.
This year's auction will generate $10.9 billion in capacity payments across PJM for 2018-19, up from $7.5 billion for 2017-18. PJM serves 61 million people in 13 states and the District of Columbia.
PJM expects the new rules to increase monthly costs about $2 to $3 per household in 2018. But the costs for consumers in the Philadelphia area might be greater because the auction price set for New Jersey, Delaware, and Peco Energy Co. territory was higher than the PJM average.
One beneficiary of the higher prices is Exelon Corp., the nation's largest nuclear-power producer, whose plants are concentrated in PJM. Exelon also is Peco's parent company.
But the auction price may not be high enough to induce Exelon to keep open its money-losing Quad Cities nuclear-power plant in Illinois. Exelon has asked the Illinois legislature for rate relief for its reactors.