* Capacity auction could be worth $10 billion
* PJM seeking about 160,000 MW of power resources
By Scott DiSavino
May 18 The Independent Market Monitor for U.S.
power grid operator PJM said late Thursday it filed with federal
regulators to withdraw a complaint against an unnamed
participant in PJM's power capacity auction, which concluded
PJM, which operates the power grid serving 60 million people
in 13 Mid-Atlantic and Midwest states, will announce the results
of the auction, which could be worth $10 billion, later Friday.
The auction, called the Reliability Pricing Model (RPM) and
held from May 7-11, will secure about 160,000 megawatts (MW) of
power resources for the 2015/2016 delivery year to help ensure
the future reliability of the grid. Capacity resources include
new and existing power plants, demand response and conservation
On May 1, the market monitor complained to the U.S. Federal
Energy Regulatory Commission (FERC) that an unnamed participant
tried to bid a new project into the auction that included an
out-of-market state subsidy that did not comply with PJM's
Minimum Offer Price Rule (MOPR) for new combined cycle and
combustion turbine natural gas plants.
The minimum offer rule was put in place to prevent load
serving entities like utilities from bidding new power plants
into the market at anticompetitive offers below the cost of
building the new generation.
New Jersey and Maryland offered long-term capacity contracts
to New Jersey power company NRG Energy Inc, New York oil
company Hess Corp and privately held Maryland power
company Competitive Power Ventures (CPV) to build a few power
plants in their states.
The states want the new generation to create construction
jobs, spur economic growth, reduce power prices, allow for the
retirement of older, dirtier plants and ensure a reliable supply
of in-state generation.
The market monitor and owners of several existing power
plants in PJM, however, have filed complaints with FERC and
lawsuits in federal and state court, arguing these long-term
state capacity contracts were anticompetitive out-of-market
subsidies that could distort the capacity market.
The existing generators make millions in the capacity market
so any reduction in capacity prices would eat into their
revenues and may even knock some of their existing plants out of
MARKET MONITOR WITHDRAWAL
In the notice of withdrawal, the market monitor determined
that "no harm to the markets will result as a consequence of the
violation identified in the complaint. The complaint is
Energy experts guessed the market monitor withdrew its
complaint because the price was expected to come in so high that
the unnamed participant's project would clear even without the
out-of-market state subsidy or prices were too low and the plant
project would not clear even with the subsidy.
Last week, two power companies with dozens of power plants
in PJM potentially worth over $1 billion in capacity payments,
Illinois based Exelon Corp and New Jersey based Public
Service Enterprise Group Inc (PSEG), joined the market
monitor in complaining about the unnamed participant.
After the market monitor withdrew his complaint, PSEG and
Exelon withdrew their complaint.
Looking forward, the market monitor said there were still
problems with the minimum offer rule and out of market subsidies
that will require resolution hopefully before the next big
capacity auction, called the Base Residual Auction, in May 2013.