Because it takes several years to build new power plants or revamp old ones to produce more energy, PJM established a series of "bridge" capacity auctions for generation pledged to be available from now until May 2011. It is those auctions that Maryland regulators and the coalition of power buyers say resulted in prices that were more than 50 percent higher than was warranted.
Energy consulting firm Kaye Scholer estimated that the first four bridge auctions resulted in $26.2 billion in customer costs across the PJM region, which serves more than 51 million customers.
Despite those high prices, the group says, little new generation was bid into the system for those years.
"In effect, therefore, the transitional auction results were no more than an enormous and unwarranted wealth transfer from customers in the PJM region to existing capacity resources," the complaint said, referring to power generators who will receive the payments.
State regulators and critics of the competitive wholesale market blame the capacity auctions for driving prices higher than they would be under traditional regulation.
PJM said two weeks ago that the latest capacity auction, which will be for generation bid for June 2011 to May 2012, provided evidence that the market is beginning to work as intended. Yesterday's FERC complaint pertains to flaws in previous auctions.
However, PJM said the most recent auction yielded capacity prices that were 37 percent lower than the previous auction's results. Also, it resulted in an additional 4,238 megawatts of new power generation and conservation resources pledged for the PJM territory. One megawatt is roughly enough to power 1,000 homes.
"Forward capacity auctions are creating incentives, and the marketplace is responding with investments," said Andrew L. Ott, a PJM senior vice president, in a May 15 statement.
paul.adams@baltsun.com
