PJM Announces Results from its 2023-2024 Capacity Auction
Customers located within PJM Interconnection’s (PJM) regional footprint, which includes all of Ohio, will pay less for capacity beginning June 1, 2023. The price decrease is the result of PJM’s latest Base Residual Auction, which cleared at a price of $34.20 per Megawatt-Day (MW-Day). This is the lowest BRA clearing price in PJM since the 2013/2014 delivery year (DA) BRA held in May 2010.
This BRA result will be used to calculate the Reliability Pricing Model (RPM) price that customers will pay for capacity during the June 1, 2023 through May 31, 2024 DY. The final RPM price for the 2023-2024 DY will vary slightly from the BRA depending upon the results of an Incremental Auction (IA) that will be held in March 2023.
The table below shows the RPM capacity prices for the 2013-2014 through 2022-2023 DYs, as well as the BRA clearing price for the 2023-2024 DY.
Table 1: PJM’s 2013-2014 DY through 2023-2024 DY Capacity Prices, to Date
PJM cited a new, less restrictive Minimum Offer Price Rule, lower unit-specific Market Seller Offer Caps, less lead time to the delivery year (one year instead of three), the use of a historical rather than forward-looking Energy and Ancillary Services Revenue Offset, and the application of a new method for determining the capacity value of wind, solar, and storage resources as possible reasons for the lower BRA price.
If you have any questions about the recent BRA, or the PJM capacity construct in general, please contact Jennifer Lemley.
Peak Loads for Summer 2022
Brakey Energy provides email and text alerts in advance of potential Capacity and Transmission Coincident Peaks (CPs) to those clients that elect to receive them. As of June 23, 2022, Brakey Energy has issued three Capacity CP alerts, five FirstEnergy-Ohio (FE) Transmission CP alerts, and three American Electric Power-Ohio (AEP) CP alerts for Summer 2022.
Capacity CPs occur during the five one-hour intervals when demand on the PJM Interconnection (PJM) grid is at its highest. Transmission CPs for FE customers occur during the five one-hour intervals when demand on FE’s zonal grid is at its highest. The Transmission CP for AEP customers occurs during the one-hour interval when demand on AEP’s zonal grid is at its highest.
The tables below list PJM’s and FE’s five highest loads and AEP’s single highest load this year, as well as the day and time of each occurrence. This is based on preliminary data.
Table 2: Five Highest Loads for PJM through June 23, 2022
Table 3: Five Highest Loads for FE through June 23, 2022
Table 4: Single Highest Load for AEP through June 23, 2022
In our 2022 Coincident Peak Forecasting Report, we forecasted that the 1CP and 5CP for PJM will be 148,237 MW and 145,070 MW, respectively. PJM’s top five peak loads to date have fallen notably below this range. With all of July, August, and September yet to come, it is very possible that all of the loads shown in Table 1 will be displaced.
In our 2022 Coincident Peak Forecasting Report, we forecasted that the 1CP and 5CP for FE would register at 12,606 MW and 12,125 MW, respectively. Uncharacteristically high temperatures across Northern Ohio during several days in mid-June resulted in very strong loads registered very early in the season. As a result, it is possible that some of the loads on Table 2 will end up being FE Transmission CPs come year’s end.
In our 2022 Coincident Peak Forecasting Report, we forecasted that the 1CP for AEP would register at 22,306 MW. The highest load to date comes within 597 MW of this forecasted peak. However, with all of July, August, and September yet to come, it is probable that the load shown in Table 3 above will be displaced.
Brakey Energy will continue to monitor weather and load forecasts and will issue alerts to participating clients when warranted. If you are a Brakey Energy client that has not signed up for these alerts but would like to, please email Catherine Nickoson.
AEP Announces Updates to SSO Rates
Electric costs increased this month for AEP’s Ohio customers that take electric generation service under the utility’s Standard Service Offer (SSO). The SSO is the default rate charged by the utility for generation and ancillary services to customers that do not contract with an alternative supplier. Defaulting to the SSO is an increasingly viable strategy for many customers with impending generation contract expirations in AEP-Ohio territory.
