PJM Capacity Auction To Proceed With Issuance of FERC Orders

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The PJM capacity auction for the 2025/2026 Delivery Year is clear to proceed following two Federal Energy Regulatory Commission orders on PJM’s capacity market rules.

On Jan. 30, FERC approved the main component of PJM Interconnection’s two-part proposal to reform its capacity market rules, seeking broadly to facilitate the energy transition while maintaining adequate generation resources to meet future electricity demand.

That first FERC order accepted PJM’s proposal to expand the Effective Load Carrying Capability (ELCC) methodology to better evaluate the contribution of each generation resource to the reliability of the system. The enhanced ELCC methodology includes thermal generators and accounts for correlated generator outages that may occur in extreme operating conditions.

PJM is reviewing FERC’s Feb. 6 order rejecting the second component of PJM’s capacity market rule reform. PJM’s second filing sought to allow generation owners bidding into PJM’s capacity market to better reflect the financial risk they take when committing to PJM’s Capacity Performance requirements.

That filing also sought to align consequences of nonperformance during Performance Assessment Intervals for resources that are committed in Fixed Resource Requirement plans and those that are committed through the capacity market. The filing also sought to improve and clarify certain Capacity Performance requirements.

“The approved reforms represent a substantial step forward in helping PJM maintain resource adequacy over the near and long terms, by ensuring alignment of market results with reliability impacts thereby driving effective investment signals,” said Stu Bresler, Executive Vice President – Market Services and Strategy.

“While FERC did not accept our second filing,” Bresler noted, “Commissioners did provide helpful guidance to PJM and stakeholders as they consider how best to advance these concepts that will help to maintain system reliability.”

The 2025/2026 Base Residual Auction, as the capacity auction is formally named, was scheduled to take place in June. PJM is seeking permission from FERC to conduct the 2025/2026 Base Residual Auction in July to allow for the orderly administration of the auction and provide additional stakeholder education.