OPC asks federal regulators to reject PJM ‘backstop’ procurement of generation for data centers, citing risks to residential customers
BALTIMORE – The regional electric system operator’s proposal to procure about 7,000 megawatts of new generation to serve projections of data center-driven power needs leaves ratepayers rather than data centers potentially on the hook to pay “the full cost of” resources “needed to satisfy their new energy demands,” contrary to promises made in the utility and data center-backed White House Ratepayer Protection Pledge, the Office of People’s Counsel said in a protest filed today with the Federal Energy Regulatory Commission (FERC).
Instead of requiring data centers to pay billions of dollars for the power plants to be procured in its “Reliability Backstop Procurement” (RBP), regional system operator PJM acknowledges that its proposal would send RBP costs to PJM zones where other customers could end up having to pay those costs, explained OPC’s filing, which was made jointly with several other state consumer advocates.
“PJM’s proposal is rife with admissions that there may be no capacity shortfall that causes reliability issues, that 15-year commitments are unnecessary to address any short-term reliability issues, and that the bids responding to the RBP will not reflect competitive prices,” said Maryland People’s Counsel David S. Lapp. “Moreover, PJM has not demonstrated that there actually is an unmet reliability need that supports having an RBP. The proposal is premised on data center growth forecasts that are highly uncertain, as recent developments have shown.”
PJM has better alternatives to ensure reliability that are far more likely to protect non-data center customers, OPC’s protest points out. One alternative is a “subscription-based” procurement in which the utilities or suppliers obligated or committed to serve data centers determine the procurement target and bear all the associated financial and credit obligations. Another is to accelerate PJM’s recently filed “interim resource adequacy service” proposal, which will give data centers a choice of bringing their own new generation or being subject to involuntary power curtailments when needed to ensure reliability.
OPC’s filing points out that PJM’s RBP proposal is “awash in fundamental contradictions,” including, among others:
- Limited “opt-outs” for states that could reduce the 7,000 MWs to be procured, but no “opt out” to reflect recent developments for previously projected data center growth which has been called into question by more recent information;
- Requiring suppliers to commit to a fixed price for 15 years, while justifying bilateral contracts of just five years as long enough to “address the reliability shortfall”;
- Failure to impose any protections to prevent suppliers from exercising market power to raise prices, while acknowledging that bidders in the procurement will bid based on an excessive price cap rather than their actual costs; and
- An excessive price cap based on a (higher) one-year cost, not a (lower) 15-year cost, despite PJM’s acknowledgement that a 15-year price lock “creates revenue certainty” and improves financing opportunities.
“PJM’s own filing explains why the RBP is a flawed, unjust, and unreasonable proposal,” Lapp said. “PJM has alternatives that better align with the Ratepayer Protection Pledge. FERC should reject PJM’s proposal.”
Earlier this month, OPC filed comments with the Maryland Public Service Commission warning that without decisive PSC action, PJM’s RBP proposal—if accepted by FERC—could impose added data center-driven costs totaling as much as $562 million on existing customers of Baltimore Gas and Electric and Potomac Edison.
OPC filed its protest today jointly with the Delaware Division of the Public Advocate, District of Columbia Office of the People’s Counsel, Illinois Citizens Utility Board, Office of the Illinois Attorney General, and New Jersey Division of the Rate Counsel.
For more on OPC’s work to protect customers from bearing risks and costs associated with data centers, see OPC’s website.
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers in electric, natural gas, telecommunications, private water and certain transportation matters before the Public Service Commission, federal regulatory agencies, and the courts.
* * *
|
