(do not) be exelon to each other
September 21, 2015 3:48 PM Subscribe
I have questions about this article which I found after receiving a letter from Exelon, our electric utility, warning of a price hike starting June 2016. What is PJM Interconnection and who controls it? Why are electric bills only rising a few dollars a month if the cost of a megawatt-day will more than double? Have 'ratepayers' been getting a deal until now or are we now overpaying for capacity assurance (is it assured)? Any explanation you can give is appreciated.
PJM is the (formerly) Pennsylvania-New Jersey-Maryland power market, now expanded to many states in the east. It's one of the world's largest transmission markets. The piece you found was on PJM's capacity market paying many millions for guaranteed future nuclear power. I don't understand PJM's market rules well enough to comment on whether this is a cash grab or not. I do know that PJM's a hot market to sell into: so much so that a private consortium is planning to build an interconnect under Lake Erie to connect Ontario's market to PJM.
As number9dream said, transmission and wholesale power cost is usually a part of your bill, often under half. These huge wholesale deals can have quite a small effect on your overall bill.
posted by scruss at 5:17 PM on September 21, 2015
As number9dream said, transmission and wholesale power cost is usually a part of your bill, often under half. These huge wholesale deals can have quite a small effect on your overall bill.
posted by scruss at 5:17 PM on September 21, 2015
Response by poster: I do read my bill! ;) The relevant line is the supply from Constellation Energy Services, the same division of Exelon that sent us the letter about the PJM change. A typical month for us looks something like "Energy at 7.370 cents per KWH 695 kWh X 0.07370 $51.22" - there's nothing else in the supply section.
posted by michaelh at 8:34 PM on September 21, 2015
The increase in capacity cost to $134 per megawatt-day from the previously set $59.37 per megawatt-day will hike the average bill paid by the typical household served by Commonwealth Edison by about $3.29 per month over what it would have been for the year beginning June 1, 2016, ComEd said today.Based on that math, I assume the average household is currently paying 3.29*(59.37/134) = $1.45 a month for 'capacity cost.' Assuming our above $51.22 is something like average, is it that we're currently paying around $1.50 for capacity cost and the other ~$49.75 in this example is a different supply cost? That would mean this is all just about a change to a small fraction of the bill that isn't even worth breaking out into its own line. If so, it probably wouldn't affect Exelon's lobbying to charge more for the bulk of the supply cost, right?
posted by michaelh at 8:34 PM on September 21, 2015
Yes it's that small. They are probably required by the regulator to send you a letter for anything like this.
The reason why it is so small is because it is a capacity payment - basically a small fee to the generators to ensure in a demand spike the can spool up production quickly but not actually generate. The bulk of your non-wires bill is going to be actual generation and much of that includes fuel costs. I believe but am not sure that the correct way to calculate your share of capacity payments is the % of demand in mwh you make up for the time the capacity is paid for*the capacity payment per mwh
Assume they are always lobbying for higher prices, but without knowing the specifics of where you live and how prices are regulated is hard to answer the last part of your question.
Pjm is probably technically owned by the founding utilities but as a business it doesn't generate revenue. It's basically a pile of rules for how utilities sell power to one another and a pile of rules for how the send electricity between regions and is regulated at the federal level. Historically there have been some examples of bodies like PJM having rules that allowed their member utilities to do questionable things but no idea if that's the case here.
In theory the capacity payments are sold at an open auction so should be fairly priced, however not having the time to dig into it, it is entirely possible that their rules were such that it wasn't entirely reasonable. Usually there are ratepayer groups who basically exist to do that math - I'm sure you can Google it.
posted by JPD at 2:52 AM on September 22, 2015 [1 favorite]
The reason why it is so small is because it is a capacity payment - basically a small fee to the generators to ensure in a demand spike the can spool up production quickly but not actually generate. The bulk of your non-wires bill is going to be actual generation and much of that includes fuel costs. I believe but am not sure that the correct way to calculate your share of capacity payments is the % of demand in mwh you make up for the time the capacity is paid for*the capacity payment per mwh
Assume they are always lobbying for higher prices, but without knowing the specifics of where you live and how prices are regulated is hard to answer the last part of your question.
Pjm is probably technically owned by the founding utilities but as a business it doesn't generate revenue. It's basically a pile of rules for how utilities sell power to one another and a pile of rules for how the send electricity between regions and is regulated at the federal level. Historically there have been some examples of bodies like PJM having rules that allowed their member utilities to do questionable things but no idea if that's the case here.
