I've been auditing bills in West Virginia and Pennsylvania and I'm getting lost in these PJM capacity charge changes. The suppliers are all calculating their PLS charges differently and when I try to verify against PJM's posted rates it doesn't match up. Some are using UCAP, others are still showing ICAP numbers. Client in Charleston saw their capacity costs jump 60% from last year. Anyone have a handle on how these new capacity performance rules affect retail billing?
PJM capacity charges - anyone understand the new rules?
Wanda - PJM capacity billing has become a complete mess since they implemented Capacity Performance in 2018. The UCAP transition was supposed to be complete by now but suppliers are still using different methodologies. In New Jersey I've seen suppliers using winter peak, summer peak, or annual average for their capacity allocation. PJM publishes the cleared capacity prices but how suppliers allocate those costs to customers varies wildly. What rate class is your Charleston client?
The capacity cost allocation problem is huge across PJM. Here in Virginia I've got clients seeing 40-80% increases in capacity charges and suppliers are blaming it on the minimum offer price rule and capacity performance penalties. But when you dig into the details, some suppliers are clearly over-recovering capacity costs. The problem is PJM's settlement data is so complex that most customers can't verify the charges. We need better transparency in how suppliers calculate and allocate capacity costs.
Tony - the Charleston client is on a large general service rate, about 5 MW peak demand. Their supplier is showing capacity charges based on "PJM Region Capacity Obligation" but won't provide the calculation methodology. Bill, you're right about the transparency issue. How are customers supposed to verify these charges when suppliers won't show their work? The contract just says capacity costs will be passed through at cost but there's no audit trail.
Wanda, that's a classic supplier dodge. "PJM Region Capacity Obligation" could mean anything. I've had success demanding suppliers provide their capacity cost calculation worksheets as part of the contract audit. Most will comply if you threaten to file a complaint with the state commission. The real issue is that PJM's capacity market rules are so byzantine that even sophisticated customers can't follow the money. Something needs to change or customers are going to get fleeced.
This capacity charge confusion is exactly why I always recommend customers include detailed cost allocation requirements in their supply contracts. Suppliers should be required to provide monthly capacity settlement reports showing how PJM charges are calculated and allocated to individual customers. Most won't volunteer this information but it's reasonable to demand it. In Tennessee we don't deal with PJM but I've helped clients in other states negotiate better contract language around cost transparency.