May 26, 2017: another op-ed on the recent PJM auction. People can vote with their feet.
Something has gone wrong in the northern Illinois electricity market. Electric bills are rising even though demand is slowing, energy prices are low and generating capacity is plentiful. As my colleague Steve Daniels wrote the other day, Commonwealth Edison customers will see the energy portion of their bills increase 13 percent between now and October, and another 5 percent by June 2018. (Energy charges make up about half the bill; the rest is for delivery.)
What gives? Well, a lot of factors unrelated to supply and demand determine the size of our electric bills. For example, we pay the cost of a political deal approved by Gov. Bruce Rauner and state legislators to prop up inefficient nuclear power plants owned by ComEd's Chicago-based parent, Exelon. We also pay fees to support renewable power sources and charges related to "smart grid" upgrades to ComEd's electrical network.
Then there's the charge we pay to assure adequate electricity supply in a region that produces far more power than it consumes. Every electric bill includes a payment to power companies like Exelon for their promise to serve up juice when it's needed most. Capacity charges are established through bidding processes overseen by PJM, a regional power grid administrator for the District of Columbia and all or part of 13 states, including northern Illinois.
This could be added to the earlier PJM post from today but for various reasons, I'm posting this as a stand-alone post. A huge "thank you" to a reader for spotting it and sending it to me.
The substantial hike in Northern Illinois' cost of electricity beginning next month is just the beginning of the increases for years to come.Actually it's not just "intermittent energy," but all nuclear energy.
With energy costs remaining at historically low levels, the price all consumers pay qualified power generators simply to promise to produce during the highest-demand days of the year keeps rising.
These "capacity" costs—essentially an additional reservation price embedded in the energy cost ComEd customers see in their electric bills—will approach the cost of the electrons themselves beginning in 2019 and now continuing through the first half of 2021.
The bottom line for customers of Commonwealth Edison is that the 8 percent increase they'll experience in their electricity rates over the next several months is just the first installment.
The reason: The capacity charge is set three years in advance. PJM Interconnection, the regional power-grid operator for Northern Illinois and all or parts of 12 other states to the east plus Washington, D.C., holds an auction each year at this time to establish the capacity price three years from now.