Name: Understanding the PJM Capacity Auction
Uploaded: 2025-08-12T19:31:38.432Z
Duration: 1 h 8 s
Description: Understanding the PJM Capacity Auction

Transcript for "Understanding the PJM Capacity Auction": Alright, everyone. Good morning. Good afternoon. We're gonna give it just a couple minutes here, and we'll get started talking about some PJM capacity. Thanks for joining us. Alright. I got it. Got a couple minutes after the hour. I think we can start kicking this off. So, thank you everyone for for joining our webinar today. We wanna talk about the PJM capacity auction and some of the recent iterations that have gone on, in terms of what we've seen from, you know, pricing and and the mechanics and different things happening in the marketplace. Couple quick housekeeping items as we get started here. This session is being recorded, so, no need to take copious notes. Please feel free. But there will be a recording available at the end, so you can go back and and find out anything you'd like. We we'd also like this to be an interactive session. We've got a lot of topics to cover, a lot of really good information, but, you know, we wanna we wanna make this applicable to everyone today. And and there's definitely a lot of nuance to this particular topic. So please ask questions. There's the the q and a function in in the webinar. We'll be monitoring that as we go. We wanna be able to answer any questions you have. And to the extent that we may or may not get to everything by the time all said and done, that gives us a chance to follow-up as well and and make sure we can answer everything that comes through today. So with that, let's let's kick it off. So my name is Peter Liska. I'm a director here at Engie Impact, both on renewable energy side and, the energy supply, so power and gas and renewables. And with me today is my good friend and colleague, Jonathan Lee, who is our expert on all things market intelligence, energy markets. He's the person I go to for everything, so we're really, really happy to have him here going through the entire landscape that is the PJM capacity market. So our our goal today, what we're trying to achieve is getting an understanding of the most recent auction and auctions we've actually seen, within the capacity market. So both the 2025, '26 planning year that we've just entered in the last couple months, But we've also got recent results for the following planning year, 2026, 2027, that have come out over the course of the last few days. And so Jonathan gonna take us into a bit of a dive onto what we've seen and some of the drivers that have gone on from that as well as, you know, some of the indications that we're seeing in terms of, you know, future auctions and and what could happen from that standpoint. And then we wanna put this all into context as well. You know, what what does it mean for me? And and so our goal is to kind of, you know, dive into some some strategies around what can you do from a management standpoint, a risk mitigation standpoint, and maybe some some thoughts to keep in mind, you know, as as we're moving forward over the course of the next couple years. And then, like I said, wanna have q and a, make sure we answer all of the thoughts that you might have in mind as well. So with that, I will kick it over to my friend Jonathan, and he will take it from here. Alright. Thanks, Peter. And, welcome, everybody. We're happy to to have you here. And, hopefully, you find this session informative, actionable, and, come away with some, some good insights as as you come through. Again, questions are are definitely welcome. But let's let's dive into, some of those, results, some of the key drivers, from from the capacity. Before I wanna do that though, I I wanna set the stage because this is not a a last year, this year, situation that just popped out of nowhere. This has been a a a storm brewing for the last, ten years. On this slide, it says, you know, auction delays between twenty twenty twenty and 2023. Well, the details of why that occurred, had been in the making for pretty much the prior decade. So, just as kind of a setting the stage of capacity, PJM, the the traditional format for that was, three years the auction would be held three years prior to the effective date of when those capacity prices would come into effect. The idea being generators would have sufficient time to bid into the auction, complete construction, and be ready to go. But over the the the twenty tens, we had a, you know, lot of influx of intermittent sources, renewables being built, in the PJM footprints throughout the nation. For PJM specifically though, those intermittent sources were able to to bid into the the auctions, but they were also some of them were also getting, depending on the state, state subsidies to incentivize further renewables growth, to help those states meet their RPS renewable portfolio standards targets. So, to drive that, that carbon free, goal. As they were built bidding into auctions, though, they were, also getting state, subsidy. So that was, they were, maybe able to bid in at a discounted rate or at least, a little bit lower than potentially. So you had older, maybe uneconomic, power plants coming in and say, hey. You know, all these renewables are are clearing the auction while we're having a hard time meeting them. So they raised, some disputes to FERC. Fast forward to to 2020, basically saying that, hey. These these rules these capacity rules are not fair for us. So in 2020, FERC stepped in and said, okay. We hear your plea. We're going to change the minimum offer price for a little bit or MOBER, to help, help some of those plants, you know, level the plant field, according to FERC. So to prevent some of those state subsidized clean energy resources from maybe artificially depressing capacity prices. So the the change in the rule though that, that