FERC Filings
Motion of EPSA for Leave to Intervene Out of Time and Comment on PJM Northern Illinois Control Area Mitigation
Introduction
On March 24, 2004, the Commission issued an order rejecting PJM’s proposed tariff revisions to implement temporary mitigation of market power for the Northern Illinois Control Area (NICA) which may be created by the integration of Commonwealth Edison Company’s (ComeEd) transmission system into PJM. In the order, the Commission observed, “PJM did not adequately consider generation in other, neighboring control areas and the ability to import that generation into NICA over available transmission capability.” Overall, the Commission was not persuaded by PJM’s analysis that mitigation will be necessary, and found that the implementation of the proposed mitigation allowed the Market Monitor too much discretion in approving additional amounts that may be added to the initial $30 per MW-day offer cap and voiding auction results by deeming the capacity market non-competitive. FERC rejected PJM’s proposal “without prejudice to a future filing that provides adequate support, including an analysis of the effects on competition of all potential sources of capacity.”
On April 23, 2004, PJM filed a request for rehearing of the March 23 Order, which included an explanatory declaration by its market monitor (MMU), Joseph Bowring, on the need for temporary mitigation of market power in the capacity markets in NICA in limited circumstances. In that explanation, the MMU relies on analysis conducted under the methodologies outlined in the Market Power Policy Order, issued on April 14, 2004. Under that new analytical framework, the MMU conducted a pivotal supplier and a market share test using uncommitted capacity and numerous other elements as outlined, defined or determined in the Market Power Policy Order. While the pivotal supplier found that no supplier is pivotal in NICA, the market share screen shows that one market participant fails the 20 percent threshold for that screen. No delivered price test was conducted as “the conservative assumption is made that all capacity, both within and outside NICA, could compete on an equivalent cost basis.” The MMU concludes that the NICA capacity market is not competitive. The MMU then outlines the basis for the $30 per MW-day offer cap and lists possible cost adders that market participants may demonstrate exceed the $30 offer cap.
EPSA is concerned with the PJM’s proposal for several reasons.
• PJM’s application of the Commission’s Market Power Policy Order to ascertain market power in the NICA region is not just and reasonable for several reasons. The test itself has led to inaccurate results in this case. Additionally, PJM proposes to extend market power mitigation over an entire market because one supplier has failed one indicative market power screen. This result clearly is not what the Commission intended when it issued its policy order for individual market-based rate authority applicants.
• The integration of ComEd’s transmission system into a Commission-approved RTO with an extensive mitigation regime already in place must be considered and does not require additional mitigation measures beyond those in place for the entire PJM market.
• The proposed $30 per MW-day offer cap does not reflect a competitive market price and is inappropriate because an annual cost-of-service calculation does not reflect seasonal pricing for capacity markets.
• An extensive offer cap on the capacity market is counterintuitive and counterproductive to the premise of the capacity market itself, which is designed to balance the impacts of energy price mitigation.
For these reasons, which are discussed at greater length below, the Commission should reject outright PJM’s proposal to cap bids into capacity markets to any extent greater than such bids are capped in PJM generally.