News & Events

REMINDER: Effective June 1, 2016 - Capacity Peformance Costs


Capacity Performance Costs

The Federal Energy Regulatory Commission (“FERC”) has approved a “change in regulation” for PJM that
will require electricity suppliers to incur a new category of capacity related costs which will be labeled “Capacity Performance Costs.”These new “Capacity Performance Costs” will become effective as of June 1, 2016, and are expected to add to the total costs that all electricity suppliers must incur to provide firm electricity supply to their customers. The magnitude of the cost adjustments that
electricity suppliers may seek to pass on to customers as a result of PJM’s Capacity Performance program for the next three PJM planning years (i.e., June 1 – May 31 for 2016-17, 2017-18, and 2018-19) have been determined through incremental capacity auctions.

The increase in costs is a result of the last couple of winters, particularly during the polar vortex experienced during the winter of 2013-2014, PJM found that natural gas-fired generators on whom they were relying to provide electricity supply and ensure the reliability of service were unable to perform
during periods of peak demand. In response to this problem, PJM has proposed, and FERC has approved (with some modifications), a plan to provide generators incentives to ensure the reliability of generation from power plants during periods of peak electrical demand, regardless of whether those periods occur
during summer or winter months. Those requirements will cause generators to incur greater costs to assure the reliability of their generation commitments or face the potential for substantial penalties for failure to perform. Please keep in mind that these new costs are the result of a change in regulatory policy and are expected to impact in a similar manner, the costs incurred by all electricity suppliers operating within PJM.