created major delays, major problems for PJM because they had to to redesign their rules in order to to quiet with that. So that led to some delays in auctions, capacity auctions. So that three year time window got shortened. FERC said, okay. We hear at PJM that, you know, you're you're having to delay these auctions. You have compressed time frames. But we believe that, the delays that you're experiencing, the the short term pain is worth the long term gain in order to, to fix some of these rules. The, there they said that the, there was significant uncertainty for market participants, in this in kind of this gray area of of rule, flux. And so they said short term pain, the long term gain to fix some of these problems. So that kicked off PJM's process of evaluating, you know, how capacity auctions were treated, the different rules in terms of different sources, how they they were able to to calculate their credit or credit rating versus your their their capacity rating, for that. Well, in twenty twenty twenty or 2021, FERC, we had a new new federal administration, new chairman at FERC. So there was created some FERC gridlock. And then PJM proposed, rules revised, try to meet that MOPR, standard, rejected, delayed multiple times by FERC. So we just have time frame of uncertainty, time frame of delays, basically regulatory limbo, that's compressing those those auctions. And so get into, you know, maybe six months prior, to when it's supposed to be effective. Capacity prices, they haven't resolved these rules. So capacity is, just kinda going forward as as is. We're starting to see three years of the the capacity declines. And then, you know, let's let's throw some more uncertainty. December 2022, winter storm Elliott. Major winter storm, during the peak time, 90,000 megawatts of generation simultaneously went offline, not just, intermittent, but you had thermal. You had freeze offs, due to this widespread, event. 80% of the generation that said that they could operate at a this the low temperature failed to operate at temperatures that were even above their their low for that. So widespread chaos. PJM, imposed 1 to $2,000,000,000 in assessed penalties because these operators, did not perform when they said that they were be able to perform, which is kind of the whole basis of the capacity market. They have their peak, load forecast, and capacity is meant to, have enough generation to meet that peak load during any scenario, in order to keep the lights on. So winter storm Elliot occurs in the midst of all this regulatory chaos, this proposal chaos. Now we gotta take into accounts, you know, what were the root causes of that? What, what could have been done to, mitigate this, this widespread, outage? So they start investigating that. And then also you have, some market design reforms, so accreditation of capacity. So the effective load carrying capability, was designed for storage and renewables. So basically, a a new way to assign the the capacity rating to those sources. The old assumption, for for those, sources was basically a a static approach. So a a solar, power plant would say, okay. We can operate at, let's say, 30% of nameplate capacity. Not really not necessarily taking into account, you know, when maybe a peak would peak, demand period happen or different seasonality, but just just kind of a static figure. Same thing with wind, seasonal average for that time frame. Batteries, you know, okay. Yeah. We can operate. Let's say we can do the full four hours of of battery storage. So this new design, these these new market forms that have been moved into, the most recent auction, so that's in part why we've seen such higher higher prices. The new new approach says, alright, PJM, we're gonna look at more of a portfolio approach. We're gonna look at a batch of solar sources. We're gonna do some seasonal studies and probably probabilistic analysis to assign. Basically, this is your, capacity rating. And then we're gonna, based on how many megawatts, this power plant has, those generation units have, then that's your capacity rating. Essentially, what that means though is you're gonna need more megawatts of, renewables or intermittent sources to meet that those those targets. I haven't even gotten into interconnection queue delays, but that will come come a little bit later. So we have that. So, more generation needed to meet even the lower targets. There's also seasonal reliability considerations, some some of that, fallout from winter storm Elliott. This one targets more thermal sources, so they have to go through more stringent summer and winter, testing, to to really prove that they they're able to meet that capacity obligation when, that they they state as they build bid into the queue, and then interconnection plays, like I just mentioned. So we look at, that's kind of a a backstory. So we're in the midst of just, some chaos, but now we're we're finding some, at least some certainty as we go forward. It's not not great in terms of pricing, but finding some certainty. So last year, 2024, this is really the first year that we got insight into they want this new capacity landscape is gonna get a hold for us. So we had that twenty five, twenty six auction, still a compressed timeline, but we got insight into that and capacity prices came in much higher than the the twenty four, twenty five auction year. 900%, increase. Now before you, you know, take that with a grain of salt, it's not a 900% increase to your bill. 900% to the megawatt megawatt day capacity price, less impact to the to the overall bill. We're getting some insight into, you know, where those future ones will go over the next maybe five years or or or beyond. But the key takeaway to all this backstory is just the market uncertainty, deter investments, created price volatility, generators that maybe looking to build, you know, we