A high-pressure system has settled over the Midwest and Mid-Atlantic which will keep temperatures elevated today and tomorrow. These high temperatures will result in PJM and NYISO electric grids being pushed to the max. In NYISO, peak load of more than 29,933 MW is expected beginning at 4:00 PM today. Between 3:00 -5:00 PM, load is forecast at or above 29,700 MW, vs the current 2020 peak of 28,867 MW.

It is important to note that load this morning is coming in ~600 MW higher than yesterday’s projections, which reflects how warm it is in the New York region today. Temperatures in New York City are expected to exceed 95 degrees. 

It appears the fireworks have come early this year as several markets are facing medium to high threats for Coincident Peaks (“CPs”) today and into the early part of next week.

With temperatures climbing nationwide, we are predicting some Coincident Peak (“CP”) alert activity this week. For clients looking to save on next year’s Transmission costs and Capacity costs (PJM market only), it will be important to monitor the situation (especially real-time weather conditions) and reduce energy consumption in the late afternoon hours, to the extent possible.

PJM released its initial report on electric load reduction as a result of COVID-19. Figure 1 shows the decrease in peak demand (blue bar) and overall electricity usage (green bar) through the middle of May, with weekends shaded in gray. On average, the weekday peak demand (in kW or MW) fell between 6.5% to 15.2%. Overall energy usage (in kWh or MWh) was not as significantly affected and was down by approximately 8% since March 24th. Not surprisingly, the weekends experienced the smallest reduction to demand and consumption.

In 2018, the State of New Jersey passed The Clean Energy Act which requires that 100% of the electricity in the state come from renewable power sources by 2050. For over 15 years, New Jersey has had a vibrant solar power market with structures and incentives that expanded the amount of solar output from 4.3 MWs in 2004 to 2,908 MWs in 2019. 

The State of New Jersey has been at the forefront of an ongoing conflict between a state’s right to establish its own clean energy goals and its participation in a regional competitive electricity marketplace. New Jersey belongs to the PJM Interconnection (PJM), which spans all, or parts of 13 states and the District of Columbia as shown below in Figure 1. New Jersey and many other states want to adopt their own clean energy standards. However, grid operators, such as PJM, are finding it nearly impossible to create a competitive marketplace with consistent rules among states that have very different renewable power goals and carbon emission standards.

Unlike ERCOT, which relies solely on the price of energy to ensure sufficient supply, the PJM market, ISO-NE, and the NYISO all rely on capacity payments to ensure that there is enough electricity generation available to meet demand. Like wholesale energy prices, capacity prices in PJM are set through an annual auction. Generating units that clear this annual capacity auction are guaranteed a fixed revenue stream in exchange for the guarantee of their availability to run if called upon. This revenue is designed to ensure that an appropriate amount of generation is available at times of peak energy demand.

In light of the impact of the Coronavirus on business operations, we are sharing information about Coronavirus and Contract Disputes circulated by the law firm Sidley & Austin.  It provides a high-level summary of the force majeure issues raised by the spread of this illness.  If your electricity and/or natural gas usage has or will be significantly affected by the spread of the Coronavirus, you should seek legal advice to determine if it is appropriate to provide a force majeure notice to your energy supplier.  As discussed in the document, the relevant electricity or natural gas contract provision may require “prompt” notice of the force majeure event.

This week PJM proposed a plan and schedule to resume its suspended capacity auctions.  If everything goes as planned, the next PJM capacity auction process using the new Minimum Offer Price Rule (MOPR) would begin in March or April 2021.  In order to meet this goal, the Federal Energy Regulatory Commission (FERC) must review and approve PJM’s MOPR.  PJM’s last capacity auction was in May 2018.  The plan and proposal to catch up on the backlog of capacity auctions are summarized below and shown in Figure 1.

In New Jersey, similar to neighboring states, larger electricity users (with a peak demand of over 500 kW) are classified as Commercial Industrial Energy Price (CIEP) customers. For these customers, the default utility price is an hourly rate that is an average of hourly prices over the course of a given month. Since these prices change every 15 minutes, there can be a tremendous amount of price risk and volatility with this structure.  However, over the last five years, there has not been a significant amount of hourly price volatility. Figure 1 shows the average monthly real-time (hourly) price in the Public Service Enterprise Group (PSEG) zone for each month of the year beginning in January 2015.  In New Jersey, and throughout the Northeast, the most volatile times of the year are the winter months of December through March. This is reflected in the chart below with price spikes in January 2018, February 2015, March 2015 and December 2017. It is interesting to note that hourly prices for this winter’s months of January and February are at their five-year lows.