By Scott DiSavino
(Reuters) - U.S. power grid operator PJM said Friday its capacity auction secured a record amount of new generation, demand response and energy efficiency resources for the 2015/2016 delivery year to keep the grid reliable as dozens of coal plants retire.
PJM said the auction, known as the Reliability Pricing Model (RPM) auction, procured 164,561 megawatts (MW) of capacity resources at a base price of $136 per MW, making the auction worth more than $8.l billion.
That was a little lower than the $150-$190 base price forecasts range of some energy analysts.
"Capacity prices were higher than last year's because of retirements of existing coal-fired generation resulting largely from environmental regulations, which go into effect in 2015," Andy Ott, PJM senior vice president - markets, said in a release.
PJM serves 60 million people in 13 states in the Mid-Atlantic and Midwest and the District of Columbia.
Energy companies announced plans to retire almost 14,000 MW of mostly coal-fired generation in PJM over the next few years due primarily to environmental regulations.
Last year, the auction secured almost 150,000 MW of power resources at a base price of $125.99 per MW.
PJM said capacity prices were higher in northern Ohio and the Mid-Atlantic region.
In FirstEnergy Corp's northern Ohio territory, PJM said the capacity price will be $357 per megawatt due to the high number of power plant outages in that area.
"The retirements impacted northern Ohio to a larger extent than the rest of PJM. PJM's board approved significant upgrades to address the transmission issues," Ott said.
On Thursday, PJM said its board approved $2 billion in transmission upgrades that will strengthen the grid especially in northern Ohio in response to the coal plant retirements.
For the Mid-Atlantic, PJM said capacity will cost $167 per megawatt.
The Mid-Atlantic region includes utilities served by Pepco Holdings Inc's Atlantic City Electric, Delmarva Power and Pepco; Exelon Corp's Baltimore Gas and Electric and PECO; FirstEnergy's Jersey Central Power and Light, Metropolitan Edison and Pennsylvania Electric; PPL Corp's PPL Electric Utilities, Public Service Enterprise Group Inc's Public Service Electric and Gas; and Consolidated Edison Inc's Rockland Electric.
Ott said the capacity prices' overall effect on retail consumer electricity rates would likely be moderated by other factors like weak natural gas prices.
"Capacity is a fairly small component of the retail price of electricity, and the cost of capacity at the retail level tends to be averaged out over several years," Ott said.
PJM said the auction procured a record 4,900 MW of new, mostly natural gas-fired generation to help replace the coal units expected to retire.
The auction establishes contracts with power producers who commit to make their facilities available to provide electricity for the PJM system for the delivery year.
In addition to the new generation, the auction secured a record 14,833 MW of demand response.
PJM's all-time peak demand is 158,448 MW.
A megawatt is enough electricity to power 800 to 1,000 homes.
(Reporting By Scott DiSavino; Editing by Tim Dobbyn and Bob Burgdorfer)