<div id="readability-page-1"><div><p><span>(Platts)--18Dec2025/340 pm EST/2040 GMT     **Push for extended price collar expected     **Affordability concerns to drive market changes     Record-high prices in the PJM Interconnection's capacity market auction for the third time in a row will likely lead to &#34;meaningful changes&#34; such as a bigger appetite for rate-based generation and a stronger push to keep the &#34;price collar&#34; in place, analysts said.     PJM on Dec. 17 announced that the capacity market for the 2027-28 delivery year cleared at the price cap of $333.44/MW-day, mostly due to forecast power demand from data centers.     &#34;We saw an increase in the peak demand forecast in this auction compared with the last one of about 5,250 MW, with 5,100 MW of that being large loads like data centers that are in the projection,&#34; Stu Bresler, PJM's executive vice president of market services and strategy, said during a Dec. 17 conference call with reporters.     This marks the second consecutive auction in which prices have cleared at the cap and the third straight auction with record-high clearing prices.          &#34;Given the rapidly increasing load forecasts and the long lead time to add new generation, we don't expect a meaningful moderation in clearing prices looking forward,&#34; Scotia Capital analyst Andrew Weisel wrote in a Dec. 18 report.     The Federal Energy Regulatory Commission in April approved an agreement between PJM and Pennsylvania Governor Josh Shapiro that set a price cap of $325/MW-day and a price floor of $175/MW-day for the 2026-27 and 2027-28 auctions.     PJM's capacity auction for the 2026-27 delivery year officially cleared at a record high of $329.17/MW-day.     This comes after the auction for PJM's 2025-26 delivery year cleared at $269.92/MW-day for much of the grid operator's 13-state footprint, a nearly tenfold increase from the $28.92/MW-day clearing price in the 2024-25 auction.     Several governors, lawmakers and regulators within the PJM region are &#34;already pushing for an extension of the ceiling for at least another auction,&#34; Weisel added.     &#34;We believe that high pricing is unsustainable, and we expect meaningful changes in the next 3-5 years due to affordability concerns,&#34; the analyst wrote. &#34;We expect multiple states to either enable regulated utilities to invest in generation or exit the capacity market altogether, which would be a [long-term] positive for regulated utilities and negative for [independent power producers].&#34;          WINNERS AND LOSERS     Power producers including Constellation Energy, NRG Energy, Talen Energy and Vistra are seen as the &#34;primary beneficiaries&#34; of the higher clearing prices.     The stock prices of Talen and Constellation were trading up around 6% a little after 1 p.m. ET on Dec. 18. Vistra's and NRG's share prices were up more than 3%.     Talen reported clearing 8,745 MW, equating to more than $1 billion in capacity revenue for the 2027-28 planning year, it said in a statement. Constellation reported clearing 15,525 MW of nuclear capacity and 2,425 MW of &#34;fossil/others&#34; capacity.     &#34;We expect [Constellation] and [Vistra], as well as other IPPs, to be the primary beneficiaries of the latest results, which demonstrate that the demand trends in the region remain strong,&#34; KeyBanc Capital Markets analyst Sophie Karp wrote Dec. 17.     Public Service Enterprise Group is also set to potentially benefit from the results due to its nuclear generation in the PJM, Karp added.     PSEG, however, will likely face pressure around affordability, the analyst noted. The company has a retail electric utility subsidiary in New Jersey.     &#34;These capacity prices flow through to customer bills, which is likely to put greater pressure on state leaders to address affordability heading into the midterm elections,&#34; Karp wrote. &#34;While the incremental costs are modest relative to the prior year, we believe the likelihood of an extension of the price/cap is now greater following the latest result.&#34;     Akron, Ohio-headquartered FirstEnergy, which operates transmission and distribution utilities in five states in the PJM region, is among the investor-owned utilities that have called for state intervention in the market.     FirstEnergy has also expressed interest in investing in generation resources under the appropriate construct.     &#34;We have these capacity auctions that don't really work the way they're supposed to,&#34; FirstEnergy Chair, President and CEO Brian Tierney said in a recent interview with Platts, part of S&amp;P Global Energy.     PSEG and PPL have also advocated for legislation to allow regulated entities to build generation to help drive down costs and meet resource needs.     &#34;More than $16 billion is being paid into these capacity markets and customers aren't getting any new generation for it,&#34; Wendy Stark, PPL's executive vice president of utilities and chief legal officer, told Platts.          NO NEED FOR CHANGE?     Power producers are skeptical of this approach.     &#34;The reality is that while customers enjoyed record low supply prices over the past decade, we are in a new era and there will be a cost to building the projected necessary resources on the timeline required,&#34; the PJM Power Providers Group and the Electric Power Supply Association, both representing independent power producers, said Dec. 17 in a joint statement. &#34;Arguments in support of dramatic policy reversals, such as permitting utilities to rate base generation, would do nothing to speed construction and would further exacerbate concerns about affordability.&#34;     Wall Street, however, believes affordability concerns will win out.     &#34;We see no off-ramp to the political push for lower PJM auction price caps as part of a negotiated collar settlement between PJM and PJM states,&#34; TD Cowen analysts wrote in a Dec. 17 report.     Without the collar in place, results were expected to hit an unconstrained clearing price of $529.80/MW-day.     &#34;We recognize that this price gap is viewed by generation developers as price suppression — and counter to the signal needed for new build — but struggle to see this economic narrative winning out in a policy environment driven by affordability concerns,&#34; TD Cowen analysts wrote.     The capacity of the resources procured in the auction fell about 6,600 MW short of PJM's reserve margin of 20%.     &#34;This does not necessarily mean, however, that the PJM system will be unable to serve load reliably in the delivery year,&#34; the grid operator said in a news release. &#34;PJM continues to hold a reserve margin of 14.8%, and there are several mitigating factors that could improve the reliability picture for the system in the 2027/2028 delivery year.&#34;     — Darren Sweeney, Darren.Sweeney@spglobal.com-- Edited by Meghan Gordon, newsdesk@spglobal.com--Platts Electricity Alert--</span></p></div></div>

<p>Record-high prices in PJM's capacity market auction are driving calls for market changes and price cap extensions. Analysts expect increased rate-based generation and affordability concerns to influence future auctions. Power producers like Constellation Energy and NRG Energy benefit from high prices, while utilities like PSEG face affordability pressures. State intervention and legislative changes are anticipated to address these issues.</p>

PLATTS: 100--Market changes, cap extension seen as likely fallout from PJM auction prices