SEC Filings

NRG ENERGY, INC. filed this Form 10-K on 02/29/2016
Entire Document

Regional Regulatory Developments
NRG is affected by rule/tariff changes that occur in the ISO regions. For further discussion on regulatory developments see Item 15 — Note 23, Regulatory Matters, to the Consolidated Financial Statements.
East Region
PJM Auction Results — On August 21, 2015, PJM announced the results of its 2018/2019 Base Residual Auction, officially integrating the new Capacity Performance product into the market. NRG cleared approximately 13,388 MW of Capacity Performance product and 784 MW of Base Capacity product in the 2018/2019 Base Residual Auction. NRG’s expected capacity revenues from the 2018/2019 Base Residual Auction are approximately $900 million. PJM announced the results of its Transitional Capacity Auctions for the 2016/2017 and 2017/2018 delivery years, respectively, on August 31, 2015, and September 9, 2015. NRG cleared approximately 3,900 MW of Capacity Performance product in the 2016/2017 Transactional Capacity Auction, and 9,700 MW of Capacity Performance product in the 2017/2018 Transitional Capacity Auction. NRG expects an approximately $425 million increase in PJM capacity revenue from 2016/2017 to 2018/2019 due to the Capacity Performance product. 
The table below provides a detailed description of NRG’s 2018/2019 Base Residual Auction results:
Base Capacity Product
Capacity Performance Product
Cleared Capacity (MW)(1)
Cleared Capacity (MW)(1)
(1) Includes imports. Does not include capacity sold by NRG Curtailment Specialists.

Capacity Performance Rehearings — On June 9, 2015, FERC approved changes to PJM’s capacity market. Major elements of the approved changes to the Capacity Performance framework include the calculation of the bid cap, elimination of the 2.5% holdback for short lead-time resources, and substantial performance penalties on Capacity Performance resources that do not perform in real time during specific periods of high demand. The rules mandate that underperformance penalties be paid to units that over perform during those periods of high demand.  NRG’s actual revenues will be the combination of the revenues based on the cleared auction MW plus the net of any over and under performance of NRG's fleet. On July 9, 2015, multiple parties, including NRG, filed requests for rehearings at FERC regarding the framework of the new annual capacity auctions. Rehearing is pending.
In addition, multiple parties sought clarification on whether demand resources could participate in the Capacity Performance Transition Auctions. On July 22, 2015, FERC issued an order allowing demand response and energy efficiency resources to participate in the Capacity Performance Transition Auctions. Rehearing is pending.
Capacity Replacement — On March 10, 2014, PJM filed at FERC to limit speculation in the forward capacity auction. Specifically, PJM proposed tariff changes that are designed to ensure that only capacity resources that are reasonably expected to be provided as a physical resource by the start of the delivery year can participate in the Base Residual Auction. These changes include the addition of a replacement capacity adjustment charge that is intended to remove the incentive to profit from replacing capacity commitments, an increase in deficiency penalties for non-performance, and a reduction in the number of incremental auctions from three to one. On May 9, 2014, FERC rejected PJM’s proposed changes to address replacement capacity and incremental auction design, but established a Section 206 proceeding and technical conference to find a just-and-reasonable outcome. On August 18, 2014, PJM requested that FERC defer further action in the proceeding. Since the request, FERC has taken no action. The Section 206 proceeding and technical conference could have a material impact on future PJM capacity prices.