have to evaluate the the economics of that. But this is price uncertainty. You know, it's a risk to to to make those financial decisions. So now we have some more certainty. So as we move forward, let's take a look at, the '25, '26. So we see that those taken effects starting June 1. If you're looking at your portfolio, you're probably starting to see some of the bills come through. And not everybody, is impacted the same. It's it's based on, you know, how supplier might be passing through or, you you know, the different product that may be on, but starting to notice, an impact, this year. So the auction for that 25, 26 plan a year, produced a 200 almost $270 per megawatt day for much of the PJM footprint. It was much higher in Dominion and BG and E. But when we look at it compared to the prior year, $28.92, per megawatt day. So quite a bit of a increase, but but remember, those $28.20 dollar $28.92 megawatt day price was artificially low. It just it was amidst that regulatory uncertainty. The new reforms hadn't been put into place yet, and so the the true number probably should have been up more, in that 2526, or even, even in what we just experienced over the last couple weeks of of the 2627. So new reforms implemented during that time. We're seeing a big impact, to, you know, some of the offer cap submissions. But what I really want you to take away from this slide is capacity is is just a proportion of your overall supply bill. It's becoming a bigger part and something that needs to be planned for going forward. But when you look at and and the those cost components, it's just kind of a, an illustrative look at it. It's gonna be different for every every person or every, portfolio. But the thing to notice is energy, which is the darkest blue, wholesale energy. That is gonna make up your lipid biggest portion, and it fluctuates. It have a lot of volatility. Look at 2022. That was the time frame when, the Russia and Ukraine literally kicked off. We had, European energy security concerns that pushed up even though US wasn't really affected nor impacted from a, a scarcity standpoint. That fear, global fear pushed prices up, so energy skyrocketed during that year. It came back down over the last few years. We noticed that volatility really still sits in that energy component of bucket. But as we go forward, capacity that that medium shade of blue, is going to to represent a bigger portion of the bill. We do have, and we'll touch on a little bit later, a a little bit more a little bit more certainty, you know, as we we move forward, on what that capacity figure is gonna be. So there's maybe some different strategies on how, to incorporate that. But capacity component and, again, for just illustrative, used to be about 5% of the total supply bill, so relatively a small portion of that to around about 20%. So maybe half a penny to now just shy of 2 pennies for for that per per kilowatt hour, but becoming a larger portion. Let's see. So, question, in the queue there. The $3.25 cap was created for three years. So last option cleared at 03/29. So first, bump that up to that. And you could even argue that it should have been higher than that. Actually, Pennsylvania's governor, Shapiro's, in some some testimony said that that that that ceiling should actually be $3.89 north of that. So, even that $3.25, that cap being set, and we'll we'll touch more on that in terms of the floor and and ceiling that FERC imposed and and why they imposed that. But but that's why for for increase that to $3.29 because maybe that $3.29 is even lower than the cost of new entry for a lot of these generators. So it's, you could argue that it's it should be higher, with that. So there's a lot of upward price pressure, for that. And then, the, '27, '28 is is, I believe it's just 27 and 28 for that that cap, but I could be wrong. People will let me know later on, with that. Let's see. Okay. Fast forward now to this year. So we have some some price certainty or or some some some price shock heading in, from last year. This year, it was even was even higher. So the entire footprint was the first time this happened, settled at the, what the the question just referenced was at 03/29/2017. So the entire footprint settled at that. That's another increase. It's about 20% increase from on capacity prices from rest of region. BG and E and Dominion actually seen a small decrease, year over year. So, for, locations at, sites in those locations, that'll be actually a decrease, with that. So total new generation and generation upgrades in that auction were just shy of 2,700 megawatts. So starting to see maybe some new generation come into the queue there or or or bid into the auction. Not enough to to satisfy the the low growth forecast at this point. We've also saw in this latest auction 17 generating units, about 1,100 megawatts worth, have withdrawn their retirement. So, sticking around in the auction, maybe some of those reforms, incentivizing them to to stick around a little bit longer, that they can meet meet some of the the the cost that they incur as they operate. Let's see here. So what were some of those main drivers that we saw? So why did it settle at at that, above the earlier proposed ceiling, for the whole PJM footprint? Basically, was it was the clear volume, the cleared amount that was bidded at the auction was just above the projected liability requirement. So that's that's really underscoring this the PJM regions tight tightening supply and demand balance. A very large part of that part of that is strong low growth, mostly driven by, AI data centers, continued electric electrification, as states continue to strive for those RPS, targets. But data centers, depending on size, but, in general, produce or require a lot of power, twenty four seven power, in most cases. So the low growth projections for those have, really