Your electric bill keeps rising, and the power market’s leading referee now is calling foul
A bombshell analysis by the market monitor for the multi-state region, including the Chicago area, found that the rules governing power generators weren’t strong enough to prevent a “non-competitive” result in a crucial electricity auction in May.
Chicagoans will pay too much for electricity beginning in a few years thanks to a recent power-generator bidding process overseen by the manager of the regional power grid that turned out to be “non-competitive,” the independent overseer of the wholesale market recently concluded.
It’s the first time ever that the independent market monitor who serves as a sort of referee of market conduct in PJM Interconnection, the region encompassing all or part of 13 Midwest and Eastern states including northern Illinois, has raised such serious questions about the rules applied to power generators and their bidding strategies.
At issue is the price all power users pay eligible generators for “capacity,” essentially their promise to deliver on high-consumption days when their juice is most needed. This cost is embedded in the electricity price all pay, whether they’re customers of Commonwealth Edison or buy power from an alternative supplier.
PJM each year conducts a highly regulated auction of power generators to determine the cost. The auction takes place three years before the price goes into effect in order to give power-plant owners contemplating closing existing plants or opening new ones more certainty on the revenues they will see in the future.
For the last few years, prices have come in higher in ComEd’s territory than in the rest of PJM. In the most recent auction, held in May, the price of power capacity for the period from June 2021 through May 2022 was $195.55 per megawatt-day. That was 4 percent higher than $188.12 the year before.
The costs of paying power generators to be “on call” during high-demand days aren’t nominal. As they have risen in recent years, thanks to changes to PJM’s market rules, they now make up about a quarter of the total energy costs ComEd customers pay.