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Largest U.S. grid seeks to pay power plants to stay on line

The manager of the nation’s largest electric grid wants to keep some power plants running beyond their scheduled closures to ensure reliability next winter.

PJM Interconnection LLC plans to ask the Obama administration to let it pay plant owners to keep at least 2,000 megawatts of generation in operation through next winter, when demand for electricity soars, according to a filing with the Federal Energy Regulatory Commission on Wednesday. The companies planned to shutter the plants before a government rule limiting mercury emissions goes into force in the first half of 2015.

“PJM is concerned about having sufficient resources during the winter of 2015/2016, given planned environmental-related retirements and the record of generator unavailability last winter,” said Ray Dotter, spokesman for PJM Interconnection LLC in Valley Forge, Pa. “PJM is checking with generation owners to see if any retirements can be delayed.”

The proposal comes as coal plants shut faster than they can be replaced with natural-gas fired generators. The PJM grid, which serves 61 million people across 13 states and the District of Columbia, has also been adjusting market rules to boost power reserves. The concern is greatest in winter, when demand for home heating limits natural gas supplies and boosts electricity consumption.

The Valley Forge, Pa.-based grid operator had secured 15.6 percent of excess supply for the year starting June 2015 in a capacity auction held in 2012, “but recent developments have raised concerns about those resource commitments,” PJM said in a letter to FERC.

PJM said it will see a “historic” 11,769 megawatts of generating resources retire during the year versus additions of 3,800 megawatts. The grid may also lose the ability to compensate and retain more than 11,000 megawatts of demand resources, where consumers cut consumption during peak periods, because of litigation, it said.

“I think the fact they are concerned about reliability and looking at delaying plant retirements does validate what companies like AEP have been saying” about the impacts the EPA’s mercury rule could have on the system, said Melissa McHenry, a spokeswoman for American Electric Power Co. Inc.

PJM took emergency measures to keep the system running last winter when 40,000 megawatts, or 22 percent of the capacity on the system, wasn’t available during a spike in demand caused by severe cold weather.

The region “would have a negative reserve margin” and demand may exceed supply by 2,600 megawatts if next winter is extremely cold, PJM said in its letter to FERC.

“Over the next two years, over 30 gigawatts of coal plants are set to retire due to MATS so it’s quite possible that PJM may see the need to reinforce reliability in some areas,” said Swami Venkataraman, vice president and senior credit officer for infrastructure finance at Moody’s Investors Service Inc. in New York, by email on Tuesday.