Vistra, Constellation jump on expectations of higher power prices
July 31 (Reuters) - Shares of Vistra VST.N and Constellation Energy CEG.O jumped on Wednesday on expectations of higher power prices following a capacity auction by the largest U.S. grid operator.
PJM Interconnection and other grid operators hold regular capacity auctions to decide on rates that utilities would get for the power they produce. These auctions are based on projections for future electricity demand.
PJM announced a nine-fold increase in capacity price for electricity across its 13-state footprint, with costs jumping from $28.92 per megawatt-day to $269.92 per megawatt-day.
Guggenheim analysts said the decision was "directionally positive" for utilities such asConstellation and Vistra, and would provide a boost to their assets powered by fossil fuel.
The price increase within PJM's service territory, which includes states such as New Jersey, Illinois and Virginia, is set to take effect in June 2025.
The significant price hike, however, may also trigger some state-level policy discussions on new capacity additions.
"With transmission planning improvements on the docket and further interconnection reforms urgently needed, these auction results should send a clear message that change can't come too soon," said Jon Gordon, director at Advanced Energy United, a trade body.
Constellation shares rose about 10% to $186.4, Vistra jumped 13.2% to $78 and Talen gained about 12%.
Reporting by Mrinalika Roy in Bengaluru; Editing by Anil D'Silva
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