tightened, that that supply and demand balance. We also have seen, like I just mentioned, that 1,100 megawatts delayed generator retirements due to interconnection backlog. Just to touch on that interconnection backlog, about 94%, there's about 290,000 megawatts in the queue. Most 94% of those are renewable, generation. But, PJM has has had a a tough time clearing those, units from from entering the market. Their old model, first come first serve, was based on the time of application. So they they reform that, over the years to more of a cluster first ready, first serve. So, basically, they'll take a a batch of, generation that says, okay. We've we've done our our site, and we got our permits in progress. We have all these other requirements in line. We're ready to go. So PJM will cluster those, do maybe one study instead of multiple studies, see how that cluster group will impact the grid, and hopefully, put those into operation quicker than the previous model allowed. So there's still quite a bit of a backlog. They hope to have that cleared out by 2027. I'll see if that happens. There's also some reduced DER, accreditation and tighter testing protocol protocols. That goes in line with the, the ELCC, information I just discussed earlier. Just assigning, more, more seasonal or more, instead of more of a static figure or credit, capacity rating. In the new model, they have to, they're tested more frequently. So instead of just kinda set it and forget it, here's your capacity rating. More stringent testing, more frequent testing, and then also they're tested, based on the, the tightest grid conditions, the seasonality of that. So saying, in the worst case scenario, winter storm, Elliott, how will you perform during that? And then that's how they they, assign their capacity rating. What that means, though, is similar to the e l ELCC, impacts, less DER, they're gonna have a lower capacity rating. So less, DER able to to bid or to to meet that capacity or that, low generation that generation target, so you're gonna need more. So that, creates a little bit of a scarcity, and so that's gonna keep driving that those prices higher as as we still, lower the capacity rating for intermittent DER and so forth. I touched on the ELCC and some of the impacts there. That's that's been implemented in the last two. Also, there's a a must offer, commitment. So intermittent sources, hybrid storage, they didn't always have to, be ready to go when, PJM, called out for for generation. Now they do. And so that changes, maybe some of their calculations in terms of how they can bid into auctions, or wear tear if they, you know, have to. So they have to consider, you know, maintenance, maybe some potential downtime if if they are called upon, be ready to go if if they need to. So that's the the change a little bit the way that they are are bidding into to auctions so that that also had an impact, performance testing, winter start up, and front fuel rules. I touched on that earlier, but that mostly impacts thermal, just having some of those summer tests, those winter tests, and then having backup fuel on-site or available, in case there is a a pipeline freeze off, or any other any other condition that might threaten the their typical supply, that they would get. And then unit specific, NSOC, that's that stands for market seller offer cap. That is a a new one that, basically prevents, lower cost units from inflating the the price. So what that means is actually older coal plants, so that when they assign their their cost, they're looking at labor. They're looking at, you know, whole set of things aspects of how they generate basically, the cost of what it takes to to be available to to generate, power. So now with that new, rule, it's more unit specific instead of, more generic. So, older coal plants can now potentially set clearing prices. So that's another potential impact going forward of of those higher capacity clearing prices. Maybe uneconomical, coal plants under the generic, rules are now gonna be able to stay in the market. I think the goal behind that is just wanting to keep, as much generation from retiring as possible, even if it's antithetical to the goals of the states, the region that wants to move to more cleaner sources with that. Alright. So going forward, expectations on future, options. I think it's it's from my opinion, those pressures that led to high capacity prices are I don't think they're gonna change going forward. You know, I think over the the years, those artificially depressed prices, didn't incentivize new generation. So now at least, even though they're higher, we're getting a better picture of what it takes to bring new generation online, to meet the low forecast even if it is, some could argue that it's lower than what it should be. So going forward the next five years, we don't get back onto a regular three year window until the twenty thirty, thirty one, auction, so that May 2027. So it's still gonna be a little bit bumpy as we go forward. On the on the right there, you kinda see the the timeline. I think the most notable, 2728, that auction is gonna be held in the next four months, so December 2025. It does have that same, floor ceiling, that FERC composed, similar to this last auction. They could bump that up if they they see that, it's not sufficiently meeting, the requirements. So higher volatile claim price is likely probably gonna end up at the the the cap going forward, at least for the foreseeable future. Post '28, it will see some cleaner resource participation as that gets gets worked out, maybe some more, you know, precise modeling for those winter risks. Really, that's the the time frame that that threatens, the PJM market more of a winter risk area. Storage and hybrids, still close to to benefit. Didn't really get into it, but the the the new bill that passed, steps down some of