PJM capacity prices fall sharply in auction except for New Jersey

Washington (Platts)--24May2013/552 pm EDT/2152 GMT


Prices in the PJM Interconnection's annual capacity auction fell sharply this year, with the exception of New Jersey, thanks to new generation, an increase in imports and weak load growth, PJM said Friday.

PJM's annual capacity auction, also known as the reliability pricing model's base residual auction, opened on May 13 and covered delivery year 2016/2017.

The regional transmission organization clearing price plunged to $59.37/MW-day, a roughly 56% decrease from its clearing price of $136/MW-day in la t year's auction for delivery year 2015/2016. The clearing price for the MAAC zone -- which includes Pennsylvania, New Jersey, Maryland and Delaware -- fell to $119.13/MW-day, a 28.9% decrease from last year's clearing price of $167.46/MW-day.

"Prices were generally lower than last year?s auction due to competition from new, gas-fired generation, low growth in demand because of the slow economy and increased imports from other regions, primarily to the west of PJM," Andrew Ott, PJM's senior vice president of markets, said in a statement. "These factors also contributed to a reduction in commitment of demand resources."

About 169,160 MW of resources cleared in this year's auction, including a record-breaking 5,463 MW of new generation. About 4,282 MW of the new generation came from new units while roughly 1,181 MW came from uprates to existing units, according to PJM.

Imports also jumped up this year, rising to about 7,484 MW in total, a roughly 90% increase over last year's import total of 3,935 MW. About 4,723 MW of those imports came from the Midcontinent Independent System Operator, which imported just 2,078 MW of resources in last year's auction.

Along with increased supply from new generation and imports, the demand growth modeled for this year's auction was also largely flat. The footprint-wide peak forecast load for 2016/2017 was 165,425 MW, up slightly more than 1% from 2015/2016's forecast load largely due to the integration of the East Kentucky Power Cooperative.

The PS Zone, which represents New Jersey, was the only region that saw a higher clearing price in this year's auction. While the PS zone cleared with the rest of MAAC at $167.46/WM-day in last year's auction, its clearing price in this year's auction rose to $219/MW-day.

While the ATSI zone in northern Ohio set a record high in last year's auction, clearing at $357/MW-day, its clearing price in this year's auction tumbled to $114.23/MW-day.

The capacity auction's results also demonstrated a continuing shift in the region's fuel mix, with gas-fired units accounting for the lion's share of new cleared generation.

"Nearly 10,000 MW of coal that offered into the 2016/2017 base residual auction did not clear the auction and cleared capacity from gas-fired generation exceeded cleared capacity from coal-fired generation by over 15,000 MW," PJM said in its report on the auction results.

This year's auction also saw a decrease in demand response participation. According to PJM, about 14,507 MW of demand response was offered in this year's auction, a roughly 27% decrease from last year. About 12,408 MW of the offered demand response cleared in the auction, a 16.3% decrease from last year's total.

However, about 1,117 MW of energy efficiency resources cleared in this auction, a roughly 21% increase over last year's total, according to PJM.

Before the auction, most analysts had predicted that prices would be weaker in this year's auction but had not anticipated such dramatic decreases.

UBS had predicted that the RTO would clear at about $115/MW-day, MAAC would clear at about $145/MW-day and the PS zone would clear under $200/MW-day. Likewise, Barclays had predicted the RTO clearing price to be between $110 and $130/MW-day, the MAAC clearing price between $130 and $150/MW-day and the PS zone clearing potentially as high as $329/MW-day. PA Consulting, on the other hand, had expected prices to be flat to slightly stronger in this year's auction.

--Juliana Brint, juliana.brint@platts.com --Edited by Richard Rubin, richard_rubin@platts.com