PJM has continued to experience delays in holding the Base Residual Auctions (BRA) for the Reliability Pricing Model (RPM) Capacity Market. These auctions are relied upon for grid reliability by sending appropriate price signals to the market and incentivizing new generation to be built by setting the capacity price three years in advance of when it is needed.
The 2022/2023 RPM BRA was delayed and held in May 2021. The 2023/2024 RPM BRA was delayed and held in June 2022. The 2024/2025 BRA was delayed and held in December 2022, but the results were not published until the end of February 2023 due to issues with the Reliability Requirement artificially inflating prices in the Delmarva South region. The price is higher when resources are less than the reliability requirement and lower when the resources are in excess. Several planned units did not offer into the auction resulting in an artificially inflated price, not indicative of supply fundamentals.
Results for both the 2023/2024 and 2024/2025 auctions are below:
The next auction for the 2025/2026 commitment period was scheduled to open on June 14, 2023. On June 9, FERC approved PJMs plans to delay the 2025/2026 RPM BRA and push the auction date back to June 2024. This delay will push back the timing of subsequent BRA auctions to 6-month intervals thereafter. This will also impact several of the incremental auctions, many of them being cancelled based on the auction timing versus the commitment period.
Illustrative Auction Schedule:
*Back to the normal 3 year forward horizon for associated commitment period for BRA
FERC is granting the delay to provide a window for PJM stakeholders to make capacity market reforms which are scheduled to be presented to FERC by October 1, 2023. PJM’s current capacity market reform proposal includes many updates to the current design including the implementation of a seasonal capacity market design focused on two seasons: Summer (May-Oct) and Winter (Nov-Apr).
As always, contract language is extremely important to pay attention to when entering into your next supply agreement. With all the delays in auctions and changes happening in the PJM capacity market, you should understand who is carrying the capacity risk in your electricity supply agreements.