The American Public Power Association has filed a formal protest with the Federal Energy Regulatory Commission over a recent filing by PJM Interconnection in which it proposes the creation of an energy pricing structure that allows prices to skyrocket during certain times of tight energy supplies. This additional market would be layered on top of its Locational Marginal Price (LMP) market and its Reliability Pricing Model (RPM) as yet another source of revenue for suppliers that it believes is necessary for reliability and to promote demand response.
"PJM has not provided justification for the creation of an additional pricing mechanism that would simply transfer additional wealth to merchant generators, allowing them to reap huge profits during a major recession at the expense of consumers," said Mark Crisson, APPA president and CEO.
In its filing, APPA points out that PJM’s own market monitor, Joseph Bowring, opposed the PJM proposal and has submitted an alternative which contains more limited changes to the markets which would not allow the dramatic price spikes as proposed by PJM.
In his filing, Bowring described PJM’s proposal as a "radical alteration of the PJM market design in a manner that would raise the overall price of wholesale electric service in PJM with no corresponding benefit to its wholesale customers." He also points out that PJM has not provided adequate justification for its proposal and that there is no reliability crisis or shortage of demand response that would create the need for such a proposal.
This proposal also arrives on the heels of APPA’s recent study showing continued high profits for generators operating in PJM. "When sellers of generation in PJM are already earning the level of returns that APPA’s 2009 Financial Analysis shows they are," APPA said in its filing, "the Commission must ask whether the upshot of adopting the scarcity proposal set out in PJM’s Filing will be to further increase these profits at the expense of consumers."
"FERC should reject this proposal out of hand and begin the necessary investigation of the existing electricity markets that APPA has repeatedly shown are not producing just and reasonable rates as required by law," said Crisson.