Regional grid operator PJM Interconnection on Wednesday proposed to revise its wholesale electricity markets to prop up prices for beleaguered “baseload” generators such as coal and nuclear plants, which are being forced into retirement by low natural-gas prices.
The proposal aims to send stronger price signals to power generators, PJM said, and also to send a political signal to the Trump administration, which in September launched a much-maligned plan to guarantee profits for coal and nuclear plants.
PJM, based in Valley Forge, said its plan was aimed at preserving competitive markets. But it also noted it would increase regional wholesale electricity costs from 2 percent to 5 percent, or as much as $1.4 billion annually for 65 million people in its territory, which encompasses 13 states and the District of Columbia.
The proposal provides an alternative course for the Federal Energy Regulatory Commission, which is considering a “grid resiliency” plan announced in September by Energy Secretary Rick Perry to guarantee cost recovery for power generators that have a 90-day fuel supply on site. The only power plants that can effectively meet that criteria are coal and nuclear power plants.
But PJM and other critics, who have flooded FERC with comments, say Perry’s proposal would upset competitive wholesale markets and boost consumer costs without addressing the stated aim of improving the electric grid’s resilience.
The debate is prompted by the decade-long boom in domestic natural-gas production, which has driven down energy costs, forcing many older power plants into early retirement. The growing dominance of gas-fueled power plants has raised concerns that the electric grid will be vulnerable to a disruption in the gas-pipeline system.
PJM proposes to tinker with the complex rules governing power markets so that owners of “baseload” power plants — those designed to be always running at a steady rate — are not penalized when the wholesale price drops too low.
Energy prices do not always accurately reflect the true cost of meeting demand, PJM said, because the cost of an “inflexible” baseload unit may not be included in the wholesale price. In areas with heavy concentrations of wind turbines, which derive income from non-market sources such as renewable-energy credits, the wholesale energy price can drop to zero at times.
While PJM’s plan would benefit any baseload generator, including nuclear and coal plants, it also would preserve competitive markets and not automatically allow power plants to recover their operating costs, as the Trump administration’s proposal would allow.
“This proposal is resource-agnostic,” Stu Bresler, PJM’s senior vice president for operations and markets, said in a Wednesday conference call with reporters.