By Rory D. Sweeney
NATIONAL HARBOR, Md. — Consumer, small-business and environmental advocates pressed PJM’s Board of Managers on the issue of transparency at their annual meeting last week, calling on the RTO to provide more explanation of its broader plans and goals.
Advocates from several member states took turns outlining their shared perspective on what they see as the largest issues PJM is currently addressing and the obstacles the RTO faces.
Brian Lipman with the New Jersey Division of Rate Counsel set the tone during his discussion of PJM’s initiative to reform how energy prices are formed.
“Advocates are supportive of looking at proposals to improve the PJM market, but it needs to be done in the most efficient and effective manner,” he said. “So with energy price formation, one of our first questions is: What happened to LMP?”
He endorsed PJM’s current focus on revising how reserves and shortage pricing are calculated, but added that “it’s unclear to us” whether reviewing the LMP calculation will be a “next step.”
“We’re asking for clear communication on this front,” he said. “There’s much being juggled by all the stakeholders in PJM, and many problems on the table for consideration. … Each one impacts another, so it’s not possible for the consumer advocates or any stakeholder to merely take a look at one piece of the puzzle without thinking about how everything will fit together and what the complete picture is. … We need to know how PJM plans to fit energy price formation into its resilience initiative.”
John R. Evans, Pennsylvania’s small business advocate, said he stays involved because “many times, if you don’t have a seat at the table, you often find yourself on the menu.”
Evans is concerned about the potential for his state legislature to subsidize its nuclear fleet, as has happened in Illinois and New York and is on the brink of approval in New Jersey.
“Show us some benefit to small business classholders,” he said. “So far, we haven’t seen that.”
Erik Heinle of the D.C. Office of the People’s Counsel discussed advocates’ support for increasing PJM’s consideration of cost-containment guarantees in staff’s analysis of transmission construction bids. Stakeholders will consider several different proposals on the topic at a May 24 Markets and Reliability Committee meeting. Heinle’s office joined LS Power in developing a proposal that would require PJM to seek input from the Independent Market Monitor in comparing cost caps to cost estimates. PJM has developed two other proposals: one would limit cost-containment evaluation to construction costs while the other would give RTO staff authority to consider a wider range of factors at its discretion and require them to perform a feasibility evaluation on any cost commitments.
While Heinle advocated for his proposal, he acknowledged the “thorny issue” of having evaluation criteria developed by one stakeholder sector and called PJM’s proposals “a considerable upgrade form the status quo.”
He also addressed supplemental and end-of-life transmission projects, arguing that “the current process does not provide adequate transparency related to data and criteria thresholds each transmission owner uses to prioritize assets for replacement.”
Jackie Roberts, director of the West Virginia Consumer Advocate Division, questioned PJM’s filing in FERC’s resilience docket, saying it made her “uncomfortable” that the comments should have “demonstrated how reliable and resilient our system already is.”
“I don’t think clearing prices are any more artificially low now than they were artificially high several years ago,” she said.
The comments “befuddled” her until she realized they reminded her of how the Obama administration’s Clean Power Plan was developed, she said. It became clear, she said, that such proposals are developed by “someone who doesn’t have the authority to require a market solution.”
“PJM asking for more authority about the gas industry … I don’t understand that,” she said. “I do think there needs to be a gas industry ISO, but PJM is not the entity to do that. That needs to be a parallel, standalone effort.
“I really am not a fan of PJM saying anything that suggests to the public … that we are not resilient and that our fuel mix may not be resilient.”
PJM CEO Andy Ott said legislators have been asking him at what point the grid would become too dependent on one set of infrastructure.
“We have been very clear in our statements about the current situation, even with the current announced retirements, [that] we don’t have a fuel security problem and the system is fine,” he said. “However, 10 years from now, if we continue to see changes in the fuel mix, we have no criteria to look at fuel dependencies and fuel security. … It’s a legitimate question for us to analyze. If you’re insinuating that PJM’s activities here are trying to change certain resources from retirement … I think that’s a misguided suggestion.”
Ott and board members agreed on the importance of prioritizing issues based on significance but defended some of staff’s decisions to move quickly on topics that some stakeholders have questioned.
“In some cases, ‘do nothing’ might not be an option because of whatever drivers are out there,” Ott said. “Ignoring problems isn’t going to make them get any better.”
Board member Charles Robinson said PJM sometimes moves quickly specifically to be “responsive to a cost concern.”
“Sometimes we move quickly because we are concerned about cost impacts, because we feel the need to correct a perceived deficiency so that we can be responsive to a cost concern,” he said.
“The board does take both cost and benefit into consideration,” board member Susan Riley said.
Robinson also questioned a note from the advocates’ slides indicating their support for the Monitor.
“From my perspective, I feel as though we also care a great bit about getting an independent view, and I believe we take it into account,” he said.
“We think the level of cooperation between PJM and the Market Monitor is at an all-time high, so I’m interested in understanding if that bullet was there just to reaffirm or if there is a perceived issue,” Ott added.
Kristin Munsch of the Illinois Citizens Utility Board clarified that it was meant as support for the Monitor going into contract negotiations next year.
“We wanted to go publicly on record that this was important to us,” she said. “Don’t be surprised when you hear consumer advocates going forward reaffirming, making that point, because we understand the discussions that might be coming to the broader PJM community.”
Bill Fields from the Maryland Office of People’s Counsel said the Market Monitor provides information and analysis in stakeholder meetings that might not otherwise exist.
“We find a lot of value in the Market Monitor continuing to provide that assistance to advocates,” he said.
Roberts brought up another concern about PJM attempting to stop Monitor Joe Bowring from filing complaints at FERC.
“Along with PJM, he is the most knowledgeable person about all matters PJM, and we simply don’t understand why there is a problem with him filing complaints at FERC,” Roberts said. “We think that’s an important [thing] you have stifled.”
The Sierra Club’s Mark Kresowik voiced concerns about what he suggested is a common assumption: that environmentalists seek high energy prices in order to drive efficiency.
“The answer is actually ‘no’ because, in addition to clean electricity being the single most important way that we’re doing to reduce carbon pollution from the economy and ultimately combat climate disruption, clean electricity also has to power the rest of the economy … in order to achieve the levels of carbon pollution reductions that we need,” he said. “In order for clean electricity to play that role, it has to outcompete gas and oil in those sectors, which means it needs to be affordable for all.
“We are increasingly concerned that many of the decisions that are made by PJM, that are in the process of being recommended by PJM, threaten to raise costs, particularly for states and consumers that are actively choosing and preferring clean energy, often without a clear reliability benefit.”
He also expressed interest in a comment made by Robinson that the board requests cost analysis on major decisions sent to FERC, noting that no such analysis was included in PJM’s recent filing to revise its capacity construct. (See PJM Capacity Proposals Widely Panned.)
“That’s a major concern for us,” he said, “and we’re seeing similar things going forward.”
Mike Jacobs with the Union of Concerned Scientists said the current capacity construct excludes some resources on the grid and he urged PJM to consider allowing resources more flexibility to make capacity offers into annual, summer or winter auctions.
“Optimization is something this organization knows how to do … instead of being stuck with old models and old resources,” he said.