Regulators: Grid operator's proposal would tie states' hands -- Gazette.Net






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Maryland's Public Service Commission is opposing the regional electric grid operator's decision to try to reshape rules that affect the construction of new power plants in a way that the commission contends will make it harder for states to ensure a reliable power supply.

PJM Interconnection's decision to seek the Federal Energy Regulatory Commission's approval for changes to the Minimum Offer Price Rule, which affects investment in power generation, also is intended to restrict states from implementing their own energy and environmental policies while protecting companies that own existing power plants and is against the public interest, PSC Chairman Douglas R.M. Nazarian said.

While opposing PJM's proposal before FERC, Maryland regulators will keep pushing for "more open and transparent stakeholder process," Nazarian said in a statement Friday after PJM notified its members that it would seek the federal agency's approval for the changes.

"This is the most egregious example we've seen of parties [who are] known to have views being left out," Nazarian told The Gazette late last month when his panel was still hoping that PJM would restart its process for crafting rule changes and include state regulators and consumer advocates more fully in shaping the proposal.

Nazarian said the changes, if enacted, would prevent any plant from getting an exemption.

PJM manages movement of electricity in Maryland, Washington, D.C., and all or part of 12 nearby states.

New Jersey's rate counsel also has complained about PJM's process.

Regulators in both states want to be able to subsidize plants to make sure they have reliable and cheaper power supplies.

Maryland uses a lot of electricity for its size, but generates only about 70 percent of what it uses, Nazarian said.

Much of Maryland's electricity is used in the central and eastern parts of the state, but it has to be generated farther west and that causes grid congestion and raises prices.

In his letter announcing that PJM would file the proposal with FERC, Terry Boston, PJM's CEO, told members that the "proposed changes make the exemption process more transparent and clear cut and ... will promote greater market certainty ... ."

The way the proposed revisions are presented to FERC as PJM's proposal gives the impression that they have been hashed out fairly, when they have not, Nazarian said.

In a letter sent to PJM in October, Nazarian criticized the grid operator for excluding public-interest stakeholders from closed-door negotiations that included energy companies.

"... PJM is visibly leading a forced double-time march to the FERC on behalf of a favored group of stakeholders," Nazarian said in that letter, so that new rules will be in effect for the power supply auction in May.

The problem with the price signal that the rule sends is that it tells of the electricity need for only a year and provides no long-term planning horizon, Nazarian told The Gazette.

Although the Great Recession brought down electricity demand substantially and another transmission line has been built, PJM told the PSC in 2007 that, without new generation, Central and Eastern Maryland and the Washington region could face rolling brownouts as early as 2011.