PA Environment Digest Blog: 30 Stakeholder Comments Received By PUC On Adequacy Of Electricity Supplies In Pennsylvania; Increasing Natural Gas Power Plant Reliability To 90-95% Would Mean No Imminent Capacity Problem

Tuesday, January 14, 2025

30 Stakeholder Comments Received By PUC On Adequacy Of Electricity Supplies In Pennsylvania; Increasing Natural Gas Power Plant Reliability To 90-95% Would Mean No Imminent Capacity Problem

The Public Utility Commission received 30 comments from a wide range of stakeholders on the issue of the adequacy of electricity supplies in Pennsylvania as a follow-up to the Commission's technical conference in November.

The PUC is gathering information and solutions to the problem of dramatically increasing electricity demand in the PJM electric grid region from data centers and bitcoin mining operations at a time when traditional coal-fired and other thermal baseload generation units are retiring and not being replaced quickly enough with renewables, storage and other generation to address existing and future electricity demand.

These trends are raising concerns about electric grid reliability and cost to energy consumers, in particular during the more frequent extreme weather conditions being experienced due to climate change.

PUC Questions

The PUC’s Technical Conference asked panelists and stakeholders to address three issues--

-- What are the right mix of resources and how do we get them online? Will effective load carrying capacity (ELCC), properly designed, accomplish this?

-- How do we facilitate completion of the construction of those generation resources?

-- What can the PUC do to ensure resource adequacy for electric distribution customers?

Click Here for more information.

Stakeholder Comments

Copies of stakeholder comments are posted online at Docket No. M-2024-3051988. Here are just a few examples--

The Natural Resources Defense Council submitted comments included these recommendations--

-- Increasing Natural Gas Power Plant Reliability To 90-95% Would Mean No Imminent Capacity Problem. In 2025/26, PJM will have barely enough capacity to keep the risk of blackouts during extreme winter weather to an acceptable level. This scarcity will raise capacity costs from $2 billion to over $14 billion per year.

The electricity shortage facing PJM is not a shortage as it is usually thought of, but rather an increased risk of blackouts if there are systemwide gas plant failures during extreme winter conditions.

If PJM could rely on its gas fleet to perform at 90 – 95% reliability during winter storms, there would be no imminent capacity problem.

In the 2025/26 auction, 87,110 MW (nameplate) of gas-fired units cleared, with an average capacity rating of 76%.

Raising their reliability value to an entirely achievable 90% would add 12.2GW of capacity to the system, saving billions of dollars over the next few years and delaying resource adequacy shortfalls until 2028.

Critically, this buys PJM and project developers much-needed time to process the interconnection queue and build the storage, wind, and solar resources that will keep the system reliable well into the 2030’s.

[Gas-fired power plants have a high risk of failure because their fuel comes through a well and pipeline system with multiple points of potential failure. Renewables, nuclear and coal plants have their "fuel" onsite.]

In order of importance, winter gas failures were: (1) mechanical issues at power plants;

(2) upstream supply, generally freezing at wellheads; and (3) gas contracting or delivery

issues.

These are all very solvable problems:

-- PJM and Pennsylvania should work together to ensure full compliance with rigorous weatherization standards at power plants.

-- Wellheads are under state jurisdiction. The legislature should take all necessary measures to ensure that we never see a repeat of the 30% loss of production that occurred during Winter Storm Elliott.

-- Gas plants with liquid fuel backup are among the most reliable performers during winter storms, with 94.4% availability during Elliott. The legislature should consider actions to strongly encourage dual fuel upgrades at existing gas plants.

This is already a requirement in New York, and it underlies the key point that maximizing the reliability of Pennsylvania’s existing fleet is a more immediate and cost-effective solution than devoting resources to constructing new fossil plants.

-- PJM capacity market rules do not reflect the improved reliability that can be obtained through these investments until several years have passed.

While this is a prudent approach and relies on generators demonstrating performance, if Pennsylvania takes any of the steps listed above, PJM should consider approaches that allow quicker recognition of improved reliability with sufficiently rigorous oversight.

