Bacon's Rebellion

By Steve Haner

Just how much the huge increase in energy capacity prices within the PJM Dominion Zone next year will cost Virginians depends on a several variables. Do not accept claims of negligible impact on face value.

In its most recent integrated resource plan filed with the State Corporation Commission, Dominion Energy Virginia projected it would need to secure 1,100 megawatts of outside capacity through the PJM regional power market for 2025.  At the new price in the most recent auction, should it do that, the cost would be more than $178 million.  At the old price it would have been only $12 million.

A report on the issue in Virginia Mercury today quoted Dominion assuring its customers they would not see any impact on bills this year.  That states the obvious. The new $444 per megawatt day price doesn’t apply until July 2025.  The question is what the rate impact will be, if any, in future years. Especially if the next auction has similar results, the first big variable.

Dominion told the Mercury and Utility Dive its ratepayers will be insulated from this because capacity purchases represent only 1% of its current costs.  But that 1% will be up to 14 times more expensive and Dominion’s own IRP projections show growing dependence on outside capacity suppliers, far more than in past years.  It shows that need to buy outside capacity despite a parallel buildout of new generation.

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By Steve Haner

Dominion Energy Virginia is facing about a ten-fold increase in the price it will pay when it must call on generation resources outside its own assets to meet daily demand. The most recent auction for guaranteed capacity within the 13-state PJM Interconnection network set incredibly new high prices, but nowhere as high as within Dominion’s service territory.

Most days Dominion will have enough power produced by its own generation assets, and not have to worry about the extra $444 per megawatt for purchased power. The impact of the new capacity prices, set to go into effect in the summer of 2025, could be more dramatic for Virginia’s rural electric cooperatives or municipal electric companies within the PJM Dominion Zone, most of which rely on purchased power.

But even Dominion’s own planning projections shared with the State Corporation Commission show a need for outside capacity purchases growing over time. This higher price may find its way onto customer bills at some point, when demand is at peak or something disrupts Dominion’s own plants.  

The huge jump in capacity prices is just one more flashing red light about the danger in the PJM region from accelerating retirement of reliable thermal generators. The stated goal of the Virginia Clean Economy Act and similar laws in other states – no coal or natural gas plants allowed – has the region rushing toward energy shortages.

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