those, tax credits for, wind and solar. So there's some uncertainty on how that's gonna be going forward. Store storage was spared from that, so they still see tax credits, in a different timeline. We'll go into too much details, on that, but they they're opposed to benefit and continue to grow. But there's gonna be ongoing pressure, for for FERC, for the states to still consider these these new, new rules. Are they effective? Have have they sufficiently incentivized new generation? The key takeaway with that is long term capacity fundamentals, and one could argue every energy component is gonna be bullish. We have low growth. We have constraints bringing generation online. So that that equation is I think clearly says there's gonna be bullish pressure in this market, and really any other market that, is has a capacity model or that has low growth and generation is failing to or is maybe a little bit behind in meeting that. So expectation is, higher capacity prices are likely to hear for a little bit. Let's see. Okay. So we'll see if some of these reforms work. Right? We're we're looking through 2030. How successful will they be? Will will PJM, you know, find some success in that interconnection queue? Can they get that backlog down to more of a manageable level by 2027? So a lot of these are gonna be, you know, setting the stage for post 2030, you know, as we're we're moving into, you know, that three year window coming back or three year prior, auction coming in back into play by, in in the next couple years. But will these reforms, be successful to help bring those capacity prices down? We'll see. Will we get more, clarity on the accreditation for high risk DERs? Will that true seasonal capacity modeling, turn out to be great? You know, they they've done millions of tests, I'm sure, in terms of Monte Carlo simulations or whatever they use, but are those accurate? We're also seeing inclusion of RMR units in auctions. Those are units that are required to stick around in case, you know, demand exceeds generation in certain locations, constrained locations. Like, look at Baltimore, parts of Virginia with that. If those are stick stick around, does that artificially or not artificially, does that push the the pricing capacity clear prices up? Does it keep it higher? We'll see, especially if new generation doesn't come in to replace those older units. First, gonna continue to review, their long term design, add in the the transitioning, the decarb, movement by states. And then, lastly, long term, do they just reconsider this whole capacity model? So we're we're in a a time frame now of, did these reforms work? Will it incentivize new generation? But for the foreseeable future or the next five years, I expect these capacity prices to to stay elevated. So with that, I will pass it, over to Peter. Alright. Thanks, Jonathan. And now we get to be a little bit selfish. So now that Jonathan kind of taken us through the whole landscape of of what's going on in the market and what's happening, now we get to ask what does this mean about me for me, you know, in terms of I'm an energy user, what does all of this stuff mean in terms of how I need to view my world, what can I do, and and how do I wanna think about these things? And my starting place in that context is usually to back it up all the way to the beginning. Let's think about capacity just kind of at its its fundamental level. Like, what's going on when we're actually talking about this whole idea of capacity? And it's really just supply and demand at its its basic level. The grid operators, whether it's PJM, ERCOT, New York, MISO, they're all obligated to provide safe, reliable, cost effective power in that in that order. And the reliable piece means they need supply that meets demand. So they're just stacking up generators until they meet whatever they're expecting from a peak load perspective, whether that's, you know, on a seasonal level like PJM does in this case in advance, whether that's, you know, in real time like ERCOT within energy only type market. So, you know, what we get out of this is some pretty good indications from the price. It it tells us a lot of things about what's happening. In theory, it tells us about the reliability of the grid we're in. You know, as we see these prices go up and up and up, what you're doing is basically watching, you know, PJM in this case, get more more and more expensive generators online to meet their demand. Think peaker plants all the way up to, you know, the very, very top end that the cap numbers we're seeing, which is that cost of new entry, basically saying, I need to build new power plants. I say in theory because as Jonathan, you know, put very clearly there for a stretch, the entire market was screwed up. The auction was not working. It was not working at the timeline or in the way it was supposed to, and we weren't getting clear signals out of the marketplace. And and so we were seeing numbers that were coming in really, really low for what they should have been. And really what was going on in the background was the generators weren't getting any indication as to what that revenue was gonna look like from the capacity market, and they priced it in on the energy side. They basically said, I need to take this into my own hands, price my forward prices ten, twenty, 30% higher to make sure that I can pay for my power plant. And then they became price takers on the capacity side that whatever I get, I get, and it's it's just frosting on the cake. Now we're seeing the reality of the situation that this this capacity market is actually acting the way it's supposed to and providing that market signal to to the the market as a whole in in the the generator investor community, if you will, that as prices go higher and higher, that's the market saying, hey. We need more and more supply. And, you know, what is