PJM IMM: Participant Behavior In 2021/2022 Capacity Auction "Not Competitive"
In a quarterly state of the market report, PJM's independent market monitor (market monitoring unit, MMU) said that capacity market performance for the 2021/2022 RPM Base Residual Auction was not competitive due to participant behavior.
"Market performance was evaluated as not competitive. Although structural market power exists in the Capacity Market, a competitive outcome can result from the application of market power mitigation rules. The outcome of the 2021/2022 RPM Base Residual Auction outcome was not competitive as a result of participant behavior which was not competitive, specifically offers which exceeded the competitive level," the MMU said in the report
"Participant behavior was evaluated as not competitive. Market power mitigation measures were applied when the Capacity Market Seller failed the market power test for the auction, the submitted sell offer exceeded the defined offer cap, and the submitted sell offer, absent mitigation, would increase the market clearing price. But the net CONE times B offer cap under the capacity performance design, in the absence of performance assessment intervals, exceeds the competitive level and should be reevaluated for each BRA," the MMU said in the report
"While most participants offered in the 2021/2022 RPM Base Residual Auction at competitive levels based on their expectation of the number of performance assessment intervals and projected net revenues, some market participants did not offer competitively and affected the market clearing prices," the MMU said in the report
"The MMU recognizes that these market participants followed the capacity market rules by offering at less than the stated offer cap of Net CONE times B. But Net CONE times B is not a competitive offer when the expected number of performance assessment intervals is zero or a very small number and the non-performance charge rate is defined as Net CONE/30. Under these circumstances, a competitive offer, under the logic defined in PJM’s capacity performance filing, is net ACR. That is the way in which most market participants offered in this and prior capacity performance auctions," the MMU said in the report
The MMU also reported that total energy uplift charges increased by $96.7 million or 194.8 percent, from $49.7 million in the first six months of 2017 to $146.4 million in the first six months of 2018.