November 15, 2017 / 10:10 PM / a year ago

U.S. PJM power grid proposes new energy price model, costs may rise

(Reuters) - PJM Interconnection, the biggest U.S. electric grid, on Wednesday proposed changes to how it calculates power costs, which could boost wholesale prices 2 percent to 5 percent in 13 Mid Atlantic and Midwest states, or between $440 million and $1.4 billion annually.

U.S. Energy Secretary Rick Perry wants the U.S. Federal Energy Regulatory Commission (FERC) to issue rules to protect so-called fuel secure plants from early retirement in FERC sponsored power markets, like PJM, by compensating the units for the resilience benefits they provide.

Fuel secure plants include nuclear reactors and coal plants with 90 days of fuel on site, according to the Department of Energy’s (DOE) Notice of Proposed Rulemaking (NOPR) filed on Sept. 28.

Stu Bresler, PJM senior vice president of operations and markets, said in a conference call the proposal was not a direct response to the rulemaking notice, adding that PJM started working on its plan about a year ago and published a white paper on it in June.

Bresler said the PJM “proposal is not designed to protect any particular fuel resource.” However, coal and nuclear plants should benefit under the PJM proposal, which would cause energy prices to rise if it is approved.

Generators have shut numerous coal and nuclear plants over the past five years and plan to retire more over the next decade in part because the units do not make enough money to keep them in service in the current low power price environment.

Under its proposal, PJM would allow both flexible and inflexible units to set energy prices. Currently only flexible units can set energy prices.

Flexible units include most natural gas plants and some coal units. Inflexible units include nuclear plants, most coal plants and some gas-fired facilities.

Since April 1998, the energy market has served the region well, allowing PJM to accomplish its mission of providing reliable electric service at the lowest cost, Bresler said.

“But changes in fuel and technology combined with a slow-down in demand growth are influencing the markets and have revealed an opportunity to enhance energy market pricing so that prices accurately reflect the true cost of serving load,” PJM said in its proposal.

Bresler said PJM will present the proposal to its members over the next several weeks and hopes to file a final version with FERC by autumn 2018.

Reporting by Scott DiSavino; Editing by David Gregorio

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