Electricity Capacity Auctions and Prices Creating Confusion for Consumers

           US - Energy News

Reflecting the growing importance of capacity prices in both regulated and retail choice electricity markets, the market in April reacted to two different pieces of capacity auction news in two different Regional Transmission Organizations (RTOs) during the month of April.

On April 14th, the Midwest Independent System Operator (MISO) completed its annual Planning Resource Auction which set the capacity prices for the 2015-16 planning year (June 1, 2015 until May 31, 2016). There are 9 different auction zones in MISO and in most zones capacity prices were significantly lower than 2014-15. Zones comprising the states of IN, WI, MI, IA, MO, AR, LA, MS, and TX all saw capacity prices fall approximately 80% with the price at around $3.50 per Mw day. These prices have a negligible impact on a customer’s electricity price. However, in Zone 4 which comprises the majority of the central and southern part of Illinois, prices rose almost 900% to $150 per MW day. This will have a very large impact on customers’ energy prices for the planning year 201516. The immediate result was a backlash against the generators in this part of Illinois and officials from MISO were invited by the Illinois Attorney General and Illinois House to testify to the results. It was estimated by the Attorney General’s office that the two largest electricity generators in the Ameren territory (Zone 4) could benefit by as much as a combined $337M as a result of the increase. It is important to note that these prices are only for the next year though the trend does seem higher. An additional point is that in Ameren a customer’s capacity bill is a function of just not price but also what a customer’s monthly peak demand is. A customer can therefore try to mitigate the increase by altering consumption patterns to lower the peak demand number.

On April 24th, the Federal Energy Regulatory Commission (FERC) granted PJM’s request to delay the May Base Residual Auction for the capacity period of 2018-19 until no later than August 14th because of some outstanding issues regarding a new capacity performance plan designed by PJM.

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