March 5, 2024

Victims of Their Own Success

PJM Regulatory Review

PJM Regulatory Review

  • The Environmental Protection Agency (EPA) announced major modifications to its controversial May/2023 proposal which would have required existing gas plants to comply with its final Section 111 rule which sought to control greenhouse gas emissions primarily through hydrogen co-firing or CCS. Existing gas-fired plants are now exempted so the EPA can focus on the remaining coal fleet and NEW gas-fired plants only.

  • PJM’s Regional Transmission Expansion Plan (RTEP) was recently modified to better achieve its goal of implementing the most efficient, economical, and reliable supply of power to the 65 million people currently served by PJM. The larger scope projects should help de-bottleneck certain zones that are being impacted by generation retirements such as Brandon Shores in BG&E. PJM load are responsible for baseline transmission enhancement costs.

Market Drivers

Energy Market Update

  • US natural gas production averaged approximately 103 BCF/D over the past week as several producers announced production cuts/deferrals. EQT announced this morning that it would cut 1 BCF/D starting immediately which motivated a NYMEX rally led by April which is now trading just under $2.0/MMBTU, up 15 cents on the day.

  • The March NYMEX contract settled last week at $1.615/MMBtu after setting multiple inflation-adjusted all-time lows heading into the last day of trading. With the EQT news today the April contract is now up almost $0.40/MMBtu after also hitting a low of $1.61/MMBtu.

  • Oil prices have rallied back towards $80/BBL as product inventories like unleaded and distillates need to be re-built and the risk of an upset in the Middle East continues to percolate.

  • Increased demand for spot LNG cargoes in Asia has helped reduce floating storage as prices below $9.00/MMBtu seemed to produce more aggressive bids.

  • Mild weather is continuing to adversely impact pricing and normal storage injection/withdrawal patterns as injections are likely to be seen starting the week of March 15 instead of seasonal norms which are sometime in April. Prices will have to incentivize additional demand which means they stay lower for longer.

Forward Pricing

Renewable Energy