Costs for electricity during extreme weather rising; Dominion says nothing to worry about -- yet

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ENERGY + ENVIRONMENT
Costs for electricity during extreme weather rising; Dominion says nothing to worry about — yet

By: Charlie Paullin - August 7, 2024 5:39 am


Transmission lines in Louisa County. (Ned Oliver/ Virginia Mercury)

The regional electric grid that supplies power to Virginia during times of extreme weather announced a 1,400% increase in some electric costs after its most recent capacity auction. But Dominion officials were quick to assure customers that they would not see an increase in their bills before the end of next year. ... PJM Interconnection, which oversees the electric grid serving several mid-Atlantic states, including Virginia, announced the increase for its capacity market. Dominion buys electricity off of capacity markets during peak, or emergency, demands.

In a news release, PJM blamed the increase on the need to meet surging electricity demand, which is coming from data centers, and electrification of vehicles and home appliances. ... Those needs also come amid the retirement of generation sources, PJM officials noted. State’s around the region have implemented policy goals to take offline older, fossil fuel sources to decarbonize electric grids. Virginia has a target to do so by mid-century as a way to combat increasing storm intensities caused by climate change.

Understanding the capacity market begins with knowing that Dominion owns generation sources to provide the electricity it transmits and distributes throughout its grid. Dominion also purchases electricity from a separate wholesale market, which is where third-party power producers sell the electricity they create. ... But when the grid experiences high demands of electricity, such as winter and summer when either heaters or AC systems are cranking, the utility may have to purchase electricity from the capacity market to meet its obligations.

The auction prices, which are set for future periods to give the third-party power producers an idea of how much they could make and whether it’s feasible to keep their sources online, were recently set for the broader PJM region at $269.20 for 2025-26. For sources within Dominion territory, they were set at $444.26 per megawatt, and in Baltimore Gas and Electric territory at $466.35 because of a limited number of them and transmission constraints. Previously, the price for the PJM region, which then included Dominion’s territory, was $28.92 per megawatt. The highest cost for other constrained areas, those with limited generation sources and transmission lines, in the previous auction was $96.24. ... “The significantly higher prices in this auction confirm our concerns that the supply/demand balance is tightening across the RTO,” said PJM President and CEO Manu Asthana in a statement. “The market is sending a price signal that should incent investment in resources.”

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