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PSC Hears SOS Suppliers' Request To Receive Supplemental Capacity Payments From Utilities Due To Change In PJM Price Resulting From Litigation
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The Maryland PSC, after hearing the matter at its administrative meeting today, took under advisement a petition from several Maryland wholesale SOS suppliers to essentially make suppliers whole due to an increase in the capacity price in PJM, as a result of litigation and a subsequent FERC order on remand concerning the capacity price
After conducting the base residual auction for the 2024/2025 Delivery Year, PJM had originally published a capacity price of $66.07/MW-day for the Delmarva zone, which had been in place at the time several SOS auctions for Maryland occurred.
At FERC and on appeal, certain capacity sellers challenged how PJM calculated this price, and as a result of a court remand to FERC, a higher price was established for the Delmarva zone. Specifically, the Final Zonal Net Load Price for capacity in the Delmarva zone is now currently $175.22/MW-day (with FERC's order setting such higher price still subject to a challenge from certain state regulators and consumer interests)
Due to the capacity price change resulting from litigation, the SOS suppliers are seeking to treat the capacity price originally posted by PJM as a proxy price under their SOS agreements, meaning that the capacity price is subject to true-up
For all SOS auctions for the 2024/2025 Delivery Year, the SOS suppliers seek to receive a supplemental capacity payment that equals the difference between PJM's posted Final Zonal Net Load Price for capacity (currently $175.22/MWd) and the
proxy price of $66.07/MWd for the 2024/2025 Delivery Year
The SOS suppliers argue that, while PJM had posted a price of $66.07/MWd, the capacity price was not "known" at the time of the SOS auction, because the price was not "final." The SOS suppliers argue that, because the capacity price was not "known" by SOS bidders at the time of the procurement, then the capacity price, per the SOS agreements, is a proxy price, and subject to true-up
Delmarva Power opposes the SOS suppliers' sought relief, stating that, under the SOS agreements, "Seller bears the risk of any other changes in PJM products and pricing during
the term of this Agreement."
"Delmarva Power submits that, pursuant to the terms of the FSA, the
Petitioners are not entitled to having the Zonal Net Load Price for all SOS auctions for the
Delivery Year 2024/2025 that occurred between February 28, 2023 and March 12, 2024 be
treated as a proxy price under the FSA, nor are the Petitioners entitled to receive a supplemental
capacity payment that equals the difference between PJM’s posted Final Zonal Net Load Price
for capacity (currently $175.22/MWd) and the Zonal Net Load Price of $66.07/MWd
published on February 28, 2023 for the 2024/2025 Delivery Year," Delmarva said
During the administrative meeting, Commissioners were concerned about a potential windfall to SOS suppliers from their requested relief. PSC Staff noted that wholesale SOS bids are not transparent, nor are a specific supplier's actual capacity costs known (due to hedging strategies, etc.)
Commissioner Bonnie Suchman took issue with the SOS suppliers' argument that a price is only "known", and thus not eligible for future treatment as a proxy, if the price is "final" (and, for example, not subject to future change due to litigation).
Suchman said that it sounds like SOS suppliers are saying that the price was known at the time of bidding, but now the price is "unknown", adding, "I don't understand how that can, I mean, there are situations that are not anticipated when you sign a contract. And parties can't say 'Well we didn't anticipate that and therefore we're going to change the terms of the contract.'"
The PSC indicated that it will accept further stakeholder comments on the issue
Petitioning SOS suppliers were Axpo U.S. LLC, Constellation Energy Generation, LLC, DTE Energy Trading, Inc.,
Hartree Partners, LP, Shell Energy North America (US), L.P., and Vitol Inc.
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June 12, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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