PJM capacity auction results clear in May and June each year. Those results flow into utility supply rates starting with the September billing cycle. Locking a fixed-rate supply contract in July or August catches the pre-rise window when suppliers are still pricing against pre-auction wholesale forwards. Locks signed in August-September average 6 to 14 percent below January-February locks for the same 24-month term across PJM zones. Here is the seasonal playbook.
How the PJM capacity auction sets the calendar
PJM runs the Base Residual Auction every May/June to procure capacity for the delivery year starting the following June. The auction clears at a market-set $/MW-day price.
Suppliers price their forward contracts using the cleared capacity price as one input. Before the auction results are public, suppliers hedge against pre-auction wholesale forwards. After the auction clears, they re-price to reflect the cleared capacity cost.
Why the August-September window prices cheapest
August through September is after the capacity auction has cleared (so suppliers know the full year-ahead capacity cost) but before the winter spike has fully priced into forward curves.
Suppliers also have most of their next-year capacity to place during August-September. They compete hard for account enrollments before the winter ramp. Customer-acquisition pressure compresses margins.
The lock strategy for the September window
Lock for 18 to 24 months. A 12-month lock signed in August exposes you to next winter at re-rate time. A 24-month lock takes you past two winters before the next renewal decision.
Read the contract clauses. Avoid teaser pricing that re-prices after the introductory window. Confirm no early-termination fee or a fee no greater than $50. The reputable suppliers ship clean contracts.
Lock the rate before the next reset.
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