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If "capacity costs" are a commodity, and it is a major cost driver, how do you estimate that cost and the volume of capacity required by year?
From a PJM market perspective, PJM utilizes the load forecast plus a reserve requirement in its capacity construct to ensure enough capacity is procured. This reserve requirement deems a certain amount of capacity above the projected peak demand to ensure reliability standards are met. The Company is assigned a share of the overall PJM capacity obligation in proportion to its expected demand.
As it relates to IRP modeling, the IRP considers the cost of PJM capacity purchases relative to the cost of building resources that can satisfy the Company’s capacity requirement within PJM. The volume of capacity purchases in the IRP model is chosen based on the RPM reserve requirement as well as least cost economics. Constraints on capacity purchases are also a factor and reflect the Company’s risk tolerance for being short capacity in the RPM market.