By Mark Jaffe, EUCI energy writer
Six consumer advocates – across four states and the District of Columbia – have filed a complaint with federal regulators contending that the rate design of the country’s largest grid, the PJM Interconnection, is creating “crushing” capacity prices.
For the 2025-2026 delivery year, those capacity prices jumped sevenfold to $14.4 billion. This will lead to a 10% to 20% increase in bills for some utilities when the year starts in June.
“There is a problem in PJM,” the complaint to the Federal Energy Regulatory Commission (FERC) said. “Its ‘Reliability Pricing Model’ is not producing just and reasonable prices that comport with market fundamentals.”
At issue is the method, the base residual auction (BRA), the PJM uses to ensure that there is adequate generating capacity on the grid at a time load is increasing and the system is transitioning from fossil fuel to renewable generation.
One problem, the complaint said, is PJM’s “systematic inflation of its load forecast” leading to requiring more generating capacity than necessary in its auctions.
The PJM serves all or parts of 13 mid-Atlantic and Midwestern states stretching from New Jersey to Illinois and North Carolina.
“PJM acts as if load increases, supply decreases, and slow entry of new resources are facts of nature when, in fact, PJM has or should have tools to manage all three without sending prices to the roof,” complaint said.
The complaint was filed by the Illinois Attorney General’s Office; Illinois Citizens Utility Board; Maryland Office of People’s Counsel; New Jersey Division of the Rate Counsel; Office of the Ohio Consumers’ Counsel; and the Office of the People’s Counsel for the District of Columbia.
“Significant aspects of the BRA design are unjust and unreasonable because they subject consumers to crushing capacity clearing prices that serve little purpose while incumbent generators reap enormous windfall revenues,” the complaint said.
While the capacity cap price soared to $270/megawatt-day (MW-day) for the PJM grid-wide, some areas with transmission constraints saw prices rise even higher. They hit $466/MW-day for the Baltimore Gas and Electric zone in Maryland and $445/MW-day for the Dominion Energy zone in Virginia and North Carolina.
“Continuing to run BRAs using the current design promises the possibility of future auction clearing prices that are even higher,” the consumer advocates warned, with the cap reaching as much as $696/MW-day and overall charges to ratepayers of $37 billion.
The consumer advocates proposed six changes to readjust the tariff, including addressing inflated load forecasting, as well as easing the capacity crunch by giving priority to “ready-to-study projects” that will be sited in areas that are more likely to have capacity constraints.
“Yes, load is increasing – but PJM has historically overestimated load and appears poised to do so again by exaggerating the likely additions of massive data center loads without firm power supplies,” the complaint said.
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