A PJM report (PDF) published on Oct. 11 refutes the IMM’s recent report on the Base Residual Auction for the 2025/2026 Delivery Year. Specifically, PJM concludes that the IMM’s recent report presents contradictory, incomplete, and unsupported or incorrect conclusions.
Issues highlighted by PJM in its response (PDF) are:
- The IMM’s analysis of the impact of Effective Load Carrying Capability (ELCC) implementation fails to differentiate between the effects of the changes in risk modeling framework and the change in accreditation framework. The move to marginal ELCC accreditation is becoming an industry standard approach that aligns capacity valuation with marginal reliability contributions.
- The IMM’s allegation of market power exercise through withholding of exempt resources lacks sufficient evidence and analysis. PJM urges the IMM to provide supporting data for this serious claim if it is available.
- While PJM agrees there may be additional winter thermal capacity available, the IMM’s analysis of this issue oversimplifies the matter and fails to account for important limitations including deliverability constraints.
- The IMM’s recommendation on including Reliability Must-Run (RMR) resources in the capacity supply curve is inconsistent with their own recent positions and fails to consider critical issues around RMR agreement obligations. Further, PJM remains concerned that forcing RMR units into the supply stack as a matter of policy could put downward pressure on the capacity price signal at the very time that new capacity is needed.
Finally, PJM analysis shows that the recent auction would have cleared at the market cap across the PJM footprint (rather than in only two areas within the footprint) if core market changes recommended by the IMM had been implemented less than a year ago. In contrast, the IMM’s report on auction results ignores some of its own recent recommendations. These contradictions pose a serious credibility challenge.
For example, had PJM addressed the “four core flaws” raised by the IMM in their report, Analysis of the 2024/2025 Base Residual Auction, in the manner the IMM suggests, the market cost for the 2025/2026 Delivery Year would have been $20.8 billion, and PJM would have been unable to meet its reliability requirement. Now, the IMM presents sensitivities reflecting different recommendations for a predicted market result between $6.7 billion and $12 billion. The actual outcome for the recent capacity market auction was $14.7 billion.
PJM remains committed to working collaboratively with the IMM and all stakeholders to continue refining and improving the capacity market design. As stated in its response, as PJM looks ahead to future auctions, PJM will continue its efforts to increase transparency, refine risk modeling and resource accreditation approaches, and ensure competitive outcomes that support long-term resource adequacy. PJM welcomes continued engagement from the IMM and all stakeholders in this important ongoing work.