The PJM Board of Managers has directed PJM to file a number of enhancements to the PJM capacity market with the Federal Energy Regulatory Commission, following an accelerated stakeholder process and advisory vote from PJM members seeking reforms in support of resource adequacy and grid reliability.
In a Sept. 27 letter (PDF) to stakeholders, the PJM Board outlined the proposed market enhancements that will be filed with FERC by Oct. 13.
The Board initiated the Critical Issue Fast Path – Resource Adequacy (CIFP–RA) stakeholder process in February with the purpose of developing and proposing enhancements to the capacity market, beginning with the 2025/2026 Base Residual Auction (BRA). The Board identified the following areas as priorities:
- Explore how PJM accounts for reliability-related risk.
- Ensure that market-seller offers reflect the risk of capacity obligations.
- Enhance resource accreditation.
- Better align capacity market and Fixed Resource Requirement rules.
“The Board wants to express its sincere gratitude to our stakeholders for their diligence and thoughtfulness during the CIFP-RA and its predecessor, the Resource Adequacy Senior Task Force,” the letter said. “Between these two processes, PJM and its stakeholders have been discussing capacity market reform for almost two and a half years. This is a sign of our evolving times; namely, the energy transition and how our markets must adapt to meet the transition.”
The Board has given PJM the following direction with regard to the October filing, which is mostly based on the PJM “annual” proposal targeting changes to its existing annual capacity market structure versus a more granular construct. The Board did direct some additional changes to the PJM proposal, which are summarized below:
- Market Structure: Maintain the annual capacity market construct for this filing but indicated interest in further exploring sub-annual designs.
- Resource Adequacy Risk Modeling: Maintain the Capacity Benefit of Ties while evaluating more accurate ways to account for this benefit.
- Capacity Performance and Alignment of Risk in the Market Seller Offer Cap: Amend the stop-loss to 1.5 times the relevant BRA clearing price.
- FRR Rule Changes and Transition: Adopt a transition for FRR entities to meet the new requirements that better align FRR with committed capacity resources.
The Board has directed PJM to file these changes to the capacity market with FERC by no later than Oct. 13 in order to be implemented for the 2025/2026 BRA. PJM is also considering multiple filings to mitigate the risk of a single component of the filing causing the delay or rejection of the entire suite of enhancements, according to the letter.
