New Jersey asks FERC to investigate PJM capacity auction results

New Jersey Governor Phil Murphy asked federal regulators to investigate whether capacity market manipulation resulted in elevated power prices in PJM Interconnection's 2024 capacity auction that cleared at record-high prices for most of the grid operator's footprint.

PJM disputed the claim and said it would comply with any such investigation.

"Today, I'm urging [Federal Energy Regulatory Commission] to take immediate action to investigate the unacceptable outcome of PJM's 2024 capacity auction -- resulting in exorbitantly high price increases that PJM will unjustly pass down on to everyday New Jerseyans," Murphy said in an April 17 statement.

PJM's capacity market auction for the 2025-2026 delivery year cleared at record-high prices of $269.92/MW-day for much of the PJM footprint, compared with $28.92/MW-day for the 2024-25 auction, due to tighter supply, higher demand and market rule changes, according to the grid operator.

Governor Murphy asked the commission's leadership in an April 16 letter to direct its enforcement unit to launch an investigation of the 2024 capacity auction.

PJM has been taking steps to improve its capacity market for the past several years amid a changing power generation fuel mix, increasing power demand, power plant retirements and other factors. FERC in February approved a set of capacity market reforms, including a finding that the categorical exemption of the must-offer requirement does not allow the withholding of capacity from the market "as a means to manipulate auction clearing prices," as described in Murphy's letter.

The letter also cited the most recent PJM state of the market report, prepared by PJM's independent market monitor, Monitoring Analytics, as finding the 2024 capacity auction results were "significantly affected by the exercise of market power through the withholding of categorically exempt resources," and that this along with other factors "resulted in actual capacity market payments that were approximately twice as high as needed."

In addition to investigating the 2024 capacity auction results, Murphy said FERC should closely monitor the conduct of upcoming auctions and continue the oversight until the markets are functioning in the "public interest."

FERC chair's perspective

FERC Chairman Mark Christie addressed PJM capacity market critics during the April 17 FERC open meeting and counted himself among the skeptics as someone who was a state regulator in Virginia for many years before joining FERC.

Christie said a lot of the problems PJM stakeholders are experiencing stem from state policy decisions many years past that are now coming to a head. States that restructured their retail markets and took utilities out of generation procurement/ownership -- such as New Jersey and a majority of others in the PJM footprint -- are at the mercy of the PJM capacity market pricing for electric utility customers, he said.

The loss of dispatchable power generation and dominance of renewable energy resources in PJM has been another factor that has the grid operator dealing with a supply mismatch for growing demand, Christie continued. PJM has warned regulators and stakeholders about premature retirements of power plants that indicate the days of power supply abundance in the PJM market are coming to an end, he added.

Anyone who asserts the generation interconnection queue is to blame is missing the point that PJM has approved nearly 50 GW of resources, but many cannot gain financing, do not have site control where facilities are planned or are dealing with supply chain problems, Christie said.

When asked about Murphy's letter during a press conference, Christie said he has not seen the letter but added that FERC conducts investigations on a routine basis.

The FERC chairman commended PJM President and CEO Manu Asthana, who recently announced he will be stepping down at the end of the year.

"He's done an outstanding job," and comments from stakeholders critical of PJM management are misplaced, Christie said, pointing out he has not been shy about addressing the capacity market construct in PJM.

The PJM capacity market woes that politicians are complaining about represent a culmination of problems more than 20 years in the making, he said.

New Jersey lacks sufficient internal capacity: PJM

PJM pointed to sluggish offshore wind power development in New Jersey as a factor leading to higher power prices for consumers.

"New Jersey has insufficient generation in-state to meet its needs, and has to make up this difference through imports," a PJM spokesperson said in an email. "A seven-year-long effort by New Jersey to fill this gap with offshore wind has failed to deliver any results whatsoever, and consumers are now paying the price for this failure."

PJM has not seen evidence supporting a finding of market manipulation in the 2025-26 capacity auction, "but we take such allegations very seriously," PJM said, adding that FERC's Office of Enforcement is the right place to address such a concern, and PJM will follow any directives we receive from FERC.