Federal agency should act to protect Delmarva customers from flawed power plant auction, says Maryland People’s Counsel
BALTIMORE – The regional electric transmission system operator’s use of a flawed planning assumption for calculating electric reliability should be remedied to avoid large rate increases for customers on the Delmarva peninsula, the Office of People’s Counsel said in a protest filed yesterday with the Federal Energy Regulatory Commission.
OPC’s filing protested last month’s proposal by PJM Interconnection LLC, the regional system operator, which would increase certain transmission costs by $177.7 million for the 12 months starting June 1, 2024, for Maryland and Delaware customers on the peninsula.
“PJM’s proposal would have profound adverse impacts on consumers in the Delmarva peninsula,” said Maryland People’s Counsel David Lapp. “Granting PJM’s proposal would serve only to provide power plant owners an unjustified windfall through massive price increases. It should be rejected.”
OPC’s filing related to the auction process under which power plant owners make advance commitments to provide power to meet reliability requirements. The auction results in “capacity” market payments to power plants that are passed on to residential and other electricity customers.
When it conducted the original auction, PJM wrongly assumed that certain generating plants would participate in the auction. Those plants did not participate and—based on the complicated mechanics of the auction process—the resulting prices were substantially inflated and did not accurately reflect the actual need for resources in the area. PJM acknowledged the problems in a filing with FERC in late December 2022, describing the auction results as “unjust and unreasonable,” and it proposed appropriate revisions that OPC supported. FERC agreed and approved the appropriate revisions. Generators appealed that order and an appellate court recently ruled in their favor. PJM now proposes to implement auction results that are based on its flawed assumptions.
In an initial February 2023 order setting aside PJM’s initial auction results, FERC itself described the flawed auction results as causing an “exorbitant price increase [that] would not be the result of supply and demand fundamentals—or an actual reliability need—meaning that there is no economic or reliability justification for those additional costs.” PJM’s proposal would cause Maryland customers to pay those “exorbitant” price increases.
OPC’s filing asks FERC to exercise its broad remedial authorities to reject PJM’s filing and retain the auction results that have been in place since FERC issued its order in 2022. OPC’s filing was made jointly with other organizations representing customers in Delaware and the Delaware Public Service Commission. The Maryland Public Service Commission filed its own protest. The rate increases at issue in the case would be effective on June 1, 2024.
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.
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