By Kennedy Maize
New controversies have added to the swirl surrounding the nation’s oldest and largest regional independent operator of the high-voltage electric transmission system, the PJM Interconnection.
PJM controls high-voltage electric transmission in 13 largely mid-Atlantic states and the District of Columbia, a total of about 67 million customers. The RTO’s most recent capacity auction fell some 6 GW short of what PJM determined was needed to assure reliability. It then proposed an emergency, backstop auction for Wednesday (Sept. 30) and asked the Federal Energy Regulatory Commission to approve the plan.
FERC on Tuesday (Sept. 29) told PJM to make major changes in the emergency plan. The commission said unanimously that “certain aspects of PJM’s proposal are just and reasonable. With respect to other aspects of PJM’s proposal that may be unjust and unreasonable, we direct further briefing regarding potential alternative approaches that the Commission believes may be just and reasonable.”
Chairman Laura Swett issued a scathing comment in concurring with the notational order. “American ratepayers and utilities need urgency, clarity, and discipline—none of which PJM appears capable of delivering at this time,” she wrote. Swett noted that PJM had hit FERC with its plan “on the last possible statutory day to open a procurement window on September 30. Whether by accident or incompetence, that timing left the Commission no meaningful opportunity to issue a deficiency letter, seek additional record development, or establish hearing procedures to attempt to rehabilitate the mess we received.”
Commissioner Lindsay See commented that “customers that drive new costs should bear appropriate responsibility for them. Existing customers should not be left paying costs attributable to new demand. That principle is particularly important here where PJM proposes a backstop procurement specifically to deal with the capacity shortfall that rapid load growth largely drove.”
FERC’s order suspended the PJM plan until February 28, 2027, subject to a paper hearing and a list of “potential modifications” the commission wants addressed. FERC suggested that PJM submit “an alternative proposal pursuant to its FPA section 205 filing rights without delay. Such a filing could expedite the resolution of the concerns that we have identified with certain aspects” of the backstop auction.
The commission then took a shot at PJM’s existing tariff, suggesting that it “may be unjust and unreasonable because the existing reliability backstop provisions appear to be insufficient to prevent the grave resource adequacy concerns that led PJM to file the instant proposal in the first place. We think it clear that PJM’s ordinary instrument for procuring sufficient capacity to meet PJM’s reliability requirement, the RPM, has failed to keep pace with the unprecedented influx of large load into the PJM Region in recent years.”
A key element driving FERC’s inquiry into PJM’s inability to acquire adequate generating resources through its capacity auctions is the growth of large-load data centers in PJM’s footprint. PJM’s Market Monitor has identified the spread of data centers as the driver of higher electricity bills in the region.
Governors of several PJM states and the legislatures, including Pennsylvania, Maryland, and New Jersey – the original members of what became PJM – have wrestled with the politics of data centers.
The FERC order recognizes the tensions between state and federal roles in dealing with multi-state regional transmission organizations. The order says, “We recognize that the rapid emergence of large loads presents a shared regulatory challenge that implicates both federal and state authority.
“Under the FPA, the Commission oversees rates and practices affecting wholesale service, including PJM’s procurement of capacity through the RBP. However, ‘states determine how Commission-approved rates are collected among the relevant retail consumers along with the rates for state-jurisdictional matters.’ Specifically, states have authority over how the wholesale costs of providing electricity, including transmission of such electricity to the retail customers, are recovered through retail rates.” 
That conflict also complicated PJM’s governance this week. On Wednesday, the PJM Members Committee, a key advisor to the RTO dominated by industry officials, according to the liberal group Resource Media, rejected a proposal from PJM’s management that would give states a “jump ball” opportunity to raise resource adequacy issues for regulatory attention. The proposal would include ‘a Memorandum of Understanding memorializing the shared responsibility and roles between the states and PJM over reliability and resource adequacy (to be filed at FERC).’”
The PJM proposal had the support of Consumer Advocates of the PJM States, one of the committee members. Clara Summers of the Chicago-based Citizens Utility Board’s Consumers for A Better Grid Campaign said, “In the reform package they adopted, PJM Members — dominated by powerful energy companies —effectively blocked a greater role for the states. Companies beholden to shareholders should not be able to override states beholden to the public on decisions impacting electric affordability. Our elected officials should have the authority to act on behalf of the public at PJM — but this vote just reinforces a status quo that favors private companies whose business models depend on squeezing everyday electricity customers to yield record profits.”
Several governors have called for a greater role for PJM states in governance of the RTO, which may be a topic at the PJM Governors Collaborative Summit in Chicago Oct. 8.
The Quad Report, covering energy policy and politics