Energy Buzz: PJM Capacity Cost Increase
This is to inform you of regulatory changes taking place in the PJM capacity market, which will affect electricity customers in Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, and the District of Columbia. It is expected that the capacity performance market reform will increase costs for all electricity suppliers and utilities.
Your electricity contract likely contains a “change of law” provision which allows these costs to be passed through to your electricity bills beginning in June 2016. While the magnitude of increased costs depends on a number of variables, our analysis shows that customers can expect anywhere from a 3.0% – 7.4% increase in electricity costs.
As a result of the 2013 Polar Vortex, in which the region was beset by electricity reliability concerns due to unexpected outages of power plants and shortages of natural gas; the Federal Energy Regulatory Commission (FERC) ordered reforms which will increase capacity and strengthen the reliability of the region’s power supply. These reforms allow for additional payments to electricity generators in return for growing their overall generation capacity. This should strengthen reliability during extreme weather events like the 2013 Polar Vortex, resulting in fewer price spikes.
The costs associated with the capacity market changes were published September 9, 2015 and cover the period of time from June 1, 2016 to May 31, 2019. Please review the chart below to budget for the impact of these additional costs. The chart lists the average per-kWh cost increase for customers across PJM.
Note: That this cost varies depending on load factor for your specific electricity account: