PJM Regulatory Review

Capacity Market Reform

PJM stakeholder proceeding nearing conclusion.

• Members unable to reach consensus on market design changes including:
• Potential seasonal capacity products
• Appropriate capacity procurement levels ​
• Qualifications ​for participation
• Performance requirements ​
• Market seller offer caps ​

PJM Board will ultimately decide what changes to file at FERC.

Filing targeted for October 1, 2023.

Additional Agenda Items

• PJM files Informational Report to FERC on Interconnection Study Performance Metrics. Backlog remains an issue.
• The US Court of Appeals for the DC Circuit agreed with FERC on the decision to eliminate the default offer cap and denied petitions for review from a group of co-petitioners. The overriding goal of “ensuring” sufficient resources remains.
• Electric/Gas coordination task force ongoing as impacts of Elliot still fresh.
• PJM submitted a new filing to FERC with proposed revisions to the PJM Open Access Transmission Tariff thus creating a new rate schedule establishing a mechanism by which Generation Owners deemed critical recover costs.
• PJM and MISO stakeholders suggested a review of potential impacts of additional generation retirements along the border of the 2 ISO’s. PJM has been a significant exporter to MISO with power flows generally exceeding 5000 MW during summer periods.
• PJM making enhancements to generator deactivation rules while identifying problems with existing policies as future reliability concerns persist.

Market Drivers

Energy Market Update

• Spot cash seen weakening as August heat in the northeast dissipates while south sizzles.
• September NYMEX settles August 29th and is taking its queue from cash by also selling off below $2.5.
• Sub $1.0/MMBTU cash will likely be a regular occurrence until colder weather is forecast.
• Natural gas drilling rigs are now down by 33 year-to-date even as production remains strong.
• Low gas prices have helped keep power prices in PJM much lower than was observed in 2022.
• LNG exports have averaged around 12 BCF/D for most of the summer months after hitting 14 BCF/D.
• Oil prices have rallied on the heals of production cuts and record demand near 103 million B/D.

Potpourri Comments

While those us of a certain age bracket (we once had to physically get off the couch to change the TV channel) lament the inexorable movement of the calendar we all try and squeeze the last morsel of fun out of the summer season. For those in the south and certainly in Texas the relentlessness of the heat this year has been both brutal and oppressive as we meander into Labor Day. The need for gas-fired generation has been made manifestly clear as power demand hit 53 BCF/D with multiple demand records across the grid even as renewable resources continue to expand. The COM-ED zone in PJM hit an all time high of 22,000 MW although PJM as a whole only registered a few days above 140,000 MW and power price volatility was fairly benign. The war in Ukraine continues unabated and international energy markets adjust to new realities of sources of supply changes. As September NYMEX rolls off next week the focus will turn to the upcoming winter season and what that portends for prices. The battle of the pre-winter bullishness versus current cash bearishness could provide some opportunities. Place your bets on warm or cold and call your CPV representative to discuss purchase options.

Forward Pricing

Renewable Energy