Posted: March 13, 2026, 1:58 pm

FERC Order 881 is Alive!!

For those of you not following along, FERC Order 881 was a rule passed in 2021 that introduced that the efficiency of transmission lines be updated hourly using Ambient-Adjusted Ratings (AARs). Basically, it requires transmission operators to take into account the weather conditions around a transmission line when figuring in the capacity to carry electricity.

So, why do we say it’s alive? Last week, PJM became to the first RTO to take into account this new methodology. In their words….

A few minutes past midnight on March 4, PJM’s systems switched over to monitoring and dispatching the grid based on the new AARs. Now, rating sets are adjusted hourly according to ambient temperatures forecast 10 days ahead for 47 separate regions with a shared weather forecast within the PJM footprint.

For a detailed breakdown of how this works, invite your favorite electrical engineer for beers, we’d recommend getting their 15 minutes early and slamming a couple of our favorite drinks, because your going to need it. If you don’t know an electrical engineer, or don’t want to have a beer with him or her, let’s try to explain in very rudimentary details on why and how this works. Electricity moving over metal power lines creates heat. Too much heat and the lines can expand in length or droop with potentially dangerous shorts.

Right now, transmission owners use seasonal values (static ratings) on how much electricity can pass on lines. Think of it this way, pick your favorite toll bridge or road that incorporates surge pricing. Instead of actually pricing on traffic, it’s priced on the hour of the day regardless of traffic. If it’s 5pm the cost of the fast lane is $10 regardless of how much traffic is present. That’s kind of how thermal limits are determined on a transmission line now. What AAR will do is differentiate between a 95 no wind day, and a 65 windy day which can have meaningful differences in thermal limits of lines. That would be akin to $10 toll on a busy day and $3 on not so busy day at 5pm on different days.

So why does this matter? According to PJM, cold and windy weather can increase a line’s usable transmission capacity by 10% to 40%, researchers for the U.S. Department of Energy found. When there are limits on the transmission line, it shows up in the price of electricity as congestion. Not to drag another analogy, but think of your Uber ride, if the driver can go point to point, your price is lower. If the driver has to go around construction, traffic, or other detours, pricing can be higher….the same applies to electricity as price is made up of the cost of energy, line loss, and congestion. According the the PJM Market Monitor, $1.75 billion was spent on congestion by load customers last year. The verdict will be out for a while on the AAR pricing, but assumptions on savings seem reasonable.

Natural Gas Market Commentary

Our friends at Pinebrook decided to take the week off, we suspect some sort of cool spring break or conference. While it would seem a bad week to be out, natural gas is closing the week pretty much exactly where it started.

While any news bit out of the Middle East is driving the oil market, gas has stayed pretty tame. For an explanation why, look back to last week’s WPO where we explained that LNG capacity is running full max right now.

Add to that, and EIA stated it perfectly in their STEO this week….

Natural gas production. Higher crude oil production results in more associated natural gas production. We expect marketed natural gas production to average 121 billion cubic feet per day (Bcf/d) this year, an increase of 2% from 2025. Production rises by an additional 3% in 2027 to reach 124 Bcf/d. The 2027 forecast is almost 2 Bcf/d higher than last month’s outlook.