Saturday, March 23, 2019

Powelson: ‘Erosion of Confidence’ in Stakeholder Process

Calls for RTO Transparency, Board Diversity, Term Limits

By Rich Heidorn Jr. and Michael Brooks

WASHINGTON — FERC Commissioner Robert Powelson on Wednesday reiterated his defense of organized markets but said he sees an “erosion of confidence” in RTO stakeholder processes.

Robert Powelson Stakeholder Process

Powelson | © RTO Insider

Powelson, who made the observation in a speech at a PJM issues workshop sponsored by the Great Plains Institute and Duke University’s Nicholas Institute for Environmental Policy Solutions, elaborated afterward in an interview with reporters.

He cited concerns over escalating transmission rates and PJM’s February “jump ball” filing of two competing proposals for insulating its capacity market from state-subsidized generation. (See AMP Seeks More PJM Scrutiny of TO Projects and PJM Board Punts Capacity Market Proposals to FERC.)

“You talk to certain state commissioners; you talk to consumer advocates; there’s a concern that voices are not being heard,” he said. “I think PJM — [CEO] Andy [Ott] has heard me say this — has to do a better job with their state outreach. … A lot of states right now are not happy.”

Illinois Commerce Commissioner John Rosales, and Pennsylvania Public Utility Commission Vice Chairman Andrew Place, who also spoke at the workshop, agreed with Powelson’s characterization. “PJM is swimming and drowning in capacity. … And capacity repricing only worsens that,” Place said.

PJM spokeswoman Susan Buehler said Powelson’s “concern about our stakeholder process … is valid and has been recently discussed with members.”

Regarding complaints about the “jump ball” filing, Buehler said: “PJM believes this is a policy question and that FERC should make policy calls. Based on the recent New England ruling, it appears evident that commissioners are divided.” (See Split FERC Approves ISO-NE CASPR Plan.)

‘Awkward Position’

Powelson said PJM’s decision to file both the two-tier capacity repricing proposal RTO staff prefer and the Independent Market Monitor’s proposal to extend the minimum offer price rule (MOPR) to all units indefinitely “puts us in an awkward position.”

The former Pennsylvania regulator contrasted the filing with the RTO’s Capacity Performance proposal, which was supported by his state as a response to the 22% generator forced outage rate during the 2014 polar vortex. “I want to see more of that synchronization as these constructs come down [to FERC]. It makes the commission’s job a lot easier if there’s those kind of alignments.

“It’s hard to build consensus, and that’s a concern too,” he added. “I don’t know how to change that, but I’d like to see us at least look at it more.”

Keech | © RTO Insider

Adam Keech, PJM executive director of market operations, who spoke after Powelson, also addressed his comments.

“I think the stakeholder process is a great process for getting feedback and vetting proposals and understanding the interests,” Keech said. But he acknowledged the RTO has difficulty advancing “big ticket items” and navigating some “larger issues.”

“And so, are there are ways we can make the process more efficient? I’m sure there are, but there’s value to the process nonetheless. … We need to not throw the baby out with the bath water,” he said.

The challenge of reaching stakeholder consensus was highlighted in a May 2017 paper on PJM’s governance by Christina Simeone, director of policy and external affairs at the University of Pennsylvania’s Kleinman Center for Energy Policy.

“For these high controversy issues, it seems the stakeholder process is falling short at exactly the time when stakeholder collaboration and joint problem solving is critical to informing profound questions about market design and the future of competitive markets,” Simeone wrote.

`Very Disappointing’

Rosales, who is president of the Organization of PJM States Inc. (OPSI), said he agreed that state regulators don’t feel PJM is sufficiently responsive. “Absolutely. 100%. Unqualified yes,” said Rosales, who called PJM’s jump ball filing “very disappointing.”

“We were very clear,” he told RTO Insider in a brief interview. “We thought that the status quo was better than these two really poor options that they put to be filed at FERC.”

