PJM and FERC At War With NJ Self-Reliance

The NJ legislature and the NJ Board of Public Utilities have given up on PJM and are planning to build new, natural gas fired power plants in NJ to protect their citizens from unreliable power companies and higher electric rates.

PJM and FERC are fighting NJ every step of the way.  FERC does not want individual states breaking away from its plan to control a nationalized electric power grid.  FERC needs federal control to insure that it can force rate payers to pay for its hare-brained “incentivized” schemes to build unneeded transmission lines and to suppress needed electricity generation.

The fight in NJ is about preventing the state from generating its own electricity.  It is also about keeping obsolete, expensive coal-fired plants in business while preventing the construction of innovative natural gas plants and new renewable power generation.

Here is the story from NJ Spotlight –

The state faces the prospect of brownouts and blackouts if a federal agency does not reverse its decision on a pilot program pushed by New Jersey to develop new power plants, according to brief filed with the Federal Energy Regulatory Commission (FERC) yesterday.

In a 37-page filing with the federal agency, the state Board of Public Utilities (BPU) asked it to reconsider its decision last month to change the rules governing energy markets, or failing that, to either grandfather or exempt New Jersey from the regulations.

That decision has cast a cloud of uncertainty over whether the state’s pilot program to develop nearly 2,000 megawatts of new gas-fired plants through ratepayer subsidies will be successful, given the changes made by FERC, a decision the state acknowledged in the filing.

The growing dispute involves New Jersey’s efforts to attract new generating capacity to the state, a move advocates argue will help depress electricity bills for consumers and businesses, who pay some of the highest energy rates in the country.

The program, approved by the legislature and signed into law by Gov. Chris Christie, is opposed by much of the electric generation sector, which has challenged the effort in federal court and successfully sought to block it before the federal agency. If implemented, program could cost power suppliers in the region up to $2 billion in capacity payments, the part of electric bills that ensure there is enough power to keep lights on at times of peak demand.


Much of the harm was attributed to policies adopted by the PJM Interconnection. In response to complaints about congestion increasing energy costs, it adopted a new rule, dubbed the Reliability Pricing Model, which was intended to incent power suppliers to build new generating capacity. The rule has proved particularly costly to New Jersey ratepayers, adding more than $1 billion a year to their energy costs.

Despite its claimed intention, the RPM, as it known, has not fostered the development of new generating capacity in the areas where it is needed, the state agency contended. Moreover, even with RPM, the PJM continues to rely on other regulations to keep old, inefficient plants ready to run when needed, under a policy dubbed Reliability Must Run (RMR), the brief noted.

Here’s why. Over the next two years, consumers in New Jersey could end up forking over more than $400 million in additional costs under RMR to keep an aging power plant in Hudson County in service. PSEG Power would receive $160 million in 2012, and another $280 million in the following year under RMR contracts, although the plant runs infrequently.

“Yet, even with RPM in place, PJM still requires RMR contracts for inefficient, old, and expensive generating units to continue to stand ready to perform in order to maintain system reliability,” according to the filing.

I don’t know why the reporter described PJM’s RPM markets as “new.”  PJM has been conducting these markets for a number of years.  The RPM markets allow companies to sell bulk electricity three years in advance which PJM claims will help with the financing of new power plants.  Except that the RPM markets or capacity auctions, as they are also called, have not done this.  They have done exactly the opposite by allowing coal-fired generators, even the least efficient, to steal market share from innovators by locking up large blocks of power years in advance.  This is the behavior of a cartel, not a neutral grid manager.

The MD PSC and their Office of People’s Counsel have been filing challenges to PJM’s RPM markets for years, describing in depth how PJM is costing rate payers billions of dollars every year.  Here is a quote from the Chairman of the MD PSC:

“We could not escape or ignore the fact that the transitional auction results will, if left alone, force Maryland ratepayers to pay almost $2 billion for capacity that never materialized,” said Maryland PSC General Counsel Douglas R. M. Nazarian.

People in NJ have finally figured out what a cartel does.

FERC needs to butt out and let the people of NJ solve their own problems.