Maryland Commission Seeks Reforms to PJM’s Capacity Auction Process

The Maryland Public Service Commission on Oct. 9 requested the Federal Energy Regulatory Commission to grant a complaint filed by a number of public interest organizations to shield ratepayers from higher electricity prices due to flaws in the PJM Interconnection LLC’s capacity auction design. In their complaint, the organizations assert that PJM’s capacity market rules are unjust and unreasonable because they fail to account for the resource adequacy contributions of power plants operating under Reliability Must Run, or RMR, contracts, an arrangement intended to keep a plant operating past its planned retirement date to prevent reliability issues.

The results of PJM’s annual capacity auction for the 2025/2026 planning year, released in July, show record clearing prices, with resources procured at a cost of about $14.7 billion, up from $2.2 billion in the prior auction. The auction cleared at $269.92 per megawatt-day, around nine times the clearing price in the previous auction. The increase in auction price can be attributed to reduced electricity supply as a result of numerous generator retirements, higher demand and the enactment of market reforms.

More recently, the Brandon Shores coal fired power asset and Wanger oil fired production facility announced their intent to retire permanently. As it stands, reliability measures are not in place to account for these retirements, and as a result power stations are expected to be paid to remain operational.  The current PJM capacity auction process does not take into consideration the capacity value of these production facilities, and therefore this creates a false shortage in capacity, which coincides with increasing prices. Due to this process, ratepayers are fundamentally paying twice, once through the higher PJM auction price and additionally to the retiring production facilities.

The complainants – Sierra Club, Natural Resources Defense Council, Public Citizen, Sustainable FERC Project and the Union of Concerned Scientists – assert that PJM forces customers to pay twice for the same capacity by not requiring RMR units to bid into the capacity market or adjust its capacity procurement targets to account for the reliability contribution of RMR units, thus creating a degree of scarcity that does not exist. The Organization of PJM States Inc., in its comments, noted that when changes to the Base Residual Auction parameters are taken into account, the cost impact to consumers of excluding RMR capacity from the supply stack in the 2026/2027 BRA alone could be as high as $14.5 billion.

The Maryland regulator requests revisions to PJM’s capacity market construct to reflect the reliability contribution of RMR resources before the next auction. Maryland is within the region of PJM, the largest U.S. grid operator, which covers 13 states and the District of Columbia.