PJM Desperate, Bargain with the Devil Didn’t Turn Out Too Well

PJM Interconnection’s influence is based upon the cartel’s ability to portray itself as the powerful planner of the regional electrical system.  PJM has never been very good at this, despite help from Dick Cheney’s 2005 National Power Act and their friends at FERC.

PJM’s managers made a bargain with the devil back in 2005 when the coal-fired members like AEP and Allegheny Energy (now swallowed by Ohio’s FirstEnergy) created Project Mountaineer to drive all of PJM’s transmission “planning.”  PJM also used its capacity market auctions to halt and roll back the construction of new power plants in East Coast states to artificially create shortages in eastern states that could only be met by AEP’s and Allegheny’s coal plants.

PJM is a cartel.  As a cartel, it’s function is to limit new businesses from entering the regional electricity market and to control prices in order to favor the members who control the cartel.  That is the problem for any cartel.  Members are constantly jockeying for power within the cartel, while externally the cartel’s manipulation of markets causes hostility from consumers and businesses outside the cartel.

For PJM, the days of the Charleston Love Fest are over.  NJ, MD and DE state governments are providing extensive incentives for new local power generators by promoting long term contracts that do not involve PJM’s rigged markets.  The real economy is also putting pressure on PJM’s former plans, because electricity demand is falling as a long term trend, not simply because of “the recession.”  The prospects for coal’s future are slowly but inexorably fading.

So what is PJM’s response?  A “new” strategy to “integrate renewable policy goals” into its transmission “planning.”

In fact, as several East Coast power companies have pointed out recently, within PJM’s own process, PJM’s supposedly “neutral” transmission “planning,” combined with FERC’s outrageous cost recovery scheme for new interstate transmission projects, provides a massive subsidy for the importation of externally generated Big Wind power from the Midwest, instead of building local sources of wind and solar generation on the East Coast itself.  New Jersey power consumers can be “taxed” by PJM’s subsidies for transmission lines that destroy New Jersey’s own ability to create renewable power capacity, businesses and jobs.

Where does that “tax” money from power consumers go?  Into the pockets of the power giants like AEP and FirstEnergy that are fighting to control PJM.

That sounds familiar to those of us who have been fighting the failed PATH project.  So PJM’s “new” renewables integration looks a lot like the old Project Mountaineer.  In many ways, the new “integration” push will provide great cover for a newly engineered Project Mountaineer, because AEP is a major source of PJM’s newly designated “external south” source of wind power as shown in PJM’s recent slide show on integration.  Guess who one of the major wind power generators is in the north Texas and Oklahoma region?  Give up?  AEP.  Funny how that worked out.

The real problem in this whole mess is that the federal government still has its own foot on the scale.  The FERC/Cheney cost recovery subsidy, that has already been declared illegal by the US Seventh Circuit Court of Appeals, remains in place.  As long as the controlling power companies in PJM have access to this forced subsidy to build new transmission lines, they will always have this club to beat back attempts by states and local communities to become self-reliant in their electricity systems.

Recent decisions in East Coast states to break out of PJM’s federally supported grip were made by democratically elected legislative bodies or elected governors.  PJM’s transmission “planning” is elected by no one.

It’s time FERC gave up its attempt to put unelected cartels in charge of our energy planning and return PJM engineers to their jobs, which they do quite well, moving electricity around and maintaining the safety of our grid.  PJM does not need to be in the position of choosing winners and losers in the electrical generation business or privatizing US energy policy.

If our electrical system is going to be regulated, it should be regulated by democratic institutions, not corporate cartels.  If our system is to be deregulated, then market forces should be allowed to operate freely, and locally, without interference from FERC or corporate cartels.