Press Release

PUC Calls PJM’s Reliability Pricing Model (RPM) Base Residual Auctions ‘Unjust and Unreasonable’

Published on 6/2/2008

Filed under: Electric

HARRISBURG – The Pennsylvania Public Utility Commission (PUC) today announced it has joined the Maryland Public Service Commission, the Delaware Public Service Commission and the New Jersey Board of Public Utilities, state consumer advocates and a large group of wholesale and retail electricity customers in filing a complaint against PJM Interconnection, LLC, a public utility regulated by the Federal Energy Regulatory Commission (FERC).

The PUC and the complainants ask FERC to hold that PJM’s Reliability Pricing Model (RPM), as implemented through the “transitional” Base Residual Auctions, has produced unjust and unreasonable capacity prices in the region.  For Pennsylvania, that equals $5 billion and unless FERC acts decisively, PJM will impose these unjust rates on electricity customers from June 1, 2008, through May 31, 2011.  The complainants urge FERC to recognize that the transitional period auctions have produced excessive capacity prices, have failed to prevent generation suppliers from exercising market power, and did not produce benefits commensurate with their costs.  FERC has an ongoing duty to ensure that implementation of RPM and the results of the capacity auctions are just and reasonable.

“Together with other states in the PJM region, Pennsylvania continues to participate in federal market structure issues to ensure that Pennsylvania’s ratepayers are protected and wholesale electricity markets function consistent with the public interest, “ said Wendell F. Holland, PUC Chairman and founding President of the Organization of PJM States.  “This filing is one of many ongoing efforts our Commission has taken to advance the interests of Pennsylvania’s electric ratepayers.  We will continue to move forward in this proceeding as well as others to make certain that Pennsylvania’s interests are protected in the federal arena.”

The following elements are listed in the complaint as producing unlawful rates:

• the transition period auctions lacked an essential element necessary to assure just and reasonable market-based capacity rates – competition from new resources, including demand response and new transmission, that could discipline conduct and prices;
• the administrative apparatus that is RPM’s hallmark has proven inadequate during the transition to restrain the exercise of market power by the withholding of capacity to increase prices; and
• RPM’s highly touted locational component created additional opportunities for sellers to raise prices while serving no legitimate function during the transition.

There is no deadline for FERC to act on the complaint, but the complainants have asked the federal agency to act swiftly.

The Pennsylvania Public Utility Commission balances the needs of consumers and utilities to ensure safe and reliable utility service at reasonable rates; protect the public interest; educate consumers to make independent and informed utility choices; further economic development; and foster new technologies and competitive markets in an environmentally sound manner.

For recent news releases, audio of select Commission proceedings or more information about the PUC, visit our Web site at www.puc.state.pa.us.

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Contact:

• Denise McCracken
  Senior Communications Specialist
  717-787-5722
  demccracken@pa.gov