Overview of the PJM BRA

• The PJM Base Residual Auction (BRA) is an annual mechanism for securing commitments from electricity suppliers to ensure sufficient capacity meets peak demand and maintains grid reliability in the PJM region.
• Suppliers commit resources for a one-year term, typically three years in advance, to ensure sufficient generation or demand management to meet future needs.

Recent Delays and Causes

• The BRA for 2022/2023 was delayed multiple times, mainly due to regulatory changes, particularly the implementation of the Minimum Offer Price Rule (MOPR).
• These delays have created uncertainty and disrupted the traditional auction schedule.

2025/26 Auction Results and Market Changes

• The 2025/26 BRA saw capacity prices rise by over 800% in much of the PJM region compared to the previous year.
• Price increases were driven by:
  • Retirement of power plants
  • Higher peak summer demand
  • A higher Installed Reserve Margin (IRM)
  • Market reforms approved by the Federal Energy Regulatory Commission (FERC), including measures to address risks from extreme weather and enhance reliability
• These changes will result in higher capacity costs for all energy providers and customers in the PJM area starting June 2025.

Future Auction Timeline

• Auction delays have reduced forward visibility into capacity prices; prices are currently known only through May 2026.
• The auction for the 2026/27 delivery year has been postponed to July 2025, further complicating planning for customers.
• PJM aims to resume a regular auction schedule, holding auctions roughly every six months to restore advanced market visibility.

Customer Impact and Options

• Additional FERC-approved changes for the 2026/27 BRA add uncertainty about future capacity costs.
• Businesses should be aware of increased capacity costs and ongoing market reforms when planning budgets and energy strategies.
• Two main procurement options are emerging:
  • Pass-through capacity costs enable customers to benefit from cost savings by effectively managing their peak loads.
  • Products with baseline capacity costs are adjusted up or down as actual auction results become available.
• These approaches help avoid risk premiums and provide flexibility as market rules evolve.

Strategic Considerations

• Understanding the evolving market and available product options is crucial for businesses to make informed decisions and manage electricity costs effectively.
• Expert guidance and tailored solutions, such as those offered by TPI Efficiency’s energy experts, can help businesses optimize their strategies in response to these market changes.