Capacity auction prices across PJM’s region, the grid operator for Delaware and other states, have surged by more than 1,000 percent over the past two years, prompting concerns from state consumer advocates about the impact on electric bills.
PJM uses the capacity auction, also known as the Base Residual Auction, to ensure that enough electricity generation is available in future years. PJM’s Independent Market Monitor has determined that the price cap has already prevented $13 billion in additional capacity market costs, which are ultimately passed on to consumers. The monitor also found that these escalating costs are driven by unprecedented increases in electricity demand, primarily from hyperscale data centers, which have increased auction costs by more than $23 billion over the last three auctions.
On January 30, Delaware Public Advocate Jameson Tweedie urged PJM Interconnection to extend a price cap on the capacity auction to protect ratepayers from billions of dollars in additional capacity price increases. The comments were part of the Delaware Public Advocate’s Office’s ongoing efforts to advocate for Delaware ratepayers on regional energy issues, particularly as the rapid growth of large energy users such as hyperscale data centers has upended the regional energy market.
In his comments, Tweedie emphasized that because the market is not functioning as intended, safeguards are needed to protect consumers. “DPA believes the price collar should stay in effect until it is evidenced that new generation/supply has come online at a level sufficient to fully meet demand…. Since the cap was put in place, these conditions have only worsened and are likely to last years until supply chain and other delays are resolved. Any auction conducted in such circumstances will not accomplish the purpose of the auction and therefore would not result in just and reasonable rates.”
On February 12, PJM agreed to seek an extension of the price cap for the next two capacity auctions, responding to requests from Delaware and other consumer advocates.
