Mixed FERC Decisions on Shoring Resource Adequacy for 2015-16

The Federal Energy Regulatory Commission approved one PJM proposal and rejected another, both of which were aimed at ensuring resource adequacy to maintain grid reliability for the winter of 2015-16.

FERC approved the request for a waiver allowing PJM to retain 2,000 megawatts of electricity capacity that otherwise would be sold in an incremental auction. However, it rejected another proposal that would have enabled generation to be available by delaying retirements and incenting earlier in-service dates for new plants.

“We’re pleased with FERC’s approval of the waiver and the additional flexibility it gives us to prepare for the high demand days coming up,” said Andrew Ott, executive vice president – Markets. “However, we will need to continue to refine our existing rules to incent more generation to be available during peak conditions.”

Both proposals were interim measures and limited in scope to deal with unique circumstances. An unprecedented number of generating plants are retiring this spring, and, at the same time, there is uncertainty about the role demand response will be able to play in 2015-16. More than 12,000 megawatts of coal generation is expected to retire by the summer.

The FERC-approved waiver applies to the third incremental auction and involves capacity that was already procured. Typically, excess capacity procured during the annual base residual auction for a period three years in the future is made available at one of the three incremental auctions before the delivery year. This process allows supplies to be adjusted – or “trued up” – to meet any changes that have occurred in load forecasts.