BALTIMORE – Flawed regional market rules allow suppliers to exercise market power and drive up prices, potentially leading to billions of dollars in unlawful, additional costs for electric customers, the Office of People’s Counsel said in a complaint filed today with the Federal Energy Regulatory Commission against PJM Interconnection L.L.C., the operator of the regional market.
Thousands of megawatts of existing resources are currently online, but under current rules are not counted as supply, the complaint said. At the same time, PJM has been systematically inflating forecasted market demand. The result is the imposition of exorbitant and unreasonable charges on customers for electric capacity, which is intended to ensure resources are available to meet reliability needs.
PJM’s capacity market is premised on new resources being able to enter the market and compete with existing resources to discipline prices and market power. That is not happening, however, because thousands of megawatts of new generation resources that could enter the market and lower prices are sitting in an interconnection queue traffic jam waiting for PJM to process their applications.
“PJM claims that high prices are the inevitable result of supply and demand, but the fact is that the high prices reflect PJM-created market rules that harm customers by exposing them to paying billions of dollars in a massive windfall to big generation companies,” said Maryland’s People’s Counsel David Lapp. “PJM should fix its rules so the rules work for the customers that PJM is supposed to be serving.”
Advertisement
PJM’s rules exempt whole categories of resources from participating in its capacity market, including wind, solar, and energy storage, as well as “demand response” resources that reduce demand during peak periods of electricity demand that the market is intended to support. PJM also exempts units slated for deactivation that are operating under temporary arrangements for reliability purposes. All these resources support reliability in the region, the complaint explains, and they are qualified to operate and should count in PJM’s constructed capacity “market” as supply, thereby reducing costs for customers.
The exemptions to market participation for these resources allow generation conglomerates that own different types of generation facilities to keep some of them out of the market, which can result in inflated overall market prices—to the benefit of their facilities that do participate in the market, the complaint argues.
Advertisement
“PJM market rules afford big generation corporations the ability to raise prices uncompetitively,” Lapp said. “Customers depend on PJM’s rules to model what would happen in a competitive market, but those rules fail to credit existing resources that can mitigate market power and do not account for the impact of PJM’s backlogged list of projects waiting to come online. The rules risk imposing massive costs on customers in the region without serving any purpose but to inflate the profits of large generators.”
Advertisement
The complaint points out many other deficiencies in PJM’s market rules and offers suggestions for needed improvements before companies submit bids in the next capacity auction in June 2025. Recommendations include requiring PJM to revamp its interconnection study process to prioritize entry into the market of new generation projects that would be sited in areas—such as those in Maryland—that have transmission constraints that limit power imports into the area.
The complaint also asks the Federal Energy Regulatory Commission, which regulates wholesale power costs, to require PJM to adopt a longer notice period for generating plants that plan to retire and a standardized agreement that governs the obligations imposed on plants that are needed to stay online to ensure service reliability. Under current rules, such plants will recover their full cost of service, but they have no obligation to participate fully in the capacity market, thereby inflating prices and shorting PJM ratepayers—including Maryland customers—who fund continued plant operations.
OPC’s complaint was filed jointly with several other state consumer advocate offices, including the New Jersey Division of the Rate Counsel, the Office of People’s Counsel for the District of Columbia, the Illinois Attorney General’s Office, the Office of the Ohio Consumers’ Counsel, and the Illinois Citizens Utility Board.
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers of electric, natural gas, telecommunications, private water and certain transportation matters before the Public Service Commission, federal regulatory agencies and the courts.