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Regulator protests ‘secret’ talks over electricity-auction rules

By: The Morning Call |

Maryland’s Public Service Commission objected Wednesday to “clandestine” negotiations over a possible change in electricity bidding rules in the Mid-Atlantic region, saying states and their consumer advocates had been left out of discussions on a proposal that could drive up prices and hurt reliability.

Among those states is Pennsylvania.

The Maryland PSC’s chairman, Douglas R.M. Nazarian, sent a letter of complaint to PJM Interconnection — which runs the regional grid — and the grid’s independent market monitor. He said PJM facilitated, and both parties participated in, “a secret and exclusionary negotiation” over electricity auctions.

“I’m not sure why they would have a stakeholder process that wouldn’t include at least those states that are most affected,” said Sonny Popowsky, head of Pennsylvania’s Office of the Consumer Advocate.

The PJM auctions, held to ensure there is enough power to meet demand, set a price that eventually feeds into consumers’ electricity bills in Maryland, Pennsylvania and a dozen other states. At issue is whether to change the complex “minimum offer price” rule that dictates how low bids can go for new power plants.

Nazarian said in an interview Wednesday that the commission was concerned that the new proposal would keep electricity supply tight and artificially raise prices, benefiting current power plant owners at the expense of consumers.

According to Popowsky, Pennsylvania ratepayers might have to pay more for electricity under the proposal, though the peculiarities of the Mid-Atlantic power grid mean the impact would fall more heavily on those in Maryland and New Jersey.

“It’s a major public issue” in those states, he said.

The Maryland PSC’s letter of protest focused on the secrecy of meetings between PJM and the market monitor.

“We were not informed of this and consumer advocates were not informed of this until after the deal was already cut,” Nazarian said. “It’s now being rolled out as a PJM proposal. … It’s going to go to the [Federal Energy Regulatory Commission] with the imprimatur and endorsement of PJM, which normally would preside over a much more open and transparent stakeholder process.”

PJM – owned collectively by both the buyers and sellers of electricity – is based in an underground room at an unmarked industrial park building near Valley Forge. From this location, it manages a regional power grid that delivers electricity to tens of millions of customers.

The outside monitor that watches the electricity market for signs of price fixing or other anomalies is a company called Monitoring Analytics. It used to be a PJM division, but PJM spun it off to give it a measure of independence.

Paula DuPont-Kidd, a PJM spokeswoman, said the proposal created by PJM and the market monitor is just that – a proposal.

“This is the beginning of the process, not the end,” she said in an email. “The outcome has not been pre-determined.”

DuPont-Kidd said a large group of PJM members “came together around a conceptual proposal to resolve problems” with the minimum-price rule and asked PJM staff and the market monitor to hear the ideas.

“The ad hoc group’s ideas are now being brought into the formal stakeholder process where they will receive full discussion and vetting,” she said.

But the Maryland commission’s letter called it a “fully formed proposal” and said the plan was to submit it in less than two months for Federal Energy Regulatory Commission approval.