EPSA supports proposed cost of new entry increase in PJM.
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Press Release Summary:
According to comments filed by EPSA at FERC, estimated Cost of New Entry in organized regional electricity markets should reflect significant increased costs of materials and labor needed to build new electricity generation and should be adjusted on regular basis. PJM factors calculated Cost of New Entry into formula it uses to estimate available future resources. CONE must be set at realistic level in order to incent participation in market and PJM capacity auctions.
Original Press Release:
EPSA Supports Proposed Cost of New Entry Increase in PJM to Better Reflect Current Costs of Investment
WASHINGTON, D.C. - The estimated Cost of New Entry (CONE) in organized regional electricity markets should reflect the significant increased costs of the materials and labor needed to build new electricity generation and should be adjusted on a regular basis in order to send clear market signals to investors, according to comments filed by the Electric Power Supply Association (EPSA) at the Federal Energy Regulatory Commission (FERC) today.
John E. Shelk, president and CEO of EPSA, said, "Building power plants and generating electricity requires the purchase of significant amounts of steel, copper, aluminum, cement, and labor, all of which have greatly increased since the cost of new entry was originally calculated by PJM in 2004. Just issued last week, CERA's new Power Capital Costs Index confirms that a power plant that cost $1 billion in 2000 would average $2.31 billion today. CERA says these costs jumped 27 percent in the last year and 19 percent over the past six months. In addition, environmental compliance with important existing clean air regulations to protect public health and the environment also contributes to cost increases -- and this does not take into account the projected high costs of compliance with proposed climate change mitigation measures that are equally important."
EPSA expressed support for a request before FERC to increase the estimated CONE in PJM, an organized regional electricity market that encompasses 13 states and the District of Columbia. PJM factors the calculated Cost of New Entry into the formula it uses to estimate available future resources. CONE must be set at a realistic level in order to incent participation in the market and PJM capacity auctions. PJM says its current CONE values have been overtaken by rising construction costs since they were originally calculated.
Shelk said, "The bigger picture underscores the necessity for CONE values to reflect the current, true costs of investment in the auction process. Properly updating the Cost of New Entry is critical to sending accurate price signals to the market, furthering the Commission's goal of promoting long-term reliability and facilitating investment that ultimately benefits consumers in PJM."
In its comments, EPSA also supports the periodic review of CONE that is provided for in PJM's "reliability pricing model" (RPM) settlement to ensure CONE is adjusted on an ongoing basis. EPSA further urges FERC to grant PJM's requested waiver of the current timeline for notification to PJM stakeholders of the review and update of CONE values, given how important this revision is to making new investments.
EPSA Supports Proposed Cost of New Entry Increase in PJM to Better Reflect Current Costs of Investment
CONTACT: DAPHNE MAGNUSON
(202) 628-8200
EPSA is the national trade association representing competitive power suppliers, including generators and marketers. These suppliers, who account for nearly 40 percent of the installed generating capacity in the United States, provide reliable and competitively priced electricity from environmentally responsible facilities serving global power markets. EPSA seeks to bring the benefits of competition to all power customers.
