Talen Energy has reached an agreement with PJM Interconnection, the Maryland Public Service Commission, Maryland electric utilities, consumer representatives, and the Sierra Club to extend operations at its 1.3-GW coal-fired Brandon Shores power plant and 774-MW oil-fired H.A. Wagner units until May 31, 2029, under a reliability-must-run (RMR) contract.
If approved by the Federal Energy Regulatory Commission (FERC), the settlement will allow Talen to run the plants well beyond their May 2025 retirement dates and provide the independent power producer with fixed payments of $312/MW per day for Brandon Shores and $137/MW per day for Wagner. The figures include performance incentives of $5 million for Brandon Shores and $2.5 million for H.A. Wagner, the company said.
In total, Talen stands to receive approximately $180 million annually under the agreement from the Maryland power plants, including performance incentives. Separately, the company will also receive reimbursements for fuel costs and variable operations and maintenance expenses.
Integral for Reliability
Wagner, located in Anne Arundel County, comprises Wagner 3, a 1966-completed 359-MWe coal-fired unit that Talen converted to run on fuel oil at the end of 2023. Wagner 4, built in 1972, is a 415-MWe oil-fired unit. The power plant also comprises Wagner 1, a 133-MWe coal-fired unit built in the 1950s, and it hosts a 13-MW gas-fired combustion turbine, which can serve as a peaking unit. Talen retired Wagner 2, a 136-MW coal-fired unit, in 2020. The two-unit 1.3-GW coal-fired Brandon Shores Generating Station is located outside Baltimore. Unit 1 was completed in 1984, and Unit 2 in 1991.
Talen on Monday said the RMR agreement is “intended to provide the power necessary to maintain grid and transmission reliability in and around the City of Baltimore until necessary transmission upgrades to provide reliable power to the area from other sources are complete.” the company said on Jan. 27.
Talen had initially sought to retire the two power plants this year, citing economic and environmental constraints. The company formally notified PJM of its intent to deactivate all four Wagner units in October 2023 and had already announced in April 2023 that it would shutter Brandon Shores by mid-2025, pointing to deteriorating market conditions, including declining energy market margins and low-capacity prices, which made continued operation financially unsustainable. The company said also faced growing regulatory constraints.
At Wagner, air permit restrictions under its Title V permit capped oil-fired units at a capacity factor below 15%, severely limiting revenue potential. Talen cited these restrictions, along with the financial risks of PJM’s Capacity Performance penalties, as key factors making continued operation unviable. At Brandon Shores, Talen initially considered converting the plant from coal to fuel oil but abandoned the plan in early 2023, determining it was not economically viable. A primary obstacle was compliance with the National Pollution Discharge Elimination System (NPDES), which prohibits coal operations at the plant after Jan. 1, 2026. Faced with high conversion costs and uncertainty over the financial viability of an oil-fired facility, Talen concluded that keeping Brandon Shores online beyond June 2025 was not feasible.
However, PJM raised significant reliability concerns about the closure of the power plants—a combined 2.1 GW. Deactivating Wagner and Brandon Shores in 2025, before planned transmission upgrades were completed in 2028, would result in voltage instability and thermal violations across multiple transmission owner areas in and around Baltimore, the regional transmission operator (RTO) warned. “Reliability tests indicate widespread voltage deviation violations upon Wagner deactivations,” specifically for units 3 and 4—a combined 774 MW. The “majority of them are associated with losing Brandon Shore’s Generator(s),” it said.
While the Wagner retirements will not necessitate additional transmission upgrades, upgrades underway to resolve the Brandon Shores violations “will resolve all reliability issues identified attributed to the deactivation of Wagner units 3 and 4” when completed in 2028, PJM said. The RTO added that its analysis revealed that to maintain system reliability, Wagner 3 and 4 “will be needed to operate under an RMR arrangement”—especially during “the interim time period from the proposed deactivation date of June 1, 2025, to the completion date of all required upgrades.”
Plants Will Not Participate in PJM’s Capacity Market
While PJM has no authority to compel continued power plant operation, an RMR agreement allows generators needed for system stability to recover operating costs. Talen, notably, initially opposed the RMR agreement but moved in April 2024 to file cost-of-service rate schedules for the plants with FERC covering their operations through December 2028. FERC accepted the rate schedules in June and has launched proceedings. The timeline for final approval remains uncertain, and modifications could arise, Talen noted. FERC must also approve the settlement announced on Monday and “may be contested by the PJM Independent Market Monitor,” Talen noted.
Under the settlement, notably, Brandon Shores and Wagner will not participate in PJM’s capacity market or face capacity performance penalties. However, PJM will include them in the supply stack, with their offer prices in future capacity auctions depending on the outcome of an ongoing Section 205 proceeding at FERC. “The offer price for the plants in upcoming auctions will depend on the outcome of PJM’s pending Section 205 proceeding, which proposes to include RMR resources administratively in supply as price-takers,” Talen said.
The delayed retirement of Brandon Shores’ was also opposed by Sen. Chris Van Hollen and several Maryland congressional representatives, who argued that the associated RMR contract would unfairly burden Maryland ratepayers while failing to align with the state’s clean energy goals.
Maryland’s Climate Solutions Now Act of 2022 mandates a 60% reduction in greenhouse gas emissions from 2006 levels by 2031 and targets net-zero emissions by 2045. To meet its clean energy goals, the state is developing a framework for a clean energy standard aimed at achieving 100% clean electricity by 2035. Wagner and Brandon Shores are among Maryland’s last remaining coal-fired power plants. Meanwhile, natural gas generation—which has more than tripled since 2015—now provides the bulk of the state’s electricity, while the two-unit Calvert Cliffs nuclear power plant supplied 40% of Maryland’s total generation in 2023.
On Monday, Talen CEO Mac McFarland, suggested the RMR agreement marked an important milestone “in the collective efforts” of PJM, Talen, the Maryland Public Service Commission, and other representatives of Maryland consumers to ensure the reliable supply of electricity to the people of Baltimore and its surrounding area. “Talen is pleased to do its part to help provide critical infrastructure with an RMR structure that simultaneously creates reliable electricity in Baltimore and protects Maryland consumer rates,” he said.
—Sonal Patel is a POWER senior editor (@sonalcpatel, @POWERmagazine).
