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FirstEnergy Talking To Its Retail Choice States About Developing Regulated-Type Generating Capacity In Light Of Record High PJM Capacity Prices
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During a second quarter earnings call, FirstEnergy Corp. CEO Brian Tierney said that the company is discussing with state policymakers development of regulated-type generation capacity, as Tierney cited record prices in PJM's 2025/26 base residual auction for capacity
Tierney suggested that an approach similar to NYPA or NYSERDA could be used to develop new capacity, with FirstEnergy allowed to develop capacity on a regulated-type basis. Tierney said that such a state agency procurement could be compatible with retail choice and energy markets
While noting that the issue is a "politically-fraught question," Tierney said, "I think the real need here in the near-term is for baseload dispatchable generation. And we are ready, willing, and able to engage in all of our jurisdictions for anyone who would like to add that on a regulated-type basis."
Tierney called the record PJM capacity prices, "the canary in the coal mine, and the canary didn't make it."
"If you look at what's happened with the IPP prices over the course of the year, they are all anticipating higher prices in the years going forward," Tierney said
"If you look at the amount of new generation that cleared in the auction [on July 30], according to PJM's auction report, it was like 100 megawatts, so essentially nil. Same in the auction prior to that, it was about 300 megawatts, again, not the right amount. If people were to respond to yesterday's print and say, 'Yes, I think it's a good idea to invest in baseload dispatchable generation in PJM', it would be six years before that capacity would come online," Tierney said
Tierney said that it appears that load growth, including data center load, and baseload generating retirements could outpace dispatchable generating resource additions.
"We are working with customers, states, and other interested parties to help ensure there is adequate capacity to meet growing load and enable the energy transition," Tierney said
In the states where FirstEnergy operates wires-only utilities, Tierney said, "we're open to any construct that would allow us to invest in capacity on something that looks like a regulated basis."
"So, if we were to have in Pennsylvania and Ohio, something that looked like NYSERDA or NYPA, where a state agency could buy, at long-term, capacity, that they might hold an auction for, that anyone -- competitive generators, regulated generators -- could offer into that, those auctions. If it looked like a regulated basis and we could offer at a price that would allow us something that looked like a regulated return and allow us to recover on a pass-through basis, fuel and energy, those are things that we'd be willing to do," Tierney said
"Maryland and Ohio, under certain circumstances, we could add generation there, and Pennsylvania would take a legislative change. So, we are open to all. And if they're open to us, we'd be willing to engage on that regulated-type basis," Tierney said
"And again, there are people that get upset and say, 'Oh you're going back to regulation'. I don't think you have to go back to regulation. I think you can still have energy markets. I think you can still have retail choice where you have it today. But I also think you could have constructs like NYSERDA or NYPA where they could buy on behalf of the state's residents. And that doesn't have to be an end to competition," Tierney said
"And they can even have auctions where all people could participate in that -- utilities, independent power producers, and others. So, for the people that say 'it has to be one or the other', I just don't think that's a valid premise," Tierney said
"The thing we wouldn't be willing to do would be start competitive generation of our own. That's something that we've recently come out of. We paid a heavy price for that. We've rebuilt our balance sheet in the wake of that, and that's not a place that we're going to be going back to. But other things, other opportunities that could benefit our customers, have the capacity that they need, be responsive from a price standpoint, are all things that are on the table, and are all things we're talking to our states about," Tierney said
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August 1, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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