Another Look Into the PJM Kremlin: What’s Really Going on with PATH?

Smoke signals continue to accumulate in the PATH situation.  The first inkling that anything was up came in January as AEP/FE told the National Park Service that they wanted a delay of the PATH EIS process until sometime after the PJM capacity auction in May 2012.

Then, FirstEnergy’s Doug Colafella (affectionately known in the Eastern Panhandle as the Lil’ Coal Fella) told MetroNews on the March anniversary of PATH’s 2011 collapse:

“Our energy delivery to customers still remains below 2008 levels,” Colafella told MetroNews. “You’re really looking at a situation that’s different today than when PATH was originally proposed.”

PJM has continued to research the PATH project for the last year, getting updates to determine if things are changing. At this point, Colafella says the answer is “no.”

“The landscape today is really no different than where we were a year ago,” he said. “Supply really continues to exceed demand on the electric grid.”

Most recently, The State Journal ran a story that included this statement taken from an interview PJM’s Steve Herling:

Meanwhile, though, PJM will make a recommendation about PATH to its board of managers in June or July.

By the way, if you want to see what reporter Pam Kasey probably wanted the title of her story to be, check out the actual file name in the URL address box on your Internet browser.  The file name is “future-of-path-power-line-could-be-decided-this-summer,” a much more accurate reflection of the facts in the story than the inaccurate title that State Journal editors hung on the piece.

The picture that has emerged from all of this mysterious discussion is that PJM may be building up to using the results of its May 2012 capacity auction to justify dropping PATH.  Go back and look at The Power Line posts about Project Mountaineer.  PJM consistently claimed that PATH was needed because there was such a difference between the wholesale power prices in western PJM and eastern PJM.  Back in 2008, Steve Herling would go on and on about how PATH was needed to raise prices in western PJM (for AEP and Allegheny) and lower prices on the East Coast.

Those days are gone.  In last year’s capacity auction, the price difference between eastern and western PJM narrowed to almost zero.  Here is a quote from the PJM press release:

In PJM’s MAAC area the price of capacity will be $136.50 MW-day, a decrease of about $100 from last year.  (The MAAC price applies to the transmission zones of Baltimore Gas and Electric Company, Metropolitan Edison Company, Pennsylvania Electric Company, and PPL Electric Utilities, Atlantic City Electric, Delmarva Power, Jersey Central Power and Light Company, PECO, Public Service Electric and Gas Company, and Rockland Electric Company.) The non-MAAC region, will pay the RTO price of $125.99, an increase of about $100. This region includes western Pennsylvania, western Maryland, Ohio, Indiana, Michigan, Kentucky and Virginia.

“The convergence of prices between the eastern and western regions of the market is primarily driven by the significant reduction in forecasted load growth through 2014/2015,” Ott said.

As PJM also pointed out in the press release, rapidly growing demand management has also made a significant contribution to closing this price gap.

If the May 2012 capacity auction results show a further narrowing of the east/west price gap, will this be PJM’s excuse for finally dumping PATH?  PJM isn’t saying.  We have to rely on the vague signals emanating from Valley Forge, PA, PJM’s mysterious Kremlin, and Steve Herling’s Yoda-like “June or July” comments.  So far, we don’t have much to go on, but the signs all point to June or July as a decision point for PATH.