Constellation Energy To Benefit From Strong RPM (CEG, PPL, PEG, DB)
PJM has released the result of the RPM capacity auction for the June 2013 to May 2014 planning year. Prices of $226-247/MW-day in the East are above expectations, whereas the West slacked at $28/MW-day, trailing the expectation of the $30-50 range. In its report, Deutsche Bank (NYSE: DB) has opined that relatively tighter conditions in the East trigger robust capacity payments, while the4 oversupplied West offers little incentive for new builds or the delay of retirements.
Constellation Energy Group (NYSE: CEG), PPL Corp. (NYSE: PPL) and Public Service Enterprise Group (NYSE: PEG) are likely to be the main beneficiaries of higher than expected Eastern PJM prices, whereas in the West, Allegheny Energy (NYSE: AYE) and FirstEnergy Corp. (NYSE: FE) are likely to report the most disappointing performance. PJM’s Reliability Pricing Model is designed to incentivize new capacity resources and to postpone retirements by offering solid capacity payments.
