Maryland PSC: PJM Process for Changes to Capacity Market Offer Floor "Tainted"

Citing the "clandestine and exclusionary process" under which proposed changes to PJM's capacity market Minimum Offer Price Rule were developed, the Maryland PSC sought an immediate halt of PJM's fast-track "educational" process, and called for the introduction of "open and transparent" stakeholder discussion before proceeding further.

Matters noted that the proposed MOPR revisions essentially dare states to re-regulate if states wish to exercise any control over their capacity requirements and costs.

In a letter from PSC Chairman Douglas Nazarian to PJM CEO Terry Boston and Market Monitor Joseph Bowring, the Maryland PSC said that it was "shocked" to learn after the fact that PJM and the Independent Market Monitor, "participated in, and that PJM facilitated, a secret and exclusionary negotiation to devise a new set of MOPR revisions."

"PJM claims not to make policy. This time, however, PJM picked a policy winner at the beginning of the conversation, perhaps to try and preempt or moot the appeal to last year's changes that remains pending. This time, PJM excluded altogether the parties with the most at stake. This time, PJM advocates new MOPR rules that are far more extreme than the P3 package that the FERC rejected as unjust and unreasonable in April 2011. This time, PJM diverged from its well-understood stakeholder process -- which, despite its flaws, at least allows all interested voices to be heard -- and relegated the dissenters to a post hoc 'education' campaign," the PSC said.

"And this time, despite these shortcuts, PJM is visibly leading a forced, double-time march to the FERC on behalf of a favored group of stakeholders, all so that the new rules can be in place for the May 2013 RPM auction," the PSC said.

"PJM's selective inclusion and exclusion of parties to these discussions has indelibly tainted the process and its results," the PSC said.

"PJM's own slides state that the discussions were initiated by suppliers and public power interests, but that PJM and the IMM were invited, and that selected other stakeholders were included and provided an opportunity 'to represent their unique interests,'" the PSC said.

"By PJM's own reckoning, four of its five sectors were included in the discussion -- put another way, one of PJM's stakeholder sectors, the sector that includes Consumer Advocates, was actively excluded," the PSC said.

"And although we are not official stakeholders, State regulators -- the parties most deeply interested in the terms of the MOPR and at whom these proposed changes are aimed - were excluded as well. So in spite of our well-known views on the MOPR, our 'unique' and public interests were, by design, never heard or considered," the PSC said.

"Indeed, we and the Consumer Advocates and the few others not at the table learned of the discussions only when PJM Staff began rolling out (to great fanfare in the trade press) a fully formed proposal, using PJM's slide template, as part of a PJM-led 'education process' that will fast-track this significant and targeted fait accompli from revelation to FERC filing in less than two months. Contrast this timeframe with the stakeholder discussions on new entry pricing, which began shortly after the May RPM auction and were quickly deemed too complex to bring to conclusion in time for next year's BRA. It may well be that we would never have reached agreement with others on changes to the MOPR, but that is beside the point: these negotiations were held behind closed doors, with PJM's blessing and assistance (if not outright leadership), specifically for the purpose of revising the MOPR to the detriment of our State's long-term reliability needs. And the proposed changes are now being represented to the world, and will shortly be characterized to the FERC, as a PJM-endorsed proposal, despite the fact that the parties being targeted were affirmatively disinvited from the process," the PSC said.

The PSC noted that it has and will raise "serious objections" to the MOPR proposal itself, but that such objections are for another time.