FERC reviewing change to caps on cost-based generation offers

A proposal that would change the limit for cost-based offers in the Energy Market this winter is being reviewed by the Federal Energy Regulatory Commission. The PJM Board had approved the proposal, which was filed with the commission on Dec. 9.

The proposal calls for the offer cap to change from $1,000 to $1,800 during certain high-demand periods through March 2015. This change is meant to deal with the possibility of high fuel costs that could result in generating resources not recovering their costs despite producing power when most needed to meet high demand.

Last January, fuel-price spikes resulting in an unusually high number of generator cost-based bids being constrained at the $1,000/megawatt-hour cap despite the generators having higher costs. To allow generators to recover their costs and continue supplying energy, PJM requested and received FERC approval to temporarily waive the offer cap when justified by fuel price escalations.

The offer cap proposal (PDF) is posted on pjm.com.