PJM increases payments to power plants, seeks to avoid grid blackouts

In an effort to avoid blackouts, PJM Interconnection, the nation’s largest grid, will increase payments to power generators by 37 percent.

The company said Friday the payment increase will begin in June 2018, and will be $164.77 per megawatt (MW) per day, as determined in a capacity auction held earlier this month. The increase represents an almost $45 jump over the previous 12 months reached in an auction last year.

Precipitating this payment increase was a decision by federal regulators to allow PJM to penalize generators that fail to supply promised power. The decision was intended to prevent unplanned shutdowns and fuel shortages, like those that greatly inflated prices during the winter of 2014.  

Capacity costs were set at higher levels for two regions because of supply constraints. The eastern mid-Atantic region, including New Jersey, Delaware and Pennsylvania, finalized a price of $225.42/MW/day, while prices in Exelon Corp.’s ComEd utility territory rose to $215.

As reported by Bloomber Business, under the new rules the grid operator can impose penalties of about $2,800 per megawatt-hour on generators that fail to deliver promised power during emergency hours, this according to Michael Lapides, an equity analyst for Goldman Sachs Group Inc. in New York.

Supply commitments rose to $10.9 billion in this most recent auction, up nearly $3.5 billion over last year.  The grid manager secured 166,837 MW of power supplies in the auction, down from 167,004 MW in last year’s auction, in part because the grid operator cut its demand forecast.

Capacity from demand-response providers rose to 11,084 MW, an increase of 1 percent. 


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