the market telling us right now? It is very, very loudly saying we need additional generation. What we've seen in, you know, '25, '26, and and this most recent option, you know, for 2026, 2027 is those prices hit the cost of new entry. The the February and the 03/29 are not random numbers. They're not, you know, what a particular power plant hit. That is the price of building a new facility according to PJM. So that's that's where the cap came into play. And so I think that actually touches on one of the questions we had about what we are seeing for a marginal unit. The marginal unit is a new unit. It's a it's a new new combined cycle gas plant is what PJM uses. What I will call out is the way PJM sets their number is they take the actual capacity price for a new plant, and they subtract off what they expect to see for energy and ancillary services for that plant. The actual cost of a gas plant is about 500 and change a megawatt day. Don't quote me on the exact number, but I think it's about $5.11. But it's over $500. And to to Ted's question that I'm seeing here about the $3.25 cap, you may notice that is below the current $3.29 price that we set recently, and that could be a problem. We're we're literally saying that the price right now in the marketplace is the price to build a new facility. Basically, the market's saying, we need to build a new power plant, and we've artificially set a cap just below the price to build a power plant today. And I look at that and say, that could be a really good recipe to set the cap for the next couple of years and get nothing out of it. And and that's that's one of the things we wanna keep in mind moving forward. The other thing is we're just hitting these these common signals, the cost of new entry. And so we honestly don't know if the market's responding at these numbers or not. And and that's we haven't had signals strong enough in in the last few years to actually see the results in terms of of building power plants because there's a bit of a window. You know, Jonathan talked on the interconnection queue. You could want to build a plant this year, but you haven't started. If if you responded to the the the, you know, $269 number and said, yeah. I wanna build a power plant. You haven't even started because you probably don't even have an interconnection yet. And and we'll kind of get into that in terms of what does that mean, you know, from a thought process. And so, you know, thinking about that in terms of what do I do? How do I respond? How do I manage my cost? How do I manage my risk? What do I need to be thinking about from a strategic side of things? This applies to PJM and quite honestly elsewhere in the country because if it really doesn't matter what region of the country you're talking about, it's kind of a different song, same album situation where every every part of the country is kind of facing the same thematic issues, in terms of supply and demand and reliability concern and load growth and AI data centers, you name it. So while the markets may behave a little bit different, the the undercurrent of everything that's going on is is pretty similar. And so what can I do? First and foremost, when we're talking about capacity, you can manage capacity. And, you know, there's no there's no right or wrong answer. There's no one size fits all situation. You know, all of these things kind of apply to what works for what my company can do, what works for what I can do, what's my risk tolerance, you know, what are my capabilities, and and just trying to account for what's happening. And so from a capacity standpoint, you know, demand response in terms of whether it's load control, backup generation, storage, anything, you know, that can can happen, you you know, physically to manage specifically to those peak load situations. In the same vein, energy efficiency projects that can lower your capacity or lower your demand across the year, all of those things are going to reduce the tag number that they use to calculate what your cost implication would be. And so any of those things hold a lot more value right now at $329 a megawatt day than they did at $28 a megawatt day. So the, you know, the cost effectiveness of of those behaviors help. Thinking about it financially a little bit, you know, contractual products might actually make sense, especially on third party supply. We're coming out of a period where there was a lot of uncertainty, and it was really hard to justify putting capacity related products in a supply contract. But for the first time in a long time, we know two years for sure, and we've got a pretty clear indication of what years three and four might kinda look like. And so that that provides some opportunity to tailor a supply contract to whatever your objectives happen to be, whether that's looking for, you know, monthly cost stability or a per kilowatt hour cost stability. When we know what these numbers are, it adds a lot less premium to what a supplier has to put in place to to structure those contracts. And so it's it's a way to potentially balance what your supply and and cost obligations look like across the year. The big one I wanna point out is to not forget the energy. What we're seeing again, going back in concept to, you know, what is capacity telling us. It's saying that the market is viewing that supply is not keeping up with demand or, you know, there might be a risk to reliability. That is a that is a bullish feature. That is an upward pressure on wholesale energy prices. And kind of wrapping in the the last bullet point on this as well, You do not solve supply issues by the end of the year. You will not solve that by next year. Power plant construction, again, assuming you even have an interconnection in PJM, which can be a five, six, seven year process at at given points in time. Even talk if you talk to anyone who's