Rosales elaborated in a panel of state regulators. PJM is “trying to resolve an issue that hasn’t become an issue yet. It’s a solution to a problem that we don’t have.”

OPSI sent the PJM Board of Managers a letter in February urging it to take no action on any repricing proposal, saying that if the RTO thought rule changes are necessary, “it should reinitiate a more holistic stakeholder process.” The organization said it was not convinced that state policies undermine the RTO’s markets and that PJM’s proposal does not respect state jurisdiction and may raise capacity prices.

But Rosales said OPSI’s concerns have gone unheeded and that PJM has recently adopted a practice of effectively covering its ears and saying, “We hear you.”

“It becomes very frustrating for us because they’ll say they listen, they’ll tell us about the stakeholder process, they’ll tell us everything that they’ve done … and then they’ll just throw it out the door and say, ‘We’re going to go with this anyway.’”

OPSI is not a PJM member, so it has no means of trying to change the stakeholder process at FERC. “We as a group have decided not to be stakeholders,” Rosales said. “We try to have a relationship with PJM … [and] play nice in the sandbox. … But for the most part they’ve not had an open dialogue. … They listen, but the changes aren’t there.”

Monitor Contract

Rosales also cited the renewal of PJM’s contract with its Monitor, Monitoring Analytics. The IMM’s current contract expires in December 2019. “We have problems with getting the Market Monitor contract — again. They seem to be going not the right way,” he told RTO Insider. He did not elaborate on his concerns, which he repeated on the panel.

Robert Powelson Stakeholder Process

Left to right: John Rosales, ICC; Andrew Place, PA PUC; Willie Phillips, DC PSC | © RTO Insider

Monitoring Analytics President Joe Bowring, a Ph.D. economist, has served as PJM’s Monitor since 1999. In 2013, the PJM board came under fire over its proposed request for proposals for monitoring services, which OPSI and other critics said contained language that would undermine the independence and quality of the monitoring function. The board dropped the proposal and signed a contract renewal with Monitoring Analytics later that year. (See Board, OPSI Bury the Hatchet over Monitor Contract.)

OPSI Executive Director Gregory Carmean did not respond to a request for comment Wednesday on the current contract negotiations. Bowring declined to comment in detail but said he was confident in reaching agreement with the RTO.

PJM’s Buehler acknowledged PJM has received questions from OPSI about the contract negotiations. “PJM believes the discussions are productive and ongoing and we are frankly confused by any other characterization,” she said.

Not Just PJM

Powelson said his concerns over the stakeholder process are not limited to PJM, saying all RTO/ISO boards should operate under term limits and ensure diversity among their members. “I’m looking at this … from general business practices as a regulator overseeing those boards and what these RTOs do; making sure they’re synchronizing with what’s going on in the corporate world.

“In my view, you can’t have enough transparency in this [stakeholder] process,” he continued. “We’re making all these changes. People should have the ability to see it, understand it and feel comfortable with the final outcome.”

Powelson also commented on PJM’s initiative, announced Monday, to seek a market-based response to potential fuel security concerns. (See PJM Seeks to Have Market Value Fuel Security.)

Based on “the briefing I received from Andy Ott and his team, I think [PJM] is exactly where we need to be,” he said.

Powelson said “people should not read into” PJM’s announcement that it will end up paying coal and nuclear operators to provide backup for gas-fired generators subject to fuel delivery interruptions. “I think what PJM is saying is ‘we’re going to look at it and we’re going to do it in a market-based approach.’ There might be other technologies out there that have the same [fuel security] characteristics. It could be an oxidized fuel cell. It could be storage. It’s going to be a level playing field discussion. … It’s going to be done in a fuel-neutral, technology-neutral way.”

Powelson said it would be a mistake for the Trump administration to use the 68-year-old Defense Production Act to keep financially struggling coal and nuclear power plants operating, as is being considered, according to published reports. The act was used by President Harry Truman to control steel prices during the Korean War.

“I think it would lead to the unwinding of competitive markets in this country,” Powelson said. “It would be the wrong direction for us to venture down.”