Posted: April 17, 2026, 1:16 pm

New Movie? Capacity Market Heist

If the capacity markets weren’t such a big footprint of customer bills, and required those who manage utility systems with loads and generation assets constant in depth planning, some of the stories would be comical to drama movies.

Case in point, this week FERC levied a $722 million fine and return of roughly $410 million in “unjust profits returned to mostly PJM against a company called American Efficient. You can’t even make this one up. Using the words for a story in Utility Drive….

American Efficient considers itself an “upstream” participant in the energy efficiency industry, according to FERC. Instead of installing efficiency products or contracting with customers who do, it buys sales data from retailers like Home Depot, Lowe’s and Walmart and then figures out how much electricity would be saved if end-use customers install the products, according to FERC. It then bids the energy savings into the capacity markets as if it caused them, the agency said.

As a reminder, the capacity market is an auction where generation assets can be paid to be available to generate when called upon. Another mechanism of the market is demand response, where those that own loads can cut their electricity usage when called upon. An example of this is Amazon being called to shut down during peak energy usage thus removing their load from the grid. With that understanding, think about the comedy of the above, over years, American Efficient presented that it aggregated smart appliances and entered them into some sort of demand response program that would pay them for the ability to shut off. This scheme apparently netted them over $400 million over the years.

This will end up in federal court and rest assured part of the argument will be ‘PJM approved’ this. While it’s pretty easy to agree this is a scam, again maybe even movie impressive, it is a fair question to ask, what the heck was PJM looking at approving this participant? Given the increase in capacity costs over the last couple years, ISOs are monitoring their market participants a little closer- we hope.

Natural Gas Market Commentary

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The natural gas market remained calm this week. Amid the broader chaos and volatility gripping capital markets, U.S. natural gas was eerily quiet. The brief early-season heatwave moving across the East didn’t move the needle much on the demand side of the ledger, and the two-week weather outlook continues to look about as bearish as possible. Storage inventories added 59 Bcf during the first full week of April, increasing the surplus to both last year and the five-year average, and stocks are poised to continue growing at a healthy rate in the weeks ahead.

With every near-term indicator pointing lower, however, the downside has been measured at best and appears to have stalled out in recent days. While an extension of mild weather deeper into the cooling season could certainly still usher in further weakness, the tighter underlying supply picture is helping keep a floor under pricing, at least for now. With production growth stalled and LNG exports continuing to push record highs, we may not build as much gas during the upcoming shoulder season as would otherwise be expected in this demand environment. From there, the potential for a hot summer puts the market at risk of a disappointing injection season and a lower-than-expected end-of-season storage peak.

Waters are calm for the time being, but as demonstrated over and over throughout the history of the natural gas market, this will not last forever.

Cut the War, Not the Power or Oil

A couple weeks ago when the war in the Middle East broke out, we opined (while emphatically reserving the right to be wrong) that the war would be short lived just on the fact China gets so much oil from the Gulf. The thought was there was roughly 3-4 weeks of surplus on the ocean and once that was used, things would get serious. As it turns out, China had built up enormous strategic reserves that stretched into the four month timeframe. Those of us of a certain age know that four months flies by like a long weekend, but it does give China a little bit of runway. So….

….move over China, hello Pakistan. As of yesterday it sounds like Pakistan has helped broker some sort of deal with President Trump even commenting he may go to Islamabad for a formal signing. Interestingly enough, Bloomberg reported earlier this week, that Pakistan hadn’t received an LNG shipment since early March and was implementing rolling blackouts due to fuel shortage.