PJM capacity prices could soar again in next auction, Morgan Stanley says (NYSE:VST)

Power prices for most of the PJM Interconnection coverage area could reach a price ceiling of $695 per megawatt per day, More than double A record high of $270 per megawatt-hour per day at PGM’s July capacity auction, driven by tight power supplies, Morgan Stanley said in an analysis this week. The week reported by UtilityDive.com.

Morgan Stanley said the potential jump in power prices for the 2026-2027 annual delivery auction scheduled for December would push energy bills higher; when combined with PGM’s previous power auction, the upcoming auction could increase residential electricity bills by about 20%, according to the analysis.

“This is also likely to increase political risk in light of other increases in customer bills — the possibility of re-alignment initiatives, subsidized power generation, or restrictions on some new loads such as data centers,” the report said, according to UtilityDive.com.

The analysis stated that under extremely tight supply and demand conditions, BJM’s energy market will be extremely sensitive to relatively small changes in energy supply.

“If a small number of new power plants are built, and any plants that retire are replaced, prices could swing between $300/MWh and a maximum of (approximately) $700/MWh,” the report said. “Given these factors, we believe there is a strong case for prices to stabilize at $700/MWh given the challenges of bringing large new power plants on stream (within an 18-month timeframe).”

Higher energy prices would provide a financial boost to power plant owners such as Vestra, Morgan Stanley analysts said.NYSE:VST), Constellation Energy (CEG), Public Enterprise Group (PEG), NRG Energy (NRG), and Talen Energy (TLN).

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