had to buy a transformer for a power plant, they're not talking about this in terms of weeks. It's fifteen, twenty, thirty, forty months. And so you're looking at three, four years if you're not in a production sequence already, paired with some of the information that we've seen lately that getting a gas turbine for a gas plant could be a five to seven year process. And so when you start thinking about thermal generation, you know, reliable around the clock type generation, three to five years is not unheard of in terms of what it's gonna take to get a plant online. Pair that with whether it's tariffs, tax credit issues, anything on the renewable side, you just put pressure on what it looks like to build renewable facilities. And so we're looking at prop you know, not a onetime issue. You know, this is a multiyear scenario to potentially get this thing solved and get this thing fixed. Expanding your time horizon is gonna be important, whether that's from a strategic standpoint, a budgeting standpoint. And if you've got the capability, it it doesn't hurt to take a look at what that means from a contractual standpoint because we've got a lot of bullish features right now. We've got some fundamentally concerning features, and being able to manage risk on a longer time horizon, you know, really starts to make sense. The wild card in all of this is the regulatory piece. Anytime we start seeing extremes, you know, one one extreme or the other, regulators start to tinker. And and especially when it comes to higher power prices, which influence businesses, industries, residential customers, politicians start worrying about reelection. And and what we when we start to see that and what we've seen lately is you start to get a lot of tinkering. And when that comes into play, we we see two things that usually come into come into effect. Change in law provisions in contracts. You know, whenever you start seeing regulatory changes, needing to be concerned about what's in your contract, how it's phrased, and and what might get changed from a change in law perspective, you know, comes into play. The other thing I would point out is when you start to see regulatory intervention and, you know, especially high level regulatory intervention, you have a degree of uncertainty. And markets don't particularly like uncertainty, and so all of those things kind of create some volatility in the market as as a whole. And I think that's that's really my biggest takeaway before I hand it to back to Jonathan here a little bit to to wrap up with, you know, some of the the big key takeaways. As we get into this place where markets are bouncing around, capacity prices are bouncing around, reliability is in, like, mainstream news conversations. The idea of complacency becomes pretty pretty risky. As you know, set it and forget it mindset worked just fine in the twenty teens when we had low energy prices, low volatility, and you could basically just sign a new contract and save money. Those days are past us, I think, and will be for a little bit of time. And so being a little bit more active, being a little bit more strategic becomes important. And and that can mean different things for for different people. You know, whether that's, hey. You looked at your your energy plan once a year, may maybe dust it off two two times, maybe quarterly. If you've been kind of on autopilot with the strategy, maybe this is the time to stress test it a little bit and make sure it fits with your company objectives and and the risk that you're you're actually willing to take on and and you're approaching things in the lens of the current market. You know, keeping up with with the pulse of what's going on becomes, you know, really, really important. And, the last question here about that I'm seeing about the the cone numbers, that actually it does influence a little bit from like, I I think I mentioned, it it does a combination of the capacity of the the capacity price of building the generation facility minus the expectation of energy and ancillary services that that generator would see. And so, you know, you you basically see a 500, you know, 500 and some odd dollar a megawatt day minus, you know, I think it's a 180. I can get those exact numbers, what's on the top of my head. That gets you to that $3.29. So that $3.29 that we saw on the most recent auction was the capacity price of a new gas plant minus their expectation for energy and ancillary services. Jonathan, I will send it to you to finish finish off here. Alright. Awesome. Okay. So heading out of this, this webinar, support for the the main takeaways. Basically, PJM capacity results over the last two years and then going forward, they are reflecting a a tightening tightening supply and demand balance. Tighter conditions lead to potentially group liability, so the incentive to to build new plants is is, what these capacity prices are reflecting even if they are short of what would actually, you know, could be representative. For the most recent auction, 2627, these new capacity rates are according to PJM, and it's gonna depend on how they're passed on to the end user users, but around a one and a half to 5% increase over the prior year, to your total bill. Now if you're in Dominion, BG and E, that's gonna be a a decrease like we mentioned, with that. And then looking forward, long term capacity fundamentals are bullish. Energy component fundamentals, bullish, just due to those those tighter grid conditions, with low growth constraints and bringing new generation online. And then as Peter, Peter mentioned, there are certain tools in the toolbox, that can help mitigate some of these cost increase, increases. Like you mentioned, it's it's gonna require more strategic active management strategy going forward. Not that that said it and forget it, going forward. Okay. So with that, let's jump into