In theory the capacity payments are sold at an open auction so should be fairly priced, however not having the time to dig into it, it is entirely possible that their rules were such that it wasn't entirely reasonable. Usually there are ratepayer groups who basically exist to do that math - I'm sure you can Google it.
posted by JPD at 2:52 AM on September 22, 2015 [1 favorite]
Response by poster: Oops, I guess if the hike is $3.29 than the current amount would be 3.29*(59.37/(134-59.37)) or $2.62 average capacity cost. Still not a lot.
Thanks, that makes sense. I think I was thrown by thinking capacity cost was just a way to describe supplying power, period, so expecting megawatt-day cost to directly translate to my kilowatt-hours.
posted by michaelh at 7:08 AM on September 22, 2015
Thanks, that makes sense. I think I was thrown by thinking capacity cost was just a way to describe supplying power, period, so expecting megawatt-day cost to directly translate to my kilowatt-hours.
posted by michaelh at 7:08 AM on September 22, 2015
Energy at 7.370 cents per KWH translates to $73.70 per MWh, so if you multiplied that up to MW-days you can see it is way out of kilter.
Something we have seen in the UK over the 25 years since the electricity sector was privatised is a huge drop in generating capacity. When it was state owned the institution that ran the whole system basically prioritised capacity to ensure the lights wouldn't go out. the UK had about 33% more capacity than its peak demand. After privatisation the market for power pushed out much of the excess capacity (mothballed as non-economic or aged out and not replaced).
The result is that the UK entered a period of real danger of not having enough available electrical power, especially in the winter, and taking into account risks such as some plants becoming unexpectedly unavailable.
Its become more apparent that in systems where there is lots of space capacity then no one really worries about security of supply, so the overall cost and how to reduce it gets talked up a lot. Applying market forces can save money (maybe) by driving out this excess capacity but once you start talking about power cuts then politically it starts to become more of an issue.
The supply companies don't really care too much if there is a bit of a power shortage now and then if it means they avoid spending say $500M on a new power station which might only be useful in making money with the occasional spike in electricity demand. They may be more keen to do so if someone will pay to have a power station available even if not generating. Where capacity gets low it may be that if the government want the power to stay on they provide capacity payments, that is, they reward people for having capacity available. The UK is just introducing this, the expectation is it will lead to a lot more gas powered electrical generation fairly rapidly, which is pretty essential. It was less likely to happen without the support from the capacity market.
The situation where you are sounds a bit different in terms of the market set up but this is roughly the same thing. How necessary it is remains a question for the regulator and any other consumer protection agencies in your locale. Its only a relatively small amount as it is only needed to cover the costs of a small fraction of generators.
posted by biffa at 10:58 AM on September 22, 2015 [1 favorite]
Something we have seen in the UK over the 25 years since the electricity sector was privatised is a huge drop in generating capacity. When it was state owned the institution that ran the whole system basically prioritised capacity to ensure the lights wouldn't go out. the UK had about 33% more capacity than its peak demand. After privatisation the market for power pushed out much of the excess capacity (mothballed as non-economic or aged out and not replaced).
The result is that the UK entered a period of real danger of not having enough available electrical power, especially in the winter, and taking into account risks such as some plants becoming unexpectedly unavailable.
Its become more apparent that in systems where there is lots of space capacity then no one really worries about security of supply, so the overall cost and how to reduce it gets talked up a lot. Applying market forces can save money (maybe) by driving out this excess capacity but once you start talking about power cuts then politically it starts to become more of an issue.
The supply companies don't really care too much if there is a bit of a power shortage now and then if it means they avoid spending say $500M on a new power station which might only be useful in making money with the occasional spike in electricity demand. They may be more keen to do so if someone will pay to have a power station available even if not generating. Where capacity gets low it may be that if the government want the power to stay on they provide capacity payments, that is, they reward people for having capacity available. The UK is just introducing this, the expectation is it will lead to a lot more gas powered electrical generation fairly rapidly, which is pretty essential. It was less likely to happen without the support from the capacity market.
The situation where you are sounds a bit different in terms of the market set up but this is roughly the same thing. How necessary it is remains a question for the regulator and any other consumer protection agencies in your locale. Its only a relatively small amount as it is only needed to cover the costs of a small fraction of generators.
posted by biffa at 10:58 AM on September 22, 2015 [1 favorite]
This thread is closed to new comments.
The actual usage charges are only one part of your bill. Read your bill! It should be broken up into several line items. Most likely there are various charges for infrastructure, distribution, etc.
posted by number9dream at 5:11 PM on September 21, 2015