AEP updated its Generation (GEN) Rider on June 1, 2022. Electric bills rendered after June 1, 2022 will be subject to the new rate. The GEN Rider, which makes up about 90% of AEP’s overall SSO rate, reflects the results of AEP’s SSO auctions for the June 1, 2022 through May 31, 2023 delivery year. The clearing prices from these auctions were significantly higher than prices for the previous (June 1, 2021 through May 31, 2022) delivery year.
The previous and current SSO per kilowatt hour (kWh) rates for AEP’s Residential (RS) and General Service Non-Demand Metered (GS-1), Secondary (GS-Secondary), Primary (GS-Primary), and Transmission (GS-Transmission) rate schedules are shown in the table below. Despite the dramatic percent increase, SSO rates are significantly below prevailing market prices.
Table 5: AEP SSO Rates
If you would like more information about how AEP’s recent rate update will impact your monthly electric costs, please contact Jennifer Lemley.
FE Announces Updates to SSO Rates
Electric costs will be increasing on July 1 for FE customers that take electric generation service under Ohio Edison’s (OE) and Illuminating Company’s (CEI) Standard Service Offer (SSO). Costs will be decreasing slightly for customers served under Toledo Edison’s SSO. The SSO is the default rate charged by the utility for generation services to customers that do not contract with an alternative supplier. FE’s SSO generation rates are higher in the three summer months of June, July, and August than they are in the other nine months of the year.
The tables below compare the current and July 1 SSO rates per kWh for OE, CEI, and TE Residential (RS), Secondary (GS), Primary (GP), Subtransmission (GSU), and Transmission (GT) rate schedules. These rates will change again on September 1.
Table 6: OE SSO Rates
Table 7: CEI SSO Rates
Table 8: TE SSO Rates
If you would like more information about how FE’s recent SSO rate updates will impact your monthly electric costs, please contact Jennifer Lemley.
The highly competitive generation offers we highlighted in the past for residential customers have long disappeared. We are now recommending customers with expiring contracts default to the SSO until likely May 2023. The SSO rate varies by electric distribution utility but is likely below current market conditions. To the extent you are in an expiring contract, make sure you provide notice to your supplier that you would like to default back to the SSO as to avoid being swept up in an extremely expensive holdover provision.
Brakey Energy has long and often found defaulting to distribution utilities’ Standard Choice Offer (SCO) a prudent strategy for natural gas supply. We encourage our readers to employ this strategy if they are comfortable riding the highly volatile natural gas market. Despite the runup in natural gas prices, we are seeing the SCO produce better pricing than many other competitive offers.
Natural Gas Market Update
The NYMEX price for June settled at $8.908 per Million British Thermal Units (MMBtu) on May 26, 2022. This price is up 22.6% from May’s price of $7.267 per MMBtu. This settlement price is used to calculate June gas supply costs for customers that contract for a NYMEX-based index gas product.
The graph below shows the year-over-year monthly NYMEX settlement prices for 2018, 2019, 2020, 2021, and 2022 to-date. Prices shown are in dollars per MMBtu of natural gas. Natural gas prices have continued to rise in response natural gas storage that is below the five-year average, steady demand for liquefied natural gas exports, and high demand for natural gas in the electric generation sector.
Figure 1: NYMEX Monthly Natural Gas Settlement Prices
Electricity Market Update
The graph below shows the Around-the-Clock (ATC) 12-month price strip for electric generation and how it has changed over the past 36 months for three Ohio utility service territories: AEP, FE (the ATSI zone), and AES-Ohio (formerly Dayton Power & Light, the DAY zone). Prices have softened somewhat but are still highly elevated relative to historical levels.
Figure 2: 12-Month Energy Price Strip
*ATC pricing as of June 23, 2022. Data provided by Direct Energy Business.
The graph below provided by Direct Energy Business shows the June 23, 2020 through June 23, 2022 ATC forward prices for calendar years 2023, 2024, 2025, 2026, and 2027 for the AD hub. The forward price for calendar year 2023 is continuing to trade at an extreme premium relative to outlier years. Although not shown on this graph, the same is true for the balance of calendar year 2022.
Figure 3: AD Hub Calendar Year Strip Prices
*ATC pricing as of June 23, 2022.