PJM Capacity Auction Flaws Spiked Prices By Billions for Customers

Washington, D.C. — Today, the Sierra Club, Earthjustice, and other environmental and consumer organizations filed a complaint to the Federal Energy Regulatory Commission (FERC) over PJM Interconnection’s failure to include reliability must-run (RMR) power plants in its capacity auction. 

According to a study by the Maryland Office of People's Counsel, had the plants operating under RMR been included in the auction, overall capacity costs for the state would have lowered by about $5 billion annually over the next three years.

Since June 2023, PJM concluded that two fossil fuel plants in Maryland owned by private equity-controlled Talen Energy, Brandon Shores and Wagner, would need to receive lucrative RMR contracts to maintain grid stability while new transmission is built to ensure reliability when the plants are eventually retired in 2028. Due to an obvious flaw in PJM’s capacity market rules, the 1,440 MW of capacity available at these plants was not factored into PJM’s most recent capacity auction. This forces millions of households to pay twice: first for the expensive RMR fossil units, and second to fork over billions of dollars in extra capacity payments because of the failure to include the RMR power plants.   

In its July auction, capacity prices increased by 833% across the PJM region, most severely impacting families in Maryland. Another study by PJM’s Independent Market Monitor also found enormous impacts from the capacity at these plants being ignored.

Earlier this month, ratepayer advocates from six states wrote a letter to PJM, urging the utility to include RMR power plants in its future capacity auctions. Instead of working to include its RMR plants in the next capacity auction, PJM claims the unprecedented price spikes—which have already cost customers $4 to $5 billion in excess payments—are appropriate given increasing demands and lower supply of energy.

The complaint asks FERC to require changes to PJM’s market rules to prevent a similar unreasonable result in future auctions, including one that will happen in December 2024. The Federal Power Act Section 206 Complaint can be found here. 

Statement from Justin Vickers, Senior Attorney with the Sierra Club: 

“By ignoring flaws in its rules, PJM is misrepresenting the current level of energy supply and costing consumers billions of dollars in energy bills. The utility cannot expect its customers to continue paying for power plants that are excluded from capacity considerations.

“The solution is clear: PJM must correct this flaw in its rules to accurately reflect the level of energy supply that is available to the region. Residents cannot afford to continue paying sky-high bills month after month, and it’s time for PJM to do right by the millions of families it services and include RMR plants in their next capacity auctions.”

Statement from Nick Lawton, Senior Attorney with Earthjustice:

“Not everyone needs to know the details of how a capacity market auction works, but they should know that PJM has repeatedly delayed and opposed reforms that would enable new clean energy projects to connect to the grid faster, and failed to build much-needed new transmission to ensure reliable electricity. As a result, Mid-Atlantic customers will now face skyrocketing electricity rates because of well-known flaws in PJM’s capacity market auction, in which they are required to effectively pay twice for power from fossil fuel-burning power plants.”

Statement from Mike Jacobs, Senior Energy Analyst with Union of Concerned Scientists:

"PJM is deliberately exacerbating the issue of electricity affordability by ignoring the full picture of their generation capacity. This poor utility practice is not in alignment with the science of grid reliability and unfairly burdens ratepayers with excessive costs. FERC must use its regulatory power to align capacity auctions with actual production potential to ensure fair electricity pricing as coal plants are decommissioned for the health and safety of people and the planet."

Statement from Tyson Slocum, Energy Program Director for Public Citizen:

“For 89 years, federal law mandates that all electric rates must be ‘just and reasonable’. PJM’s absurdly flawed auction format allowed fossil fuel companies to easily manipulate the market and price gouge millions of working families. Federal energy regulators have a solemn duty to protect households from these unjust and unreasonable rates, and must act quickly to change the rules to protect families from this unjustified price gouging.”

Statement from Tom Rutigliano, Senior Advocate for the Sustainable FERC Project at NRDC (Natural Resources Defense Council):

"PJM is already overpaying to keep some of these old facilities like Brandon Shores on its roster, now it is leaving them on the sideline for no good reason. Letting prices soar while ignoring resources consumers are paying top-dollar to keep running is inexcusable. PJM must do better, and if they don’t, FERC must move quickly and make this common-sense change that will save consumers billions of dollars."