We realize that these steps will be neither easy nor cheap. But the potential savings will quickly reach billions per year for most of the remainder of the decade.

NRDC argues that rapid investment in the reliability of the existing gas fleet is a highly cost-effective way to address resource adequacy issues in the short term and should be fully explored before considering green-field investment in new power plants or gas infrastructure.

-- The electricity supply situation in PJM is precarious, and if not managed carefully will cost tens of billions of dollars and risk life-threatening winter power outages. Commonsense options exist to meet the region’s reliability needs, but both PJM and the Commonwealth must act quickly and decisively. Time is not on our side.

We urge the PUC to not lose sight of the fact that this issue is primarily one of timing and administration and to resist any attempts to take advantage of it to undermine other states’ energy policies or give undue preference to favored technologies.

The Energy Association of Pennsylvania, representing electric and natural gas utilities, recommended--

-- Conduct an Integrated Resource Assessment to identify and address generation shortfalls.

-- Leverage Default Services Plans and other filings to enable proposals that will enhance resource adequacy.

-- Address ancillary issues, including the limitations of intermittent resources and the impacts of large single-point loads.

-- Encourage innovation and forward-looking resource planning to ensure Pennsylvania remains a leader in electric reliability and affordability.

-- Set clear and realistic timelines for any required action on the part of utilities, which account for existing timelines set for acquiring generation and building infrastructure.

Glen Thomas, former Chair of the Public Utility Commission, said--

-- Stay Committed To Markets: Establishing competitive markets was not an easy task and there have been ups and downs since 1996. Pennsylvania consumers paid billions of dollars in stranded costs to treat utilities fairly for the investments that were made in generation that would not have been recoverable in a competitive market.

The Polar Vortex of 2014 saw significant price increases as wholesale market prices briefly spiked and many retail consumers were exposed to spot market prices.

Similarly, Winter Storm Elliot in 2022 tested the resilience of the system however, grid reliability was maintained and subsequent improvements to PJM's markets were made.

After each of these events, questions were raised about the value of markets. Fortunately, Pennsylvania stayed committed to the path it started in 1996.

-- Be Vigilant Without Being Hasty: Markets by their nature are cyclical. There are ebbs and flows, highs and lows. The key to successfully navigating them is allowing them to work as intended and history has proven they will.

-- Get Smart On Load Growth: The PUC could play a very important role in improving the way load growth information is collected and processed. Specifically, the Commission could direct the Bureau of Audits to investigate and report on the load forecasting practices of Pennsylvania’s EDC [electric utilities]. They could identify best practices and make recommendations to the Commission.

-- Get Smart on PJM Issues: A big reason we are facing the challenges we face today is because PJM advanced and FERC approved policies that drove prices below competitive levels and drove resources off the system. Without going into details, between 2020 and 2023, market harming changes were made to the Minimum Offer Price Rule (MOPR), the Market Seller Offer Cap (MSOC) and the VRR Curve reference unit and parameters.

Pennsylvania needs to be at the table and a loud voice in these discussions advocating for competitive market signals-- not signals that are artificially high or low because of policies that are disruptive to the market.

All the comments can be found at Docket No. M-2024-3051988.

Resource Links:

-- PUC Invites Stakeholder Comments On The Issue Of The Adequacy Of Electricity Supplies In Pennsylvania [Background On Issue] [PaEN]

-- PUC Urges Natural Gas Customers To Explore Ways To Reduce Heating Costs; All But One Major Gas Utility Has Increased Cost Of Gas In PA [PaEN]

-- PUC Encourages Consumers To Prepare For Dec. 1 Electricity Price Changes; Rates Will Vary From 8.4% Decrease To 31.2% Increase [PaEN]

-- Utility Dive: North American Electric Reliability Corp: Natural Gas Electric Generation Is Threatened This Winter By Ongoing Concerns About Gas Production, Delivery In Extreme Weather Conditions [PaEN]

-- Guest Essay: Renewables Can Help Stop Winter, Summer Power Outages, Avoid Energy Price Spikes [PaEN]