the the q and a. We got about, seven minutes left. So let's, let's take a look at some of these. Let's see. One of the questions that came through prior to the webinar was, what is the anticipated impact on commercial rates through 2027? Kinda goes in in, in line with the, the interest to get your thoughts on 2728. See what else is planning here. Like we mentioned, there is some certainty. Yeah. We know the capacity or there's a there's a strong possibility that capacity is gonna settle at that that ceiling. So there's, year over year when we look at, 2627 from 2526, one half to 5% increase just on the capacity portion. When we look 2728, that number is gonna be less less than than that probably because we're already at that ceiling. It's likely to settle or clear, Towards that, it could be bumped up a a little bit. Like I mentioned earlier, the energy portion of it is is one that can fluctuate quite a bit. Right now, the the wholesale energy market is backwardated. Near term has has softened a little bit. 2026, there's still an expectation of tighter condition. 2027 on the energy fronts is a little bit lower than cal 2026. We'll see if that premium or those tighter conditions start to have an impact on that wholesale market. If there's any instance of grid reliability or grid operations being threatened, that wholesale market is is gonna respond. So that's the big wild card right now, but capacity for that 2728, is is relatively locked in. Yeah. I I think, you know, as we're as we're talking about, you know, 2728 in particular, 2829 also runs at that that one seventy or the one seventy five to three twenty five window. I won't guarantee that we're gonna hit the top end of it, but you will see no surprise look on my face if we're sitting at $3.25 on on all of those. Realistically, there there to my knowledge, there's not anything different. And I I think that was kind of one of the questions that came through as well. You know, what what are they doing differently to to push anything through? The realistically, at this point, the hope is that you have enough a sequence of enough high prices in a row that it it is enough of a signal to get generators to move. And and that it does, you know, cause some of the existing facilities that might have been considering retirement to to get out. You've got enough window to hopefully bring some new stuff in place. Anyone that was potentially considering, you know, backing out of their current projects, you know, we've we've seen that in Texas. It'll keep a lot of that in place in in a lot of that moving. I I think that's the the biggest thing is, you know, getting enough high level stuff in place to and and enough high level prices to move things forward. I think we saw one other question about, you know, the idea of, like, Pennsylvania backing out of PJM. I don't think you do that in an unreliable environment. Is again, my my personal opinion, don't don't be surprised if anything happens in this world, but the the ISO mindset and and the larger grid mentality creates enough balancing effect even though, you know, Pennsylvania in this case is much more of a supplier than than some of the other states. It doesn't mean they're out of the woods in terms of what the the future of load growth and and the need for supply looks like. And and being able to balance and blend and and push costs around and potentially charge some other people at higher levels, that that becomes a pretty important feature, I think. And so I would be surprised at this point to see anyone there there might be bluster. They might want to, you know, try to use that from from a negotiation perspective, but, I don't think anyone wants to go put themselves on an island in in this particular environment of unreliability. Jonathan, I don't know if you have a different view on that, but that's just my my take. Yeah. I'd agree with that. Couple more questions. Peter, do you see any on the the pre registration that you want to address? We I think we had some stuff about I mean, the the one thing I would call out and and I I think it it hits on a couple different questions that came in as well, Jonathan, you know, is what you can see around, you know, curtailments or electrification or a whole bunch of other things. And and one thing that that will kind of hold, not only from an ISO perspective but from a business perspective, is you will see load get stunted if the supply is not there. And and that's you know, the the supply has to come first. We're we're kind of seeing it in Texas in the opposite regard is that some of the generation is getting built as the the data center load is getting built to come in behind it. And so we've actually seen some some depression on on the Texas side of things. You're going to see that at some point kind of happen from a PJM perspective that they're not gonna just keep running upload, whether it's, you know, electrification, data centers, whatever. They're just not gonna be able to pull power if if the supply is not there. They're not gonna be able, you know, allowed to energize if if that's the case. And so the one thing that you will see is they will hit enough of a signal, you know, to to be able to maintain the grid reliability. It doesn't mean you don't have some short term risk that might come into play, but you will see loads gets basically stopped if the supply is not there. And and so that that is one drastic tool that can happen and and one thing to keep in mind. We we are right at the top of the hour. To the extent that we've missed any questions, we'll make sure that we get those, you know, sent out along with everything. But I do wanna thank everyone as as we're gonna probably start seeing some people drop. Thank you for joining. Thank you for the the engagement, the questions. Hope you enjoyed it, learned things, and please don't hesitate to follow-up.