This week's capacity auction for the regional power grid contained some good news for consumers: Prices are down.
But the results will increase pressure on generators struggling to compete in a new energy world dominated by abundant natural gas.
Payments from consumers to suppliers that can guarantee capacity in the year starting June 2019 will fall by $4.1 billion to $6.9 billion, said PJM Interconnection L.L.C., the Valley Forge grid operator that includes 13 states and the District of Columbia.
That will be $4.1 billion more in the pockets of households and businesses, which pay the capacity costs as part of the kilowatt-hour charges on their utility bills, PJM spokesman Ray Dotter said.
What's good for consumers may be hard for some generators to stomach.
The price that some generators bid was too high to clear the auction, so they will not receive any capacity revenue for 2019-20. That includes Exelon's Three Mile Island nuclear plant near Harrisburg.
It was the second consecutive year that TMI Unit 1 failed to bid low enough to win the auction, leaving the 837-MW plant's economic fate uncertain.
Capacity payments, which are separate from the price of the energy generated, are fees paid to power producers to guarantee they will be able to generate electricity on demand. PJM procures power three years in advance, based on its load forecasts.
Exelon's other nuclear plants in the region cleared the auction, including the Limerick reactors in Montgomery County.
Exelon's Oyster Creek plant in New Jersey, which is scheduled to be retired in 2019, did not participate in the auction.
Nuclear generators such as Exelon have been pushing for rate relief in some states to help them compete with low-cost gas producers and subsidized renewable energy suppliers.
Exelon has lobbied for rate support in Illinois for its troubled nuclear reactors, which it says should be recognized for zero-emissions generation, like wind and solar generators. This month, Exelon announced that it would retire its Quad Cities and Clinton plants if the Illinois Legislature does not pass comprehensive energy legislation in the session set to end Tuesday.
Quad Cities and Clinton have lost a combined $800 million in the last seven years, despite high performance, Exelon said.
Quad Cities failed to clear the auction this week.
Chris Crane, Exelon's chief executive, said that the capacity market alone is insufficient to save some nuclear plants "that are facing the lowest wholesale energy prices in 15 years."
The PJM auction results, announced Tuesday, were the second done under new rules that the grid operator adopted last year to penalize power producers that fail to meet their obligations to provide power on demand.
PJM procured 167,306 MW in the auction at a clearing price across most of its territory of $100 per day for a megawatt of power capacity. The price was down 39 percent from $164.77 last year.
The price decline was even more pronounced in PJM's eastern zone, which includes Peco Energy Co. in Southeastern Pennsylvania, and all of New Jersey and Delaware. The price cleared was $119.77, down 47 percent from $225.42 last year.
At $100 a day per megawatt, capacity payments mount up for a power producer: For a large nuclear power plant, it could mean $100,000 a day, or $36.5 million a year.
Prices were lower this year because there was more supply and about 1,200 MW less forecasted demand in the region, said Stu Bresler, PJM's senior vice president for markets.
About 5,529 MW of the new generation cleared, mostly natural gas generation. Coal-fired generation, much of which is being retired, was reduced by about 2,600 MW. About 1,500 MW less nuclear generation cleared the auction than the previous year.