FERC Filings
MOTION TO INTERVENE AND PROTEST OF ELECTRIC POWER SUPPLY ASSOCIATION-PJM Interconnection, L.L.C., Allegheny Electric Cooperative, Inc., Atlantic City Electric Company, Baltimore Gas & Electric Company, Delmarva Power & Light Company, Jersey Central Power
II. PROTEST
A. Independence
EPSA believes that PJM’s governance structure functions quite well and in most respects satisfies the independence standard of Order No. 2000. In a few significant areas, however, PJM falls short. First, in PJM, the Reliability Assurance Agreement (“RAA”) governs reliability issues. PJM’s Reliability Committee oversees the RAA. Various provisions in the RAA result in Load Serving Entities being the only market participants eligible for membership on the Reliability Committee. This structure is unacceptable in an RTO. Reliability cannot be separated from other issues that involve all market participants. The Commission should direct PJM to amend the RAA to permit all market participants to participate and vote in the Reliability Committee.
Second, while EPSA appreciates the fact that PJM, unlike many other transmission providers, has adopted generation interconnection procedures, those procedures need further refinement. In particular, PJM’s generation interconnection procedures inappropriately leave significant responsibility and authority with PJM’s transmission owners. In particular, transmission owners remain responsible for conducting facilities studies and system impact studies. The experience of many EPSA members in the study process in PJM has not been positive. Feasibility studies take much longer than they should, and transmission owners have too much say concerning the nature and costs of interconnection. Most of these same transmission owners have affiliates with existing generation assets and projects in the interconnection queue. In addition, the transmission owners have their own interests at stake when evaluating the nature of transmission reinforcements required to interconnect. The Commission should direct PJM to modify its interconnection procedures to ensure that PJM, and not the transmission owners, is responsible for ensuring timely completion of studies and negotiations. In addition, PJM, and not the transmission owners, must ultimately be responsible for determining what transmission reinforcements are required.
Finally, EPSA is troubled by PJM’s endorsement of the Transmission Owners Agreement (“TOA”). PJM decided to endorse the proposal without input from stakeholders. PJM’s endorsement calls into question the supremacy of the PJM tariff over the TOA. Specifically, it is unclear whether approval of the TOA effectively blocks merchant ownership of transmission in PJM. Whatever the merits of the proposal, PJM’s decision to endorse the TOA compromises its objectivity and independence. In light of the extreme time constraints under which all parties are operating, and the limited supporting information accompanying the filing, EPSA urges the Commission not to rule on the reasonableness of the Transmission Owners Agreement until PJM, in consultation with all stakeholders, has fully considered the issue. Alternatively, EPSA urges the Commission to sever the TO’s incentive rate proposal from PJM’s RTO compliance filing and consider each matter in due course in separate proceedings.
B. Congestion Management
PJM’s otherwise workable congestion management structure continues to be plagued by one very serious defect. PJM manages congestion through locational marginal pricing and financial fix transmission rights (“FTR”). PJM initially chose to allocate the FTRs directly to load serving entities based on system peaks. Needless to say, this resulted in allocation of virtually all FTRs of any value to the existing utilities. The result was essentially no market for FTRs and no way for other market participants to hedge congestion. PJM thereafter changed the allocation of the FTRs to load rather than load serving entities (“LSE”), which was a step in the right direction. However, there still is no significant forward market for hedging congestion. The Commission should direct PJM to amend its congestion management process to permit equal access to FTRs to all market participants so that FTRs will be available to whatever entities value them the most.
Market participants also would benefit from the ability to procure FTRs on an annual or longer term basis, instead of having to deal in monthly auctions. Thus, PJM should expand its auction to include all FTRs for greater liquidity and should offer the option of at least a 12 month auction period.
C. Scope and Configuration
If the Commission is serious about its desire to create regional transmission organizations, rubber stamping existing ISOs is the wrong way to go. State-wide or power pool-based ISOs may have made sense under Order No. 888,<sup>4</sup> but the Commission must recognize that simply approving the scope and configuration of existing ISOs likely will perpetuate the current balkanization of the electrical grid. These existing entrenched organizations, with parochial interests and political constraints, are unlikely voluntarily to transition into a more geographically diverse RTO. If the Commission approves PJM as a separate RTO, there will almost inevitably be three separate RTOs in the northeast for the foreseeable future, and inter-RTO relations will be treated as “seams issues” and not as issues to resolve on the path to creating an RTO whose scope and configuration is dictated by physical realities rather than historical accident or supposed political necessity.
PJM cites its recent plans with Allegheny Power as a means for enlarging the regional transmission system. The creation of a PJM West, which would function as a for profit transco, is a step in the right direction. But greater effort must be expended to insure even greater geographic expansion and consolidation with existing ISO structures in the northeast. At a minimum, steps must be taken and proposed to coordinate operations, planning, and maintenance of short term reliability, clarify responsibilities, streamline market monitoring, and eliminate seams issues with PJM West.
D. Market Monitoring
Consistent with the need for interregional coordination, the Commission should direct the establishment of a regional, independent cross-RTO monitoring organization. Such organization should have authority to collect transmission and relevant market information (while protecting the confidentiality of commercially sensitive information), but should not have enforcement powers. The market monitor should simply gather and compile information and make recommendations to the RTOs and the Commission. In the end, it is the Commission’s responsibility to approve market rules and to enforce the rules already in place. Finally, the Commission should develop clear, concise, and consistent criteria as to bidding and other market behaviors applicable to all market participants so as to allow the market monitor to perform its function in a fair, efficient, and effective manner.
<sup>4</sup> Promoting Wholesale Competition Through Open Access Non-discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, FERC Stats. & Regs. 31,036 (1996